BYRON CENTER — Over the next year, SpartanNash Co. plans to reinvest its federal tax savings in its employees and in energizing its Family Fare grocery stores.
In announcing the food distribution and grocery retailer’s 2017 fourth quarter earnings, SpartanNash executives said they expect to split the tax savings equally between elevating its 15,000 associates’ wages “to the right compensation levels” and “in bringing this Family Fare brand to life.”
President and CEO David Staples said the company will offer associates a one-time bonus and increase wages for retail and distribution workers to be competitive with other companies in the market, as well as offer them increased training.
With the Family Fare reinvestment, SpartanNash (Nasdaq: SPTN) aims to keep up with consumer demands by becoming more experiential and focused on health and wellness as well as organics and local products.
“(W)e want to bring it even more forward into what the consumer is evolving towards, and not be stuck in the past,” CFO Mark Shamber said in a conference call with brokerage analysts this week.
Shamber said the company has excelled in many of the areas that speak to those consumer trends, “but we haven’t necessarily packaged it all together and really brought it forward” in a cohesive message to customers. It aims to do more marketing and various in-store programs to better communicate the message.
“So I think this is a lot about packaging that better and bringing it more clearly … to the consumer and really hitting on these big trends that I think we’re well positioned to deliver on,” Shamber said.
Combined with Family Fare’s “Fast Lane” click-and-collect service that allows customers to shop online and pick up their orders at a store and a home delivery service it’s rolled out in South Dakota and plans to bring to Michigan market this year, “we’re going to offer a convenience in not just location, but in the types of products we offer, the grab-and-go, the meal solution, and the convenience of shopping,” he said.
“Our store quality is high, we have consistently invested in our stores,” Shamber said. “But the world’s changing and the demand of the consumer are changing.”
SpartanNash said it expects capital expenditures of $60 million to $70 million for the 2018 fiscal year.
Reflecting the challenging and competitive retail market, SpartanNash executives said they expect sales from retail operations for the 2018 fiscal year to be slightly negative to flat. It forecasts that reported earnings will be $2.02 to $2.09 per diluted share.
That compares with a loss of $1.41 per diluted share, or $52.6 million, for 2017, which reflects $222.7 million in non-cash and goodwill impairment charges related to its retail segment, higher costs in the Caito Foods Service business that it acquired last year, and higher-than-anticipated startup costs related to its Fresh Kitchen facility.
SpartanNash generated $8.13 billion in net sales for 2017, a year-over-year increase of 5.1 percent, or $393.5 million.
In the fourth quarter, the company generated net sales of $1.92 billion, up 5.3 percent on expansion in its food distribution business and the Caito Foods business, as well as organic growth. SpartanNash reported earnings from continuing operations of $34.7 million, or 94 cents per diluted share.
The fourth quarter earnings included a benefit of 71 cents per diluted share from the federal tax changes.
In the quarterly call, analysts also asked executives if the current challenging retail environment presented any acquisition opportunities for SpartanNash.
CEO Staples said the company remains opportunistic, yet focused on maintaining fiscal discipline to keep leverage in check and avoid the financial stress some of its over-leveraged competitors are feeling in the current conditions.
“I think our company is incredibly well positioned to take any opportunity that comes its way,” Staples said. “We’ve always been focused on managing our leverage and trying to make sure we can be opportunistic …
“And so I think these environments do provide all types of different opportunities, whether that’s new customer acquisition, whether that’s business acquisition. And I think our company continues to be well positioned for any of those. So we’re really excited about the times. I think this is where we’ve been able to make really good inroads in the past.”