Wholesalers & Distributors

SpartanNash's New CEO Eyes Efficiencies as Company Posts Q3 Sales Growth

Surging e-commerce business, increased consumer demand amid COVID-19 offset in part by higher expenses

In his first quarterly earnings call as president and CEO of SpartanNash, Tony Sarsam on Nov. 12 laid out his priorities for accelerating performance at the Grand Rapids, Mich.-based distributor.

"Our financial results have underwhelmed in recent years and I am confident …we can achieve more," said Sarsam, who took the helm at SpartanNash in September after two years leading Dallas-based Borden Dairy. At the top of Sarsam's list of to-dos: realizing operational and supply-chain efficiencies.

"I think there are a number of productivity areas we can go hunt," he told investors. "I’m knee-deep into that as far as which to take on first." Pressed for specifics during the call's Q&A, Sarsam mentioned aging IT systems as a potential area for improvement.

For the quarter, which ended Oct. 3, SpartanNash posted net sales growth of 3.1% to $2.06 billion and retail same-store sales growth of 10.6%—the fifth consecutive quarter of same-store sales growth in that division. Gross profit grew to $324.8 million (15.8% of net sales) from $290.4 million (14.5% of net sales) in the prior year quarter. That growth resulted from improvements in margin rates within each of SpartanNash's three segments: retail, food distribution and military, the company stated in a news release.

Operating earnings growth within the retail segment was partially offset by higher incentive compensation tied to improved segment performance, the company noted. SpartanNash also reported higher corporate administrative expenses within the military and food distribution segments.

COVID-19's impacts on the company’s sales have been wide-ranging. Base closures and restrictions on commissary shopping drove Defense Commissary Agency sales lower, with net sales for military distribution declining 9.5%. Within retail, lower fuel sales and store closures made same-store sales not as rosy as they otherwise would have been, but the company still posted a gain of 6.2% in retail net sales vs. the prior year quarter, with increased consumer grocery driving the growth.

SpartanNash saw more than 175% growth in its e-commerce business during Q3, the company noted.

For fiscal 2020, SpartanNash narrowed its projections for adjusted earnings from continuing operations to $2.42 to $2.50 per share from a previous projection of $2.40 to $2.60 per share.

Amid a surge in COVID-19 cases across the country and uncertainty about future mitigation measures—including school shutdowns, and stay-at-home orders—SpartanNash needs to get through the rest of 2020 before it can get a better view of 2021, Sarsam said.

"We're not sure what the sales trends will be coming out of the holidays," he said. "We're all trying to predict the future [amid] something we've never seen before."

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