Spartan posted net earnings of US$6m for the 12 weeks to 23 June, matching the result in last year's first quarter. Operating income was down 16.3% at $11.7m.
First-quarter gross margin decreased 60 basis points thanks to lower margins in Spartan's retail and distribution segments, the launch of a new promotional campaign and "market conditions" in some fresh departments.
Net sales inched up 0.2% to $603.9m. Comparable-store sales, excluding fuel, increased 0.1%, although Spartan said that was "significant improvement in the run-rate".
However, it forecast a 1-1.5% in second-quarter comparable-store sales and earnings per share "below" last year's results.
"For fiscal 2013, the company expects flat comparable store sales and anticipates that earnings per diluted share from continuing operations for fiscal year 2013 will approximate fiscal year 2012, excluding the 53rd week last year," Spartan added.
Spartan Stores Announces First Quarter Fiscal Year 2013 Financial Results
Company Reports First Quarter of Fiscal 2013 Earnings from Continuing Operations of $6.1 Million, or $0.28 per Diluted Share
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Spartan Stores, Inc., (Nasdaq:SPTN) a leading regional grocery distributor and retailer, today reported financial results for its 12-week first quarter of fiscal 2013 ended June 23, 2012.
First Quarter Results
Consolidated net sales for the 12-week first quarter increased 0.2 percent to $603.9 million compared to $602.6 million in the same period last year, as sales increased in both the distribution and retail segments.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter was $22.6 million, or 3.8 percent of net sales, compared to $24.6 million, or 4.1 percent of net sales last year.
“We are pleased with our ability to improve the sales momentum in our retail segment, despite continuing to operate in a challenging environment during the first quarter,” stated Dennis Eidson, Spartan’s President and Chief Executive Officer. “We remain focused on tightly managing the controllable aspects of our business and believe the marketing and promotional efforts around our YES Rewards program will continue to enhance and emphasize our value offering to the consumer. Additionally, we remain committed to increasing the return to our shareholders, as demonstrated by the increase in our quarterly dividend and continued share repurchases.”
First quarter gross profit margin decreased 60 basis points to 20.2 percent from 20.8 percent in the same period last year. The decline in gross profit margin was due to lower margins in both business segments due to reduced inflation-driven inventory gains, the launch of the Company’s “Yes Is More” promotional campaign in the retail segment, market conditions in certain fresh departments, as well as, grand opening promotional expenses.
First quarter operating expenses were $110.0 million, or 18.2 percent of net sales, compared to $111.3 million, or 18.5 percent of net sales in the same period last year. The Company’s expense leverage was driven by productivity improvements in the distribution and retail segments, as well as lower employee incentive compensation expenses compared to the prior year period, offset by increased marketing and supply expenses associated with the “Yes Is More” promotional campaign and grand opening expenses associated with one new store, one relocated store and two remodeled stores.
Earnings from continuing operations for the first quarter of fiscal 2013 were $6.1 million, or $0.28 per diluted share, compared to $6.1 million, or $0.27 per diluted share in the first quarter of fiscal 2012. As a result of changes to the State of Michigan’s tax laws, the first quarter of fiscal 2013 includes a net after-tax benefit of $0.6 million, or $0.03 per diluted share, and the first quarter of fiscal 2012 includes a net after-tax charge of $0.5 million, or $0.02 per diluted share.
Net sales for the distribution segment were $258.3 million in the first quarter of fiscal 2013 compared to $257.1 million in the same period last year.
First quarter fiscal 2013 operating earnings for the distribution segment were $7.8 million compared to $7.4 million in the same period last year. The increase in operating earnings is due to lower employee incentive compensation expense and continued improvements in operating expense controls, partially offset by a lower gross profit margin due to reduced inflation-driven inventory gains.
Net sales for the retail segment were $345.6 million in the first quarter of fiscal 2013 compared to $345.4 million in the same period last year. Comparable store sales, excluding fuel, were up 0.1 percent, a significant improvement in the run-rate due to the Company’s capital plan and the “Yes Is More” promotional program, as well as a favorable calendar shift.
First quarter fiscal 2013 operating earnings for the retail segment were $3.9 million compared to $6.6 million in the first quarter of fiscal 2012. The decrease in operating earnings was due to the launch of the “Yes Is More” promotional program and the grand openings of one new store, one relocated store and two remodeled stores. In addition, earnings were impacted by reduced inflation-driven inventory gains and market conditions in certain fresh departments, partially offset by lower employee incentive compensation and ongoing cost containment initiatives.
Balance Sheet and Cash Flow
Cash flow used in operating activities for the first quarter of 2013 was $19.2 million compared to cash flow provided by operating activities of $6.7 million for the first quarter of fiscal 2012. This decrease was primarily due to the timing of seasonal working capital requirements given that the first quarter ended one week closer to the July 4th holiday than last year and a $9.8 million tax payment related to the previously mentioned tax law change which will reverse over the remainder of fiscal 2013.
As previously announced, the Company continued to strengthen its financial position by amending its credit facility to increase operational flexibility, extend the maturity date to June 2017 and lower its interest expense by $0.4 million annually. In addition, the Company repurchased approximately 604,000 shares of its common stock in the first quarter of fiscal 2013 for a total expenditure of $10.9 million. As of the end of the first quarter, the Company had approximately 50 percent of the authorized $50.0 million repurchase program available for future stock repurchases. The Company also increased its dividend for the second consecutive year, to $0.32 on an annual basis, from $0.26, which represents a 23 percent increase.
The Company had total net long-term debt (including current maturities and capital lease obligations and subtracting cash) of $154.6 million as of June 23, 2012 versus $137.0 million at the end of the first quarter of fiscal 2012. The Company’s total net long-term debt-to-capital ratio is 0.33-to-1.0 for the first quarter of fiscal 2013 and the net long-term debt-to-Adjusted EBITDA ratio on an annual Adjusted EBITDA basis is 1.44-to-1.0. The Company anticipates substantially reducing its net long-term borrowings from these levels over the remainder of fiscal 2013 due to the Company’s strong cash flow and the non-recurring nature of certain significant first quarter cash payments.
The Company believes that cash flow from operations and the approximately $155.0 million of availability under its revolving credit facility will be sufficient to fund its operations and strategic growth initiatives for fiscal 2013.
Mr. Eidson continued, “While the economic environment in our markets remains challenging, we are pleased with the improvement in our comparable store sales trend, the solid execution of our operating plan and our ability to provide the brands, products and services that best deliver value to our consumer in today’s economy. We are encouraged by the sales performance of our latest Valu Land store and continue to work on opening three to five new Valu Land locations during the second half of fiscal 2013. As we look to the remainder of the year, we continue to expect the pace of the economic recovery to continue, although at a slower rate. We also expect lower inflation-related gains when compared to the prior year for the next couple of quarters. However, we expect the unfavorable impact to be lower in the second and third quarters of fiscal 2013 than we experienced in the first quarter.”
The Company expects that second quarter comparable store sales will be lower when compared to the first quarter of fiscal 2013 by 1.0 to 1.5 percent and second quarter earnings from continuing operations will be slightly below the prior year’s results. This expectation reflects the continued economic challenges, lower inflation-related gains and the calendar shift previously mentioned.
For fiscal 2013, the Company expects flat comparable store sales and anticipates that earnings per diluted share from continuing operations for fiscal year 2013 will approximate fiscal year 2012, excluding the 53rd week last year.
The Company continues to expect capital expenditures for fiscal year 2013 to be in the range of $42.0 million to $44.0 million, with depreciation and amortization in the range of $39.0 million to $40.0 million. Following the amendment to the Company’s credit facility, the Company now expects total interest expense to approximate $13.0 to $14.0 million.
Original source: Spartan Stores