Reiterates Mid-single Digit Net Sales Growth
and Lowers Fiscal 2019 Profit Guidance
Expects to Achieve a Run Rate of Over $20
Million in Annual Cost Savings from Project One Team Initiatives
Over the Next 24 Months
SpartanNash Company (“SpartanNash” or the “Company”) (Nasdaq:
SPTN) today provided preliminary net sales and earnings results for
the 16-week first quarter ended April 20, 2019. The Company also
updated its outlook for the fiscal year ending December 28,
2019.
David Staples, SpartanNash’s President and Chief Executive
Officer, commented, “We remain focused on achieving our top five
objectives for 2019: 1) growing sales in the mid-single digit
range; 2) realizing an annual run rate of at least $15 million of
earnings improvements through Project One Team over 24 months; 3)
strengthening our management team, systems, food processing and
supply chain operations; 4) reducing debt and working capital while
lowering financial leverage ratios; and 5) improving adjusted
operating earnings and EBITDA.”
Mr. Staples continued, “While we made significant progress
against our strategic objectives, challenges in the supply chain,
fresh kitchen and retail operations did not allow us to convert our
top line success to the bottom line. This, along with the ongoing
voluntary recall at our fresh cut fruit operations caused us to
fall short of our original financial expectations in the first
quarter and will impact our fiscal year 2019 outlook. We continue
to be pleased with our sales growth and ability to attract new
business at our fresh kitchen operations. Our team remains focused
on deploying strategies to generate profitability from this growth,
despite the historically tight labor markets and higher cost of
transportation. As previously announced in April, we initiated a
voluntary recall of certain fresh cut melon products, and we
suspended production of all fresh cut fruit items for approximately
two weeks. We have resumed production of non-melon products and
hope to begin watermelon processing in the next week, with
cantaloupe and honeydew to follow, returning us to full production.
Food safety is of paramount concern to us and we will always strive
to do what is best for our customers. While we suspended
production, our team and other outside parties conducted extensive
testing; not a single test result was positive for contamination in
our products or at our facility. Finally, in our retail operations,
we continue to navigate a tough environment, which was compounded
in the last period of the quarter by the significant shifts in the
timing of government SNAP benefit payments and the Easter
holiday.”
“Our team remains committed to improving our operational
execution and financial results as we begin the implementation of
initiatives in connection with our company-wide program, Project
One Team, and we continue to build out our supply chain
leadership,” added Mr. Staples. “Project One Team has exceeded our
initial expectations and we now estimate the initiative will result
in more than $20 million in annual run rate efficiencies and cost
reductions when fully implemented over the next 24 months.
Additionally, we have made key leadership changes across our
organization and engaged a team of outside production experts for
our fresh kitchen to improve our execution and best position us for
sustainable improvements in our business for the remainder of 2019
and into the future. As we look to the remainder of the fiscal
year, we believe our comparisons to the prior year will improve
sequentially each quarter.”
Strategic Business Objectives
As outlined in its fourth quarter earnings release and discussed
above, the Company has defined its top five objectives for 2019.
These objectives remain critical in the context of the Company’s
long-term strategy to evolve into a company with a national, highly
efficient distribution platform that services a diverse customer
base through its three highly complementary business units of Food
Distribution, Military Distribution and Retail.
The following summarizes these objectives and the Company’s
progress during the first quarter of 2019:
Achieve Mid-Single Digit Sales Growth. The Company advanced this
objective in the first quarter, realizing over 6% sales growth
compared to the same quarter in the prior year. This growth was
bolstered by contributions from the newly acquired Martin’s
business in the Retail segment, as well as growth in both the Food
Distribution and Military segments. Before the intercompany
elimination of Martin’s sales, the Food Distribution segment
realized growth of 5.2%.
Realize an annual run rate of at least $15.0 Million of Savings
Over the Next 24 Months from Project One Team. The Company has
exceeded its objective by identifying over $20.0 million in savings
opportunities, which the Company expects to achieve in its run rate
over the next 24 months. The effect of implementing these
opportunities is not currently expected to be material to earnings
in 2019.
Strengthen Management Team, Systems and Supply Chain Operations.
During the first quarter, the Company appointed a new Chief
Merchandising and Marketing Officer, Chief Information Officer and
several other key additions throughout the IT and supply chain
operations. Other strategic additions to the management team at
various levels are in process. The Company continues to invest in
enhancements to its systems and supply chain operations, however
some improvements are developing more slowly than initially
expected, partly due to the competitive employment environment in
both warehousing and transportation.
Reduce Debt and Working Capital While Lowering Financial
Leverage Ratios. Adjusted for the funding of the Martin
Supermarkets’ acquisition, the Company paid down over $20.0 million
in debt in the first quarter of fiscal 2019. The Company also
reduced its inventory levels by over 2% from the first quarter of
fiscal 2018, without negatively impacting customer service levels,
despite continued sales growth. The Company will continue to focus
on debt and working capital improvements for the remainder of
fiscal 2019.
Improve Adjusted Operating Earnings and Adjusted EBITDA Growth.
First quarter of fiscal 2019 profitability was significantly below
the Company’s expectations due to the factors mentioned above. The
Company is focused on achieving growth in its financial performance
through initiatives aligned with the organization’s overall
strategy, which include the strategic objectives noted previously.
In addition to the items above, the Company is in the process of
executing strategic investments in the Retail segment in connection
with the implementation of the Company’s new retail brand
positioning. The Company expects to begin realizing the benefit of
these investments in the second half of 2019.
Fiscal 2019 First Quarter and Full Year Outlook
The Company expects net sales for the 16-week first quarter
ended April 20, 2019 to be $2.54 billion compared to net sales of
$2.39 billion for the first quarter of fiscal 2018. For the 2019
first quarter and fiscal year the Company now expects the
following:
Previous Guidance Preliminary Results
First Quarter First Quarter Ended April 20,
2019 Ended April 20, 2019 Adjusted EPS from Continuing
Operations $0.33 - $0.37 $0.23 - $0.24 Reported EPS from Continuing
Operations N/A $0.20 - $0.21 Adjusted EBITDA N/A $54 - $55 million
Previous Guidance Updated Guidance Fiscal
Year Fiscal Year Ending December 28, 2019
Ending December 28, 2019 Net Sales Growth Mid-single digits
Mid-single digits Adjusted EBITDA $210 - $220 million $190 - $205
million Adjusted EPS from Continuing Operations $1.70 - $1.80 $1.20
- $1.50 Reported EPS from Continuing Operations $1.27 - $1.44 $0.70
- $1.04
The Company’s adjusted earnings per diluted share for the
remainder of the fiscal year exclude a charge to terminate the
Company's frozen pension plan of $15.5 million to $16.5 million,
with full fiscal year adjustments totaling $16.5 million to $18.5
million after tax. The financial update provided today is an
estimate based on information available to management as of the
date of this release and is subject to further changes upon
completion of the Company’s standard quarter end closing
procedures. This update does not present all necessary information
for an understanding of SpartanNash’s financial condition as of
April 20, 2019, nor its results of operations for the quarter then
ended. A quantitative reconciliation of non-GAAP adjusted earnings
per diluted share for the first quarter and full fiscal year 2019
will be provided as part of the Company’s full first quarter
financial results.
The Company does not plan to provide preliminary financial
results in the future other than in unique circumstances, or in the
event of a material event that requires disclosure. The Company
will report full first quarter financial results on Monday, May 20,
2019 before the market opens and host a conference call to discuss
its results on Monday, May 20, 2019 at 8:00 a.m. ET.
About SpartanNash
SpartanNash (Nasdaq: SPTN) is a Fortune 400 company whose core
businesses include distributing grocery products to a diverse group
of independent and chain retailers, its corporate-owned retail
stores and U.S. military commissaries and exchanges; as well as
premier fresh produce distribution and fresh food processing.
SpartanNash serves customer locations in all 50 states and the
District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Djibouti
and Egypt. SpartanNash currently operates 161 supermarkets,
primarily under the banners of Family Fare Supermarkets, Martin’s
Super Markets, D&W Fresh Market, VG’s Grocery, Dan’s
Supermarket and Family Fresh Market. Through its MDV military
division, SpartanNash is a leading distributor of grocery products
to U.S. military commissaries.
Forward-Looking Statements
This press release contains "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, and
Section 21E of the Securities Exchange Act of 1934. These include
statements preceded by, followed by or that otherwise include the
words "outlook," "believe," "anticipates," "continue," "expects,"
"guidance," "trend," “on track,” “encouraged” or "plan" or similar
expressions. The statements in this press release are inherently
forward looking. Forward-looking statements relating to
expectations about future results or events are based upon
information available to SpartanNash as of today's date, and are
not guarantees of the future performance of the Company, and actual
results may vary materially from the results and expectations
discussed. Additional risks and uncertainties include, but are not
limited to, the Company's ability to compete in the highly
competitive grocery distribution, retail grocery, and military
distribution industries. Additional information concerning these
and other risks is contained in SpartanNash’s most recently filed
Annual Report on Form 10-K, recent Current Reports on Form 8-K and
other SEC filings. All subsequent written and oral forward-looking
statements concerning SpartanNash, or other matters and
attributable to SpartanNash or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements
above. SpartanNash does not undertake any obligation to publicly
update any of these forward-looking statements to reflect events or
circumstances that may arise after the date hereof.
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version on businesswire.com: https://www.businesswire.com/news/home/20190509005956/en/
Investor Contacts:Mark ShamberChief Financial Officer and
Executive Vice President(616) 878-8023
Katie TurnerPartner, ICR(646) 277-1228
Media Contact:Meredith GremelVice President Corporate
Affairs and Communications(616) 878-2830
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