US food retailer Spartan Stores has posted a drop in second-quarter earnings and said it expects lower distribution sales and fuel margins to pressure earnings for the rest of the year.
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Net earnings for the quarter ended 12 September dropped to US$10.4m from $10.6m in last year’s second quarter, the company reported yesterday (14 October).
Consolidated net sales for the 12-week period also fell to $610.2m from $626.8m in the comparable period of last year.
Sales were hit by price deflation in certain primary product categories, lower retail fuel prices and a shift in the mix towards more private-label products, the company said.
Second-quarter retail net sales, however, increased 11.3% to $360.2m, due primarily to the incremental sales related to the acquisition of VG’s Food and Pharmacy stores.
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By GlobalData“As we progress through this difficult period, we are continuing to work on strengthening our consumer value proposition and improving the controllable factors of our business that will create additional operating leverage, and position our company to benefit when economic growth resumes,” Dennis Eidson, Spartan’s president and CEO said.
EBITDA for the quarter dropped to $30m, or 4.9% of net sales, compared with $31.5m in the prior year.
Second-quarter operating earnings were $21m compared with last year’s $22.5m. This was due to lower sales and procurement related gains, reduced fuel margins and incremental costs associated with the acquired retail stores.
Earnings from continuing operations for the quarter, including higher interest expense associated with the company’s most recent acquisition, were $10.5m, compared with $11.6m last year.
“Core distribution sales, excluding the effect of the VG’s sales, are expected to decline relative to last year by an amount similar to that of the retail segment. These factors, as well as the anticipated lower fuel margins relative to last year’s third quarter, will provide additional pressure on earnings as the year progresses. We estimate that the lower fuel margins will affect third-quarter earnings by approximately $0.03 per share,” Edison said.
