US grocer and distributor Spartan Stores has reported flat first-quarter net earnings despite increasing sales.

The Michigan-based retailer said yesterday (27 July) that net earnings were US$6m for the quarter ended 18 June, flat on the previous year. Sales increased 4.4% to $602.6m, while operating earnings rose 4.9% to $14m.

In the company's retail segment, operating earnings increased 23% to $6.6m which it attributed to lower health care expenses and moves to contain costs. Sales rose 4.1% to $345.4m, due to to higher fuel prices and volume. Comparable-store sales, however, were down 0.9%.

Spartan's distribution segment recorded a 7.3% decline in operating earnings due to a lower rate of procurement gains, increased LIFO expense and the cycling of a favourable settlement in the previous year. Net sales rose 4.8% to $257.1m.

"We are pleased that our first-quarter fiscal 2012 financial performance was in line with our expectations," said Spartan president and CEO Dennis Eidson. "We achieved year over year sales growth for the third consecutive quarter in our distribution segment while continuing to enhance our value proposition to the consumer and tightly managing the controllable aspects of our business which resulted in improved profitability in our retail segment."

The company said that the economy in Michigan has seen some improvement on its previous lows to a more stable level. "However, this improvement has been mitigated by higher fuel prices, which impacted consumers' discretionary income and an uptick in the unemployment rate over the last two periods of the quarter," the company said.

It expects comparable store sales to turn positive in the second half of the year as it benefits from cycling 2011's competitive store activity. Spartan plans to roll out its loyalty programme across its remaining banners and the economy continues to experience inflation.

"As a result, we remain cautiously optimistic about our operating outlook and expect continued improvement of our key financial metrics in fiscal 2012," said Eidson.

Shares in the Spartan were down 2.63% at the NYSE's close yesterday to $19.28 a share.