• Net Sales: Decreased by 0.6% to $2.25 billion compared to $2.26 billion in Q3 2023.
• Gross Profit: Increased to $355 million or 15.8% of net sales, up from $348 million or 15.3% in the prior year.
• Adjusted EBITDA: $60.5 million with a margin of 2.7%, flat compared to last year's third quarter.
• Net Earnings: Decreased by $200,000 to $10.9 million; EPS flat at 32 per diluted share.
• Adjusted Net Earnings: Decreased by $2.3 million to $16.5 million or 48 per diluted share.
• Wholesale Segment Sales: Decreased by 1.6% or $25.9 million, primarily due to reduced case volumes.
• Retail Segment Sales: Grew by 1.9% to $675 million, with comp store sales up 0.7%.
• Cash from Operating Activities: Year-to-date $123.3 million, an increase of over 28% compared to the same period last year.
• Leverage Ratio: Increased to 2.4 times net long-term debt to adjusted EBITDA from 2.2 times in the previous quarter.
• Full Year Guidance: Net sales expected to be $9.5 billion to $9.7 billion; adjusted EBITDA expected to be $252 million to $257 million.

• Warning! GuruFocus has detected 6 Warning Signs with SPTN.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SpartanNash Co (NASDAQ:SPTN) has improved its total company retention rate by nearly 20% since launching its strategic plan.
• The acquisition of Fresh Encounter is on track to close, adding 49 stores to SpartanNash Co (NASDAQ:SPTN)'s retail portfolio and expanding its footprint in Ohio, Indiana, and Kentucky.
• The military channel has grown sales over the past 11 consecutive quarters, contributing positively to SpartanNash Co (NASDAQ:SPTN)'s wholesale segment.
• SpartanNash Co (NASDAQ:SPTN) has achieved a 50 basis point increase in gross profit margin due to an accretive sales mix and higher vendor funding.
• The company is actively pursuing M&A opportunities, with recent acquisitions expected to add more than $10 million in adjusted EBITDA annually.

Negative Points

• Consolidated net sales decreased by 0.6% to $2.25 billion, with lower volume in the wholesale segment.
• Comparable store sales in the retail segment were down 70 basis points, despite some positive trends.
• Higher restructuring charges and increased retail store labor and healthcare costs led to higher SG&A expenses.
• Interest expense increased by $600,000 to $9.9 million, impacting net earnings.
• Adjusted EBITDA decreased by $400,000 compared to the prior year quarter, reflecting ongoing challenges in the market.

Q & A Highlights

Q: Can you discuss the strategic importance of the Markham acquisition and its impact on SpartanNash's fuel distribution business? A: Tony Sarsam, CEO, explained that the acquisition of Markham Enterprises, which includes three fuel centers and convenience stores, is part of SpartanNash's strategy to expand its footprint in stable demand channels. The fuel business offers good margins and consistent revenue, making it an attractive area for growth. Jason Monaco, CFO, added that these locations are co-located with existing supermarkets, providing synergy opportunities through loyalty programs and enhancing the overall value proposition.

Q: How did the private label segment perform during the quarter, and what differentiates SpartanNash's approach from competitors? A: Jason Monaco, CFO, reported stable performance in the private label segment, with penetration remaining strong in the high 20% range. SpartanNash continues to see strength in its primary brand, Our Family, and its premium Finest Reserve brand. The company focuses on meeting consumer needs by offering both premium and value options, which has helped improve store traffic and competitiveness.

Q: What prompted SpartanNash to pursue two acquisitions in a short period, and how do these align with the company's growth strategy? A: Tony Sarsam, CEO, stated that the timing was right for both acquisitions due to the readiness of the previous owners and SpartanNash's long-standing relationships, particularly with Fresh Encounter. The acquisitions align with the company's strategy to expand its footprint and enhance its growth potential, both geographically and within existing markets.

Q: Is there any progress with the Amazon Fresh business, and how does it factor into the 2025 outlook? A: Tony Sarsam, CEO, mentioned that while the Amazon Fresh business has faced declines, SpartanNash is working with Amazon to stabilize and grow the business productively. However, the company is not relying on significant growth from this segment in its 2025 outlook, focusing instead on maintaining a strong partnership.

Q: How is SpartanNash addressing consumer behavior changes and promotional strategies in the current market environment? A: Tony Sarsam, CEO, highlighted efforts to refine pricing strategies and promotional depth to resonate with consumers. The company is testing various promotional tactics, including bundling and multi-item deals, to enhance value for shoppers. Jason Monaco, CFO, added that SpartanNash is leveraging its merchandising transformation to strengthen vendor relationships and drive value across the supply chain.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.