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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Q & A
Operator
Operator

Yes. Thank you. [Operator Instructions] And the first question comes from Chris Mandeville with Jefferies.

Analyst
Blake Anderson

Hi, good morning. This is Blake on for Chris. Thanks for taking my questions. Can you first of all, walk us through the learnings just from your assessment of the Fresh Kitchen business? I know you've been discussing some options there with outside experts. So just a little more detail on the main problems you're experiencing, what you found out and how you came about the decision to sell that business?

Executive
Mark Shamber

Yeah. I mean, I think, Blake, I appreciate the question. I think at this point, our findings and the decision, I mean, I don't want to focus too much on that as we have at this point made the decision to exit that business and we have a process underway that we think will be completed by the end of the fiscal year. I think at the end of the day, it was strategically a good decision. There were some expectations of sales growth from some customers and where we thought there would be opportunities and while they -- eventually the sales team, they thought the sales have come, they've come at a lower rate than I think we initially anticipated. And the length of the runs or the -- we have far more SKUs and smaller runs and I think we're originally in the projections. And so, while the team made significant efforts to reduce our labor costs associated with that and manage the shrink associated with that, we just weren't able to get them to a level where we felt, as the additional sales came on-board, so we should wait for that period of time. And then, it was a scenario where the sales lead time, I think was perhaps, longer than we initially expected. And by virtue of the shorter runs, we've talked probably in the last three or four quarters about looking to see measurable improvements, so that we could see that we're on a trajectory and the sales growth we've added customers, we've added volume, it just hasn't happened at the pace that we needed. And so, we felt the right decision was to exit at this point in time and move forward.

Analyst
Blake Anderson

Okay. That's helpful. And then, are you willing to share any numbers on the EBITDA level it had or maybe how much of a headwind that was to margins, so we can think about the lift going forward?

Executive
Mark Shamber

No. I don't think we're going to get into that level of detail. I mean, it was sort of an integrated operation. And so, in trying to break out some of the administrative aspects of it at this time, I think is a little challenging. And given, we talked about the fact, if you go back to some of the prior calls that we were doing, $40 million to $45 million of business, and we're -- with what we're exiting, we're only going to exit on about $20 million