SpartanNash Retail Sales Fared Better Than Expected in 2021

Company reports retail comp sales growth of 7.3% in Q4 and a decline of 0.5% for the full year
SpartanNash microfulfillment center
Photograph courtesy of SpartanNash

A year ago, SpartanNash predicted a retail comp-store sales decline of 6% to 8% for full-year 2021 and sounded a note of caution about possible grocery deflation pressuring margins as Americans started going out to eat more often.

Oh, how things have changed.

In the Grand Rapids, Mich.-based retailer and wholesaler's fourth-quarter and full-year fiscal 2021 earnings, released Feb. 24, SpartanNash reported a full-year retail comp sales slide of only 0.5%, with retail comp sales increasing 7.3% year over year in the fourth quarter. Part of that fourth-quarter sales surge was the result of price inflation; the company said that higher store traffic also played a role.

"We are in a solid position heading into 2022," SpartanNash President and CEO Tony Sarsam said in an earnings call with investors and analysts. Sarsam and CFO Jason Monaco said the company continues to execute on its initiatives to boost operational efficiency, including the expected opening this spring of a new California distribution facility, positioning the company well to deliver sustainable growth and shareholder value for the long term.

"We believe we've got real value-creation opportunities here, and we're running against it," Monaco said. While the company isn't predicting retail price inflation, which hit 7.5% in January, to ease in the next few months, that's likely to moderate down to somewhere north of 3% over the course of the year, he said. Consumers, too, will hopefully then get a break from the whiplashes of inflation, a changing COVID-19 landscape and the ending of pandemic-era government assistance programs.   

For the full year ending Jan. 1, 2022, net sales across SpartanNash's three segments—retail, distribution and military—were $8.93 billion, down 2.8% from 2020 after adjusting for 2020's additional sales week. Adjusted EBITDA was $43 million for the quarter and $213.7 million for the fiscal year, with a paydown of long-term debt contributing to an improved debt-to-adjusted EBITDA ratio of 1.8x, vs. 2.0x at the end of fiscal 2020. Adjusted earnings per share for fiscal 2021 came in at $2.08; the company anticipates adjusted earnings per share for fiscal 2022 to be in the range of $2.10 to $2.25.

Sarsam, echoing comments he made throughout 2021, said labor pressures continue to be a top challenge for the company.

On the labor front, "the year has started in a similar way as it left off at the end of last year," Sarsam said. "The labor market is still very tight." While the company has raised wages and seen a "waning of the some of the highest level of turnover" it experienced in the second and third quarters of 2021, turnover is "still very high and still very challenging," he said.

Supply-chain challenges persist, as well, Sarsam said, in part because of persistent staffing challenges at the top of the chain. "Candidly, we have not seen any improvement there," he said. "They're still struggling to produce the orders that we make, and that actually hasn't changed much—it probably has gotten a little bit worse since the middle of the fourth quarter." 

He continued: "With the labor issues and challenges, there's less surge capacity in the overall supply chain. Whether it's from agriculture, manufacturing, trucking, even the inventories that are held at the store level—all of those capacities are more limited, so if something like a normal disruptive event, like a snowstorm in the Midwest, [happens], it will cause outages to be more significant and linger for a little bit longer."

That situation is likely to improve as labor pressures moderate, Sarsam said, but for SpartanNash, like other retailers, there will be no snapping back to normal from the supply-chain headaches that plagued businesses in 2021.

In SpartanNash's distribution business, net sales were $1.03 billion in the fourth quarter, a slight increase year over year after factoring in 2020's extra week. The company's military segment declined again, recording sales of $445.4 million in the fourth quarter vs. $514.1 million in the year-ago period. The slide resulted primarily from continued lower sales volumes at U.S. military bases and a decline in export sales, which were hampered by port backups and other global supply-chain challenges, according to the company's news release. Inflation provided a modest offset to those losses. 


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