SpartanNash paid down debt, saw improved margin rates and notched higher net sales in all three of its segments (retail, food distribution and military) in the fourth quarter of 2020, but the Grand Rapids, Mich.-based company is offering modest expectations for 2021.
SpartanNash reported 8.7% year-over-year growth in retail comp-store sales for the final quarter of 2020, down from 10.6% growth in the third quarter but beating analysts' estimates. However, the company forecasts a comp-store sales decline of 7% to 9% for the first quarter of 2021 and a retail sales slide of 6% to 8% for the full year.
"Fiscal 2021 will present a new environment where we expect to see a change in consumer behavior," SpartanNash President and CEO Tony Sarsam said in a news release announcing the company's fourth quarter and fiscal 2020 financial results. The sales boost the company saw in the past year as consumers ate more meals at home is expected to moderate as COVID-19 vaccinations continue and restaurants and other businesses reopen more fully. In addition, grocery deflation—first seen in the grocery, dairy, produce and frozen categories at the end of the year and showing modest worsening in the early weeks of 2021—may further pressure margins.
Healthcare costs, too, are expected to climb over the course of the year as more employees schedule elective procedures and additional healthcare visits that they chose or were forced to put off during the height of the pandemic.
However, SpartanNash's improved cash flow and debt-to-adjusted EBITDA ratio (currently 2.0x vs. 3.7x at the close of 2019 after the company paid down $197.8 million in long-term debt in 2020) lend the company some financial muscle for fiscal 2021.
And despite continued COVID-19-related pressures, the company still saw net sales grow 9.5% in the year to $9.35 billion. (A 53rd week included in the year accounted for 8%, or $158.9 million, of that growth.) Adjusted earnings per share were 43 cents for the fourth quarter vs. 23 cents a year ago and $2.53 for the full year vs. $1.19 for all of 2019.
The company's reduced debt load will allow for investment in the talent and technologies needed to maintain SpartanNash's competitiveness and ensure long-term growth, Sarsam and EVP and CFO Mark Shamber indicated in the company's earnings call.
"As we emerge from the impact of the pandemic in 2021, we recognize there are many opportunities we will need to capitalize on in order to live up to our potential," Sarsam told investors and analysts.
"The benefits will not come overnight," he added. "However, I'm confident that we will make the right investments and better position our platform for more prosperous growth in the years to come."