Spartan Stores, Inc. Earnings: Margins Suffer as Costs Rise, Profit Falls

Spartan Stores, Inc. (NASDAQ:SPTN) reported its results for the second quarter. Spartan Stores is a regional grocery distributor and grocery retailer, operating mainly in Michigan and Indiana.

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Spartan Stores Earnings Cheat Sheet for the Second Quarter

Results: Net income for Spartan Stores, Inc. fell to $10.3 million (45 cents per share) vs. $11.2 million (50 cents per share) a year earlier. This is a decline of 8.8% from the year earlier quarter.

Revenue: Rose 2.9% to $619.6 million from the year earlier quarter.

Actual vs. Wall St. Expectations: SPTN fell short of the mean analyst estimate of 49 cents per share. Analysts were expecting revenue of $622.8 million.

Quoting Management: “The consolidated net sales increase combined with our management team’s focus on tightly managing the controllable aspects of our business enabled us to report both improved earnings from continuing operations, excluding unusual items, and Adjusted EBITDA as compared to the same period last year,” stated Dennis Eidson, Spartan’s President and Chief Executive Officer. “Our efforts to provide the consumer with a quality shopping experience are paying off as we have improved nearly every key driver of overall consumer satisfaction, specifically with our focus on fresh excellence. These efforts, combined with our chain-wide loyalty card, will enable us to provide even more value and to have a better connection to the consumer than ever before.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the first quarter, net income rose 0.7% from the year earlier, while the figure increased more than twofold in the fourth quarter of the last fiscal year, 45.3% in the third quarter of the last fiscal year and 7.7% in the second quarter of the last fiscal year.

Gross margin shrank one percentage point to 21.4%. The contraction appeared to be driven by increased costs, which rose 4.3% from the year earlier quarter while revenue rose 2.9%.

Revenue has now gone up for three straight quarters. In the first quarter, revenue rose 4.4% to $602.6 million while the figure rose 2.3% in the fourth quarter of the last fiscal year from the year earlier.

The company has now fallen short of estimates in the last two quarters. In the first quarter, it missed expectations by one cent with net income of 29 cents versus a mean estimate of net income of 30 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 29 cents a share to 28 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $1.50 a share to $1.48 over the last ninety days.

Competitors to Watch: Nash-Finch Company (NASDAQ:NAFC), SYSCO Corporation (NYSE:SYY), United Natural Foods, Inc. (NASDAQ:UNFI), AMCON Distributing Co. (AMEX:DIT), Synergy Brands, Inc. (SYBR), Core-Mark Holding Co., Inc. (NASDAQ:CORE), SUPERVALU INC. (NYSE:SVU), G. Willi-Food Intl. Ltd. (NASDAQ:WILC), The Kroger Co. (NYSE:KR), and Weis Markets, Inc. (NYSE:WMK).

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(Source: Xignite Financials)