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SpartanNash (SPTN) Q1 Earnings Surpass Estimates, Sales Up

Zacks Equity Research

SpartanNash Company SPTN reported first-quarter fiscal 2020 results with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings improved year over year. Impressed with its year-to-date results, the company raised its outlook for fiscal 2020.

Q1 in Detail

Adjusted earnings were 67 cents per share, which beat the Zacks Consensus Estimate of 38 cents in the fiscal first quarter. Also, the metric increased significantly from 24 cents per share reported in the year-ago quarter.

The company registered sales of $2,856.5 million, up 12.4% from $2,542.4 million in the prior-year quarter. Moreover, the figure surpassed the consensus mark of 2,537 million.The uptick can be attributed to increased sales owing to COVID-19 pandemic along with growth related to existing customers in the Food Distribution unit.

Further, gross profit of $423.6 million increased 12.2% on the back of improved sales volume. However, gross margin contracted 10 basis points (bps) to 14.8% in the quarter under review.

Meanwhile, the company witnessed SG&A expenses of $391.3 million, up 8.6% from $360.4 million in the year-ago quarter.

Adjusted EBITDA improved 35% to $74 million from $54.7 million in the prior-year quarter.



Segment Details

Food Distribution: Sales in the segment increased 17.1% year over year to $1,369.5 million in the quarter. Segmental operating profit was $11.4 million, down 53.7% from the prior-year quarter’s level due to Fresh Cut business divestiture.

Retail: Sales in the segment improved 11.5% year over year to $782.6 million in the quarter. Segmental operating profit was $12.6 million against an operating loss of $0.8 million in the prior-year quarter. The metric improved on the back of higher sales volume, favorable labor rates (as a percentage of sales) along with reduced health insurance expenses.

Military: Sales in the segment improved 4.9% year over year to $704.4 million in the quarter. However, segmental operating loss came in at $2 million against an operating loss of $1.6 million in the prior-year quarter. The downside was caused by increased incentive compensation expenditures.

Financial Details

The company concluded the quarter with cash and cash equivalents of $21.3 million, long-term debt (including financial lease liabilities) of $591.1 million, and shareholders’ equity of $685.7 million.

Cash provided by operating activities was $129.3 million at the end of 16 weeks ended Apr 18, 2020.

In a separate press release, the company declared quarterly dividend of 19.25 cents per share, payable on Jun 30, 2020 to shareholders of record as on Jun 12. During the first quarter, the company repurchased 860,752 shares worth $10 million.

Outlook

The company has been experiencing increased demand owing tohigher food-at-home consumption amid the coronavirus outbreak. Consequently, management anticipates sales to surpass its previously provided guidance for fiscal 2020.

For fiscal 2020, the company now expects adjusted earnings from continuing operations in the range of $1.85-$2.00 per share compared with the prior guidance of $1.12-$1.20 per share. Moreover, management now envisions adjusted EBITDA in the range of $205-$215 million compared with the prior guidance of $180-$190 million for fiscal 2020.

The company now expects fiscal 2020 adjusted EBITDA of $205 million to $215 million compared with the prior guidance of $180 million to $190 million. The projected figure is in line with the company's expected increase in operating earnings.

For second-quarter fiscal 2020, management anticipates adjusted earnings to grow 70-100% from 33 cents per share reported in second-quarter fiscal 2019.

Price Performance

Notably, shares of this Zacks Rank #1 (Strong Buy) company have surged 72.1% in the past three months against the industry’s decline of 7.5%.

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