SPTN – SpartanNash's (SPTN) Earnings Beat in Q2, Sales Decline Y/Y

SpartanNash Company (SPTN Free Report) posted mixed results for the second quarter of 2021 wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same. Both metrics plunged year over year.

This presently Zacks Rank #3 (Hold) company posted adjusted earnings from continuing operations of 54 cents a share, outshining the Zacks Consensus Estimate by a penny. However, the bottom line decreased nearly 26% from 73 cents a share earned in the same quarter a year ago.

Consolidated net sales of $2,106.6 million declined 3.6% year over year due to the absence of the prior-year period’s favorable sales, aided by elevated consumer demand with respect to the pandemic across all segments. The top line also lagged the Zacks Consensus Estimate of $2,129 million. The company saw a sales decline across all three segments, somewhat offset by strong growth in some existing Food Distribution customers.

SpartanNash Company Price, Consensus and EPS Surprise

Gross profit dipped 1.4% year over year to $333.6 million. However, gross margin expanded 30 basis points (bps) to 15.8% on growth across the Food Distribution and Military units, and higher proportion of margin accretive Retail and Food Distribution segment sales. This was somewhat offset by elevated LIFO expenses.

Adjusted operating earnings came in at $29.3 million, which decreased 22.3% from $37.7 million reported in the year-ago quarter. Adjusted EBITDA fell 8.1% to $54.4 million with a margin contraction of 10 bps to 2.6%.

Segmental Analysis

Net sales at Food Distribution dipped 3.1% to $1,056.5 million due to lack of higher sales prevalent in the prior year on the back of elevated consumer demand. The same was mitigated with persistent growth in some existing Food Distribution customers. The segment’s sales jumped 13% from the second-quarter 2019 actuals. The unit accounted for 50.2% of the company’s consolidated sales in the second quarter of 2021.

Retail’s net sales slipped 1.8% to $620 million in the reported quarter, mainly due to the absence of last year’s favorable sales, attributable to higher coronavirus-led demand. However, the metric was partly offset by better fuel sales in the quarter. Retail comparable store sales also slid 2.7% year over year even though the metric rose 12.1% on a two-year comparable basis. The retail segment represented 29.4% of total sales in the period.

Finally, net sales at Military, which constituted 20.4% of the overall quarterly sales, were down 7.1% to $430.1 million. This was mainly due to persistently lower volumes at domestic commissaries caused by limited base access. The segment’s sales tumbled 12.3% from the second-quarter 2019 reading.

Other Financials

SpartanNash ended the quarter with cash and cash equivalents of $24.1 million, net long-term debt of $427.2 million and total shareholders’ equity of $756.2 million. The company paid long-term debt of $75.8 million in the reported quarter.

Cash generated from operating activities was $105.4 million during the second quarter. The company had free cash flow of $33.7 million in the 28-week ended Jul 17, 2021. Capital expenditures and IT capital totaled $43.8 million in the first half of 2021. For 2021, management still projects capital expenditures and IT capital in the band of $80-$90 million.

In the first half of the current year, management declared cash dividends worth $14.4 million, equal to 20 cents a share. It also bought back 265,000 shares for $5.3 million in the same period.


Management expects sustained momentum in the Retail business. However, it continues facing challenges in the distribution operations, mainly considering the ongoing pandemic-related conditions. The company revised 2021 outlook, which includes the improved trends in Retail and headwinds associated with sales trends in its Military business. SpartanNash also completed drafting the blueprint of its supply-chain transformation initiative.

The company continues projecting total net sales in the band of $8,800-$9,000 million, indicating a decline from $9,348 million generated in 2020. Retail comparable sales are likely to be a negative 2-5% for the current year compared with a negative 5-7% predicted earlier. Food Distribution sales are anticipated to decrease 1-3% while Military Distribution sales are estimated to fall 9-13% in 2021.

Adjusted EBITDA for 2021 is likely to fall in the range of $200-$210 million from $239 million delivered last year. The metric was earlier estimated in the $195-$210 million band.

The company estimates reported earnings per share between $1.56 and $1.69, implying a decline from the prior-year’s tally of $2.12. Adjusted earnings per share are envisioned to be $1.70-$1.80 for the current year, indicating a decrease from $2.53 registered in 2020. Adjusted earnings per share were previously anticipated in the bracket of $1.65-$1.80.

Price Performance

This grocery retailer’s stock has decreased 15.6% in the past six months compared with the industry’s 5.1% decline.

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