SpartanNash bullish on future with military commissary PL contract
GRAND RAPIDS, Mich. — Fresh off winning new private label business for military commissaries, SpartanNash noted that its robust own brands initiative is feeding an enthusiasm for its future earnings potential.
SpartanNash on Wednesday posted $1.9 billion in sales for the second-quarter ended July 15, representing an increase of 3.7%. The increase in net sales was driven by contributions from the Caito Foods Service acquisition and organic growth in the food distribution segment, the company stated.
"We continue to be very pleased with our food distribution segment's performance despite challenging retail market conditions, as the creative solutions we offer our customers continue to contribute to their success as well as ours," stated David Staples, president and CEO SpartanNash. "During the quarter, we began shipping private brand products to U.S. military commissaries and look forward to the continued roll out of this program in the second half of the year.”
The commissary operator Defense Commissary Agency is the equivalent to a $5 billion retailer, Staples told investors Thursday morning.
SpartanNash has approximately 250 own brands in the commissary system today, Staples told investors Thursday morning. That assortment will grow to approximately 425 by year’s end. “Our private brand initiative with [Defense Commissary Agency] is progressing nicely and we began shipping products to commissaries during the second quarter,” Staples said. “With DeCA’s stated target of up to 4,000 SKUs in this program, we have the potential for substantial growth over the next two years, which would result in a significant improvement to our financial results. As we have previously noted, our strategy with the military segment is to be the best-in-class provider for DeCA in these Exchanges.”
“We continue to enhance our private brands programs for both independent customers and corporate owned stores,” Staples said. “In the second quarter we announced the launch of the Our Family brand into the Michigan region. This brand will replace our Spartan brand and will provide us with a system-wide national-brand-equivalent or better-quality program, providing a larger variety of product offerings at a lower cost to our customers, and will allow us to streamline our supply chain. Thirty retailers in Michigan already depend on the Our Family brand,” he said. “We’re excited to expand the brand and introduce it throughout our distribution network.”
Additionally, SpartanNash continues to expand the Open Acres fresh brand product offering, and have begun to incorporate its own fresh cut fruits and vegetables into the brand. SpartanNash also continues to enhance its expanded Living Well offering, which includes the natural and organic Full Circle private brand line and a significant number of new SKUs across organic produce and healthier specialty items.
We have extended significant effort to build an industry-leading private brand, and after recent wins such as the DeCA private brand worldwide program, are now being contacted by new companies to potentially help them drive sales through a wide variety of private brand offerings,” Staples said. “For the second quarter, private brand unit penetration in our retail operations was 21.5%, up 30 basis points from the prior year quarter, whereas the national average was slightly negative during the same time period. We ended the quarter with approximately 4,800 unique private brand items and we continue to enhance our assortment.”
In addition to posting quarterly results, SpartanNash named Mark Shamber EVP and CFO effective Sept. 11. Shamber previously served as CFO for United Natural Foods, a specialty and organic food distributor. Following his departure from UNFI at the end of 2015, Shamber has been working as an independent consultant and serving as the vice chairman, board of directors of Day Kimball Healthcare. Earlier in his career, Shamber worked in the audit practice of Ernst & Young, and in the finance department of Reebok International.
As SpartanNash's EVP and CFO, Shamber will direct finance, mergers and acquisitions, treasury, internal audit, real estate and risk management. He will report to Staples.
More shoppers, digital growth give Walmart Q2 boost
BENTONVILLE, Ark. — Walmart reported better-than-expected results for its second quarter amid surging online sales and an increase in store traffic.
Walmart's total revenue for the period ended July 31 rose 2.3% to $123.36 billion for the quarter, better than analysts had expected. U.S. store visits increased 1.3% over the year-ago period.
Same-store sales for U.S. stores, excluding fuel, rose 1.7%. It was the discounter's 12th consecutive quarter of comparable sales gains. Sales rose 1.2% at Sam's Club, and 1.8% at Walmart.
Online transactions surged 60%, boosted by new digital initiatives, including the acquisition of e-commerce players like Moosejaw and Modcloth, and an expanded assortment of merchandise.
"Sales growth is coming from across the business – including stores, e-commerce and a combination of both," said CEO Doug McMillon in a statement.
The company reported low single-digit comps increases in its health and wellness segment, noting that customer traffic, branded drug price inflation and script growth drove solid performances in sales of both pharmacy and over-the-counter products. (The company’s Sam's Club division's health and wellness segment saw mid-single-digit comps increases, which it attributed to generic script count momentum and strong performance in nutrition and protein drink sales).
A particularly bright spot for Walmart was food, which had its best same-store sales quarter in five years. The performance bodes well for the chain which is more than holding its own in the midst of brutal competition from the likes of Aldi, newcomer Lidl and Amazon.
Neil Saunders, managing director of GlobalData Retail, said that Walmart's continued investment in everyday low prices is helping to drive its success in grocery.
"As the grocery sector enters one of its toughest phases, we believe that Walmart is well positioned to make further gains," Saunders said. "It is one of the few firms that have the firepower to cope with the push towards compressed prices and margins."
Walmart has been investing heavily in its online operations and in price promotions. Those efforts took a toll on the chain's margins and net income.
"We note the decline in net income, but believe that some short term erosion is necessary as the business invests in its future," Saunders commented. (For more of his commentary, click here.)
Net income fell 23% to $2.9 billion, or 96 per cents per share, from $3.7 billion, or $1.21 per share, in the year-ago period, at least partly due to a loss from repurchasing debt after a bond tender offer.
Excluding special items, the discounter reported adjusted earnings per share of $1.08 a share, topping analysts' estimates of $1.07 per share.
Gross margins were down 11 basis points to 25%, including a five-basis-point decline in the United States. Operating margins fell to 4.9% from 5.1%, and U.S. operating expenses rose 3.9%.
"Strategic price investments in key markets and the growing mix of our e-commerce business reduced the gross margin rate," Walmart CFO Brett Biggs said in a statement.
Walmart raised the low end of its earnings outlook for the full year, now forecasting profit ranging from $4.30 to $4.40 per share, adjusted. Previously, the retailer said it expected to earn $4.20 to $4.40 a share. Analysts were calling for earnings per share of $4.37.
CVS Pharmacy to acquire 20 Fagen Pharmacy locations
WOONSOCKET, R.I. — CVS Pharmacy will be acquiring 20 Fagen Pharmacy locations in northwest Indiana and northeast Illinois, the company announced Wednesday. Eight of the locations will be converted to CVS Pharmacy stores and 12 will be closed, with their files being transferred to nearby CVS Pharmacy locations.
“I’d like to thank all of our patients and employees for their loyalty and dedication over the past 45 years,” Fagen Pharmacy owner Gerald Fagen said. “I’m grateful to have been able to serve the pharmacy needs of our community and I am confident that CVS Pharmacy will provide the same top-notch customer service and pharmacy expertise we have provided at Fagen Pharmacy.”
The two companies said they were working to make the transition as seamless as possible. CVS Pharmacy said that it expects to hire many current Fagen Pharmacy employees currently working at the locations. Indiana stores in Crown Point, Valparaiso, Gary (two stores), East Chicago, Whiting, Michigan City and Griffith will be converted in September. Indiana stores closing include three in DeMotte, two in Valparaiso and one each in Rensselaer, Valparaiso, Portage, Gary and Hobart, as well as Illinois stores in Hobart, Beecher and Hammond.
“CVS Pharmacy looks forward to bringing its innovative pharmacy care programs and services to Fagen Pharmacy patients in Indiana and Illinois,” CVS Pharmacy area VP Everett Moore said. “We will continue to provide excellent care to patients and look forward to introducing our industry-leading offerings at these new locations.”
Per CVS Pharmacy’s 2014 decision not to sell tobacco products, none of the locations being converted will sell tobacco products. They will introduce a range of health, beauty and personal care products, exclusive private-label products and the CVS Pharmacy ExtraCare program, the companies said.