by Terrie Ellerbee/associate editor
The company that will result from the merger of Spartan Stores and Nash Finch Co. will without doubt have one thing in abundance: brands. Plans are to begin integrating the two companies before the end of the calendar year, as shareholder approval is pending but expected.
Edina, Minn.-based Nash Finch operates no less than 10 banners, including Pick’n Save, Supermercado Nuestra Familia, Family Fresh Market and Econofoods among them, as well as the No Frills and Bag ‘n Save brands it acquired last year in the Omaha, Neb., market. Spartan brings D&W Fresh Market, Family Fare, Forest Hills Food and VG’s to the marriage, but the Glen’s Market banner is on its way out.
“When you grow your retail portfolio primarily through acquisition, you accumulate more brands than probably you need,” said Dennis Eidson, CEO, president and director of Grand Rapids, Mich.-based Spartan Stores, at the company’s second quarter fiscal year 2014 earnings call on Oct. 24.
After testing the Family Fare banner in the western Michigan market, Spartan Stores saw positive comp trends as much as 3 percent and in some cases better. And while that’s not “wildly explosive,” Eidson said, “the stores are getting refreshed at the same time,” and the changeover brings other benefits as well.
“It will allow us to leverage our marketing spend because right now…we have to do a separate (marketing) campaign for Glen’s vs. Family Fare,” he said.
Five Glen’s locations were converted to Family Fare in the second quarter with the remodels including updated décor and signage as well as new fixtures where needed.
By the end of next year, all Glen’s locations will have been rebranded as Family Fare stores.
Meanwhile, Spartan’s price-centric Valu Land banner will rest at eight locations at least until the end of this fiscal year, although the company is pleased with positive comp sales in the 6 percent range for the brand. Spartan took the banner to metro Detroit, a market that has been “a little more challenging for us,” Eidson said. “There’s a bit of lumpiness in the performance of the stores over on the eastern side of the state.”
Sales increase in both retail and distribution segments
Consolidated net sales for the second quarter increased 4.5 percent to $649.5 million vs. $621.6 million a year ago. Both the retail segment and distribution business saw positive gains.
Net sales in the company’s retail segment increased 4.4 percent, rising from $362.3 million in the same period a year ago to $378.1 million.
The company continues to refine its YES Rewards card program that was fully rolled out last year. Active households increased more than 1 percent vs. the same period a year ago.
Spartan Stores’ private label line continues to grow. During the second quarter, more than 100 net new private brand items were introduced, bringing the year-to-date total to more than 270. As of the end of the second quarter, the company had 4,600 items and is on track to introduce 300 to 350 more next year. Private label penetration at retail was approximately 23.3 percent in the fiscal year-to-date period, Eidson said.
Spartan Stores has seen little movement in price pressure—no “irrational behavior in pricing or promotion,” Eidson said—and competitive supercenter openings.
“At retail, we’re basically seeing no inflation,” he said. “And I’d say the pricing climate hasn’t changed significantly. I think everybody is in the same boat, trying to chase volume that in some instances just isn’t there in our marketplace.”
He said there haven’t been any supercenter openings in Spartan’s trade area, but there will be some activity next year, with three and possibly four Walmart Supercenter stores opening. Eidson said that “is a more robust number than we’ve had in the past several years…so next year will be a little bit more formidable in terms of that type of activity.”
Dave Staples, CFO, principal accounting officer, EVP and treasurer for Spartan Stores, reiterated that the company doesn’t have many stores that don’t already compete against at least one supercenter and that the expected activity is hardly a “new wave of competition.”
Distribution segment sales rose 4.7 percent for the quarter, up to $271.4 million from $259.2 million a year ago. Spartan Stores supplies approximately 380 independent grocers in Michigan, Indiana and Ohio. It is in the process of automating warehouse operations with robotic high-lows to perform some unloading and storage tasks. The benefits from that changeover are expected to begin to be realized in the second half of fiscal 2014.