SpartanNash Company (NASDAQ:SPTN) Q2 2019 Earnings Conference Call Transcript

Aug 15, 2019 • 08:00 am ET

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SpartanNash Company (NASDAQ:SPTN) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Dennis Eidson

As many of you know, I have a long history with SpartanNash, having retired as CEO in 2017, and prior to that, I served as President, Chief Operating Officer and EVP of Marketing and Merchandising, dating back to 2003. In the last few days, since I've stepped back into the day role at SpartanNash, certainly been refreshing to see the passion and dedication of our associates across the organization. We're confident in the strength of our platform and the effort of our associates that help us to secure wins across all of our segments in order to gain momentum. I look forward to working together with this team to drive meaningful improvements, while positioning SpartanNash to achieve long-term profitable growth and improve value for our shareholders.

As part of the effort, we've decided to exit the Indianapolis-based Fresh Kitchen operations and shift Caito's focus and expertise to the produce distribution and Fresh Cut operations. We believe this transition better aligns with Caito's operational expertise and it will enable them to improve service levels and efficiency. Production will continue as the transition plan is executed, and we're committed to make the transition as seamless as possible for our Fresh Kitchen customers, associates and our suppliers. We expect to complete this transition by the end of fiscal 2019, and we'll update you on the developments in the future course.

With respect to our strategic business objectives, our team has made progress in many areas during the current quarter. Although we've not achieved our profitability goals, we remain focused on translating our sales growth into improved bottom line performance. Consolidated net sales increased 5.3% to $2 billion, representing the 13th consecutive quarter of growth for the Company. We also continue to make progress on our other strategic objectives during the quarter, and are particularly pleased with our ability to strengthen our team, improve working capital and lower debt levels.

In the Retail segment, sales growth was driven by contributions from the newly acquired Martin's business. Additionally, we've experienced a positive consumer response to the relaunch of the Family Fare banner in West Michigan, resulting in a favorable trend in the sales for these locations.

In the Food Distribution segment, net sales increased 3% before the impact of the elimination of intercompany sales from Martin's. However, we experienced some deceleration in the rate of sales growth from more recent quarters, largely due to unseasonably cool and very wet weather. We're pleased that these trends have improved during the month of July as the weather became more favorable and the rate of growth approximated the more recent levels.

In the Military segment, net sales increased nominally even as the broader commissary environment continued to contract in the current quarter. We expect Military revenues continue to be slightly ahead 2018, the remainder of this year as we benefit from new business and growth in DeCA's private brands.

As we move forward, we expect Project One Team, our previously discussed Company-wide initiative, will help drive growth and