SPTN - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to SpartanNash Company’s Third Quarter 2019 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would like to turn the conference over to introduce Ms. Director. Managing Turner, Cathy ahead. go Please

Cathy Turner

good morning fiscal Company’s quarter to and earnings conference welcome XXXX SpartanNash call. third Thanks

On today’s issued Vice call and are earnings Time. everyone Dennis Eidson Chairman to access approximately Officer; Financial By the Mark X:XX should Chief Eastern have Chief which and and Shamber at and Executive was President release Officer. now yesterday Executive Interim President PM

will the at recorded copy of days. earnings available replay www.spartannash.com/investors. and call a visit XX website release company’s For SpartanNash the being This is a approximately website be on please for

Before the made that discuss Internal projections we begin differences forward-looking in companies. from we’d uncertainties pressures plans contain like call results others statements to discussed and and remind estimates may everyone distribution factors such involve cause actual food statements. results include by that during may forward-looking comments among among expectations that competitive these forward-looking differ significant management statements. risks and These external may will today’s and retail materially

uncertainties, The conditions. strategic operations integrating and and general plans economic and market in inherent implementing

any with information associated Investors statements. factors the SEC. asset any revise on undue release forward-looking to of claims XX-K recent Report the forward-looking obligation statements in risk company’s should statements. and most Annual uncertainties be earnings filings any other about risks Because with forward-looking and and risk these or Form the uncertainties can update Spartan place not and then Additional intention found SpartanNash’s or

most earnings financial other non-GAAP required financial Regulation performance. included useful reconciliation these This comparable G to measures as yesterday. was company’s company’s information release the presentation the period with provide about to certain issued the directly information A measure includes investors financial in by and GAAP which non-GAAP of is and comparable measures measures

pleasure to over my to now call the Dennis. turn it’s And

Dennis Eidson

our highlights and Good in today. will overview then an today’s financial Katie. operational third on additional I’ll annual of review detail progress our outlook. thank us you joining our provide On some everyone for start quarter morning and to Great, call with Mark financials

Finally we call up your for open the will questions.

since the have last role In grateful especially performance support weeks, organization we fiscal our some that at been entire the also team. and actions been however, that in impacted own environment recognize into XXXX. the We four has for the of the to management step the I’ve SpartanNash. day operating day I’ve our challenging, acknowledge back

the the external We in are to execution results plan committed of by on our impact improving mitigating our business focusing of factors.

quarter to continued with to track of second delivered year We’re recognize platform, of pleased results have provided to we keep take and for encouraged in quarter we outlook, we our full in the us are the achieve current and August time year our the consistent growth as with however, with on We earnings have and us long-term initiatives the current in benefits third our that guidance strength strategy. confident realize fully the remain part our release. will are of

company. net consecutive $X the of increased representing billion consolidated to quarter, the third growth XX the For quarter sales for X%

generated in have quarter realized as a our growth to line of as another profitability the to satisfied for sales We’re expectations quarter. with well

positive quarter, progress return We the store our strategic during other particularly retail to pleased and also are with on continue objectives sales. to make comp

of approximately the XXXX. fund down year, fiscal the last of Martin’s further of reduction year. Project million ability over one the $XX to annual team to balance, beginning $XX improve resulting at a million the we in in remain our Since in on both The working and acquisition capital compared third debt, and debt in to to $XX our run using savings over million on ability rate paid $XX quarter reduction the to despite achieve debt track million prior from of

the target. significantly from forward also reduction expect fiscal as million to working the make is the improvement, our year I capital in work $XX capital sales. we quarter reduced team to look of third while Our fourth quarter growing last we working toward

business sales the net were Food our a segment, reported basis. in on segments, to flat Distribution Moving

elimination X.X% second sales before impact increased to sequentially improved of the However, the rate of and from of the intercompany growth the Martin’s quarter.

will supply forecast the we reduction and in to processes we’re systems committed our strategy improved already demand chain On levels. private seeing support requirements. tools and we remain Recently, our side, to and activities, better in efficiencies service purchasing to invested and strengthening which inventory a the improve

drive in to In efficiency addition, our and investments we meaningful in transportation costs. warehousing to manage operations continue play

facility we fresh will us the distribution will for grand event This operations which Dakota. North opening region, Next in hold of facility week, the Western efficiencies our to and in our capabilities enhance centralize Fresh a Fargo, allow our network. will new generate will

our more initiatives Investments sponsor we are in make execution continue to costs. also reduce operations being attract in you systems chain look updates transportation warehouse and our associates made to strategic to in operations the improve future. forward and talent as in our and investments to retain bring supply We’ll our and and

exiting announced Kitchen we the Cut Caito’s our to Fresh As distribution produce last and shifting focus operations. quarter, Fresh operations and we are

transition efficiency. and of anticipate to Fresh us cast operations aligns operational facility the as believe related fiscal expertise early the quarter quarter XXXX. assets first cease this will Caito’s and We with fiscal and during We better selling the Kitchen will quality improve as of fourth and enable XXXX

Military our sales growth private decreased DeCA from by nominally In comparable offset DeCA’s as program, where business new locations. at brand net and sales declining the segment, operated

private remain option exclusive private brand we of supplier DeCA’s to recently and global DeCA the products. We’re brand happy to report extend our their that relationship supply exercised

was by Martin’s newly driven contributions from acquired In sales Retail the business. segment, growth

of the for at positive beginning to mentioned, a sales return store I call, we As the the quarter. reported comp

a experience in in continue the in sales Michigan, locations. of positive banner the consumer We resulting Family favorable Fare response these to relaunch West to trend for

to it we’ll our experience, apply and ongoing and learning strategies. from marketing We’re merchandising this relaunch

and Through and customers this dunnhumby. meet experiences shopping with pleased customer strengthen insights their relationship future a also our growth. partnership fuel better We we will to programs loyalty positioning are needs as and to have new assortment, for data started deliver our

to respect with process has advisor search Spencer transition Executive formal next executive leadership the identify to firm, our has in of Board Stuart, Officer the Finally, an consulting Directors begun retained process. an and SpartanNash. to a leader the of as been Chief

With that, Mark over turn call review. to I’ll the now the for financial

Mark Shamber

everyone on and Dennis, good and conference morning the us Thanks, to webcast. call joining

fiscal of of per Adjusted X% billion, over EPS share, quarter third $X.XX $X.XX came diluted at in diluted Net of billion. XXXX sales increased quarter. XXXX’s quarter $X.XX million, to of the third EPS third compared in of third for an or $XXX sales for the to fiscal $X increase adjusted share XXXX’s per XXXX quarter fiscal

include program both the third $X.XX diluted XX, for were excluded for reference $X.X my expenses share million associates, expenses in for on and remarks. per specifically Our I’ll a operating prepared these transition eligible our costs in supplemental transition as or costs transition XXXX. CEO adjusted earnings of the of incentive August associated quarter the from with provided which guidance remainder

in decreased Shifting a the earnings million million, fiscal Distribution quarter, share share of fiscal per third diluted third quarter sales XXXX. to diluted GAAP quarter. business our $X.XX to of by net $X.XX reported basis, in X.X% On or $X.X Food in segments, of a per compared to in XXXX’s the loss we $XXX

sales Sales intercompany X.X% existing the of elimination the sales growth primarily driven increased Martin’s by customers. to subsequent acquisition. to from Excluding

third $XX.X an to of as totaled costs of compared primarily offset asset quarter million, XXX basis from higher increase Food related supply the in fiscal accelerated costs points chain Inflation XX quarter, in from fiscal and volume. basis Food QX, in quarter to impairments, third compared in higher third during partially well up the Distribution expenses million the higher basis to XXX points the Reported increase quarter administrative due as transition points for XXXX. the by earnings to $XX.X earnings XXXX, of and Distribution an to

Adjusted million operating of prior the the $XX.X income income versus totalled third operating million. adjusted $XX.X in quarter year’s quarter

$X.X operating as other well in are in excludes related of Kitchen the which year as to adjusted Fresh expenses operations Table quarter in earnings release. press operating Third losses the current yesterday’s the X million detailed

during Fresh could expect as the cease first we assets earnings occur quarter the As production and quarter covered related fourth release, of the and the facility as of in the early disposition the that Kitchen fiscal will XXXX.

decrease program. Military lower mostly The million. $X net the sales of or existing incremental the reflect compared in X.X% private by offset DeCA’s at of operated $XXX.X expansion brand of to locations, prior to and continued DeCA third the with approximately quarter new business volume primarily $XXX.X customer, million due comparable sales of million sales decrease year from is

primarily XXXX, third of and third quarter XXXX, On the earnings an operating operating of due quarter in chain loss in basis, $X.X the loss supply third $X.X third higher $X.X adjusted to reported was quarter. of the administrative to million Military’s quarter for fiscal compared earnings million Military in million $X.X million operating XXXX’s to expenses. an of costs of compared

our net was the quarter increase in from compared The due business. the million third year. Finally, $XXX.X XX.X% contributions to sales for the $XXX.X Retail to increased million acquired sales quarter last to Martin’s

sales offset sales in who by store are total were gallon per areas to fuel a comparable were slightly X.X%. decrease primarily Additionally although price negative. These a lower partially positive gallons due

The by earnings compared million XXXX of Retail for quarter stores, of and across higher million $X.X reported Martin’s $X.X million costs. costs These acquired closure the the combined third $X.X quarter. offset driven of in operating with increase was were transition several prior by primarily in third year’s of in the by underperforming earnings margin categories stores. increasing the the to and the partially contribution improvements increases administrative

earnings to $X.X basis, in XXXX, an an largely increased rate operating million for of earnings Interest period expense XXXX’s million of to the million million. year. higher On driven $X.X in third quarter, by $X.X third $X.X last the third interest the of $X.X same adjusted were quarter fiscal by to XXXX increase compared million of operating compared quarter Retail’s

third distribution expense the assets rate previously corporate immaterial. interest with will further $XX.X the any comparisons we we our in with of as plan quarter improved that termination be pension the due expect the A-X Our remaining Also of down And after early associated loan of costs expenses pension the quarter. recognize to third plan announced. in of the settlement actual sequentially term million pay associated

with consistent operating flows relatively of which our Year-to-date, of $XXX million, XXXX cash we consolidated is million. cash generated operating year-to-date $XXX flows

decreased total offset closed the million, approximately acquisitions the of the have Our debt term disposition capital as $XX and other our certain non-core and supermarkets investments Martin’s XXXX improvements capital to fiscal in net of end $XXX from working million locations. by we long of with

incentive profitability have now we XX, And transition programs XXXX, the current in provided outlook expect associated XXXX. remainder the August with on CEO guidance. reflected consistent the our with and our For of transition sales and the supplement we on costs

expect We at that on sales our net consistent single-digit outlook mid with growth XX. remain original provided will February

plus comp to fourth points. basis are XX sales be expected flat relatively the or Retail minus quarter for

year detailed in in X yesterday’s million $X.XX release. on basis outlined of an release, yesterday’s we taxes to expect after $XX as full earnings per excluding million $X share As charges $XX earnings totaling adjusted Table of to

to This excluded have the $X guidance specifically now costs, August million million from transition which been guidance. $X.X our reflects of XX

partially a programs annual for incentive plan. the lower supplemental offsetting incentive the Company’s XXXX payout significantly With

diluted After fiscal the per $XXX will in operations continuing of we we EBITDA million the a expect range costs, $X.XX perspective, from range from GAAP XXXX be From reported earnings expect share. $XXX.X million. factoring fiscal adjusted will in to transition $X.XX XXXX to

to purchases XXXX guidance may purchases We for for or million range fiscal expenditures are versus considered there updating not XXXX. $XX our to are whether GAAP in lead of expenditures capital impact certain time fiscal as a million capital $XX

to XX% while million XX%, range from amortization to $XX to tax benefit million rate $XX adjusted will our year to to of XX% now a We and from and our tax range depreciation from rate expense from full effective range $XX million, reported approximately range million interest expect $XX.X XX.X%. will to

point this back at over I’d like to And to Dennis. call turn the

Dennis Eidson

the third on reaffirm a with to positive return to done return are growth the profitability retail full-year expectations long-term. to our work guidance. comp that believe we and we still the pleased to organization as We capable store closing In over needs levels top is our our line – quarter be Mark. achieving capable ability sales recognize and deliver much to Thanks, of

on to and growth. focused is get back our is executing to us objectives profitable team Our

questions. turn I’ll that, call open with And turn for it and the back Francesca to – up back it

Operator

Karen begin now first Instructions] will The with from We ahead. the [Operator Short session. Barclays. comes question-and-answer Please go question

Karen Short

Hi. very Thanks much.

and elaborate wide fourth to can it’s you because takes little a question. my relates excluding for XQ? the to ask the That’s including as Just is a about transition wanted that bit the or on little still bit XQ guidance pretty first range puts into to it quarter, maybe the whether back EBITDA

Dennis Eidson

those couple expense Yes, And the it I some were seen insurance we in and started items we’ve by areas higher Karen, quarter well had I areas. are I risk. we’ve guess insurance our of has there areas this mean, would has started of that of can period than any had. the from off exposed But the one performed factors that way historically but health judge think perspective side the some week we’ve uncontrollable we’ve quarter the any that you health certainly given or weeks, on a the such into rates fourth mean is I historically were of – that self-insurance some I play, where in fall as

But that improvements supply will so within also we’ve base start to make we to a – expectations we’re while are start leading a then, it. chain And those see our XXXX. got that take good give us also – of some we’ll component and into to striving hold some and was

conservative little just the in regard. bit range on We’re a being that

typically it’s wider know range to it I than but QX we have that much it our going into wide. we felt would leave So was that a prudent

we versus some that to we upside the that one started message off but felt weren’t if give a and way as maybe try narrow we have to We other might send. we trying well to lean

Karen Short

Okay.

more the on on working amount you’re $X opportunity? exactly kind elaborate little you the on and note is doing frame a also what just there that a a chain. on bit you Can So of could supply capital

Dennis Eidson

Well.

of think some we’re taken of the RDC’s away we’ve done mean, of of we’ve our supplementing some the certain our for done some talked third the identifying where supply on we’ve think that that team job We whether and shifting On started the growth. some parties And had and hire. business I and but stronger away that and certainly about getting we’ve they’re calls we’ve contract of chain, I – them folks having HR buildings. I with these some great temps on or going been out of of a own into we’ve things customers and volume move with workforce has in to to the prior been

– fleet that we your using selecting own of supplementing opportunity the bringing doing own as And talked from more instead of contracted your now last drivers so part for of we’ve were and of selecting comes workforce from driver temps couple you’ve third-parties. with got the where years, our

identifying onboard standpoint. We’re drivers bringing that and more the from of

a cost on So use there a you mile, to that be could differential more a when XX% per is XX% third-party.

at folks way experience curve the that we’ve the point, onboard. Now progress folks always in-house down significant feel historical brought we’re the that we with the the the we to where got challenge not we’ve there. all migrate environment that making we’re don’t rate in low unemployment seen The bring everything that on is but that we current

there we a caution we same these from level there’s the past. not bit expect the otherwise little new get So would efficiency in hires may of some of that of

what of And feel the I is the to say, opportunity within all then mean, I aspects of the – the the I turn it’s the inventory on and working we I working a capital but reduce second more our primarily there AR some on things levels. AP, inventory focused think of capital, call levels of we’re different on it’s inventory on of side between it I there. question, some focus where inventory the would mean, is I of on mean, part would

Karen Short

give that? you on then by can what outlook color basket And versus inflation. and you’re just retail to little a assuming that? cost to turning on was of you’re then going then terms with inflation specifically versus I’m seeing in traffic category And what give inflation retail for Okay. at and

Dennis Eidson

negative than we better at inflation positive slightly obviously on some was still and quarter comps the dairy. was the the sales in more the or was XX little transaction We bit and retail at the inflation XX that positive a X.X. grocery which experienced robust points of transactions per was The saw than two the on in sum Yes inflation little of the retail points. bit the X.X% makeup the higher QX was retail

side double-digit. the On eggs the quarter is category negative dairy of business negative XX we’re points year-to-date significantly a were the that egg in was negative driver that big

at on inflation us. see affected we side that So the That’s what retail.

QX the on that guidance we of clear we we on Mark quarter. the I question in answered Karen guidance end being was of this that it gave QX at part the that it the wide make insisted reaffirmed that

simply math taking it’s transition out costs. So the

think numbers are We gave So going the thought you calling bit companies to that and everybody quarter we can we’re in range. little that a we sure to a I we committed gave so to we going challenge a you stay were make and understood. hit the wanted number we

probably to devices bit that a would I our think but we narrowed blame it have left own on me. one little

Karen Short

thanks. helpful in get that’s the queue. Okay I’ll back

Operator

Mandeville question is Jefferies. go Chris next with The Please ahead. from

Blake Anderson

sustain forward to And about we Hi what Starting over same-store margin? this a sales on you making? just that investments is capital was prioritize try invest to the same-store you’re talk Blake even think for maybe bit retail you the that can little more positive your willing segment of how flat positive going to sales? matter a should about willingness drove or to on Are Chris.

Dennis Eidson

with the incredibly to diligent sales. store the I would in the team say comp through was regard us managing quarter

think insights from Laurie Executive a I’d So and merchandising those business and her to we she’s for have past. brought new is applying of a Laurie marketing give responsible I for that. And the she credit our first lot Senior Ryan

through dogged that to we it clear of and going the indeed got increasingly sure make organization were we quarter kind became did. what was we close do to to to we we’re about they positive comps were going be very Blake As the And there. going

I in fuel all to the quiver the not using would say aggressive whether quarter social on pretty irrational aggressively we comp-store promotional sales. drive the media front arrows but were of in quite the use it’s aggressive we

remarks pointed out with its feeling in his Mark scenario the run QX. here As we’re same earlier

up were you look we that our if comp trend bounced we So don’t bouncing down to see at down. and

period a again is holiday to baseline that positive how got can we maintained. so on would our we’re pretty maintaining relates a but retail it been I That’s of has QX capital Fare Family characterize of the took expanding the we I the know it’s going we pretty hoping company lot unknown to the segment West amount of referenced really good how couple Michigan feeling Last get significant last we We’re I as of a to of be year relaunch there. there’s And spent aggressive the I driver that there. capital in significant did banner in was capital years. where in that spend.

plan of side. the the execution at is just supply our chain probably is forefront in of it think retail as I the

we’re think forward. both on positioned focus going well the distribution is I as our segment strategically So and a and retail company in that execution

Blake Anderson

for XQ? maybe expectations what it All I And your right the did you are great. say then missed distribution in sales

Dennis Eidson

be where food I say out beginning would we didn’t. at year We have distribution. of as the to we for we’d the guidance that But thought laid the

impact it’s in the say to of as quarter. inter-company or is probably been would far. would continue low-to-mid for adjusting all expect Martin’s the that consistent so elimination. I I single that fourth So digits They’re the trend they’ve that still year excluding

Blake Anderson

like supply time as moving And you’ve is well several declining some looks there’s been for All had a cost center then Fresh now. been Kitchen I one pieces talked for the last elevated me know that about we’ve some It chain in margins. those on operations. have as distribution right. distribution issues

or business. exit single-digit low-to-mid to we about can even you’re how assume in Fresh margins? Now soon the if stabilize able expand seems you talk can And like making you investments going continue some you distribution that to to you’re start margins still are that it in Kitchen

Dennis Eidson

be over I millions doing we’d that repeating in Well business to it do our over and of soon as possible. them as short again. think would like the answer and transactions But thousands we’re and

small those it’s to so on lead that efficiencies our And end. improvements big

get the focused so foundation for the start side. those and team team chain on the been on improvements And us supply have getting laying his Walt those to to

be But in of wherever the more a the in one to as have true we And you’re focus because of taking more different system. using in cost answering at and routing efficient routing out I mentioned technology we’re third-parties shift efficient becoming become software questions have our reduce reliance trying outside will the in then the that from perspective. Karen’s some on the the is we just looking factor to capable that

engineered focus and can that with where put we labor trained has within help we’re increase case and a the and remains happy not be per standpoint shipping have throughput I efficient we’re away our working that. as at the with meaningful improve hour and would supply but possible our from that’s Looking standards throughput. are a try to where to to line. and chain the and to Again as been be benefits bottom associates our having say single warehouses the selecting throughput and

laid we results hopefully that into go able for being second of we to virtue by and like third think in us I the a feel into of we as to benefit quarter bit guidance year-end maintain get we’re out that starting the XXXX. And the should quarter traction

Operator

The with Please next go Charles Northcoast question is Cerankosky ahead. from Research.

Dennis Eidson

Chuck maybe morning if you your we back you get can’t the our Chuck. end. We on queue. otherwise in hear be want muted Good you second line another can give may

Operator

go Capital. BMO The question ahead. Kelly Please is with from next Bania

Kelly Bania

questions. impacting margin the the maybe I segment gross help quarter. talk understand in shift customer Thanks my as a you if it how if Distribution Hi wondering driver the mix about segment good could by was margin could within gross you is quite for us Particularly And just that? accelerated taking well? Wondering morning. bit of

Dennis Eidson

I by I say say the Martin’s. don’t what for improvement? significant or typically of simply the when think the them. Kelly of into talking would a drove reflection you’re year-over-year in I perspective margin talking Well that go overall gross a any little bit to margin from saying segments answers our improvement degree. the obviously gross sort would is the you’re to are acquisition the – different gross you’re improvement margin of sequentially as year-over-year The we

Kelly Bania

last seasonality quarters changes? to closer was if when to you understanding have am think just with couple Martin’s? just XX. pull just or if it The of XX Martin’s margin was been I this curious closer I there gross underlying underlying And was what’s out any

Dennis Eidson

say an to Kitchen a about as I careful think of what that distribution. contributing that we Dennis a a would to from investments and losing the a Kitchen little perspective with competing significant it overall margins able feel comp bit to from as few I was I comps that Fresh food the that would were for I we say were where side. were we retail to made want much drag money be ago on as just us our just on in we Fresh they we overall factor a about marketplace talk was helped achieve. made we’ve comments it made the the here in relates and the selective how particularly the we perspective that moments sequentially sale were some retail

a sequential from certainly was a benefit of standpoint. Having that the out mix

a say Martin’s But charges sequentially some we obsolescence the on we’ve quickly last would some inventory didn’t been at standpoint from And we have I year’s look thought. bigger that equation that was else. really Kitchen exclusion some to as of year-over-year guide the probably would numbers move in anything much the had from it Fresh had some from from would we had customers I than As third the say related a charges that taken board brought there. as sequential we a where quarter driver

Kelly Bania

customers coming just customers then just and much distribution mix and that think larger margin? impacts How from you gross X.X% smaller is shift how as the the growth. Okay about the

Dennis Eidson

to the by mean We’ve I from X% we relates the to that’s that maybe true year said declining I our losses shifts set year-to-year an we we of independence. think based about this we’ve guidance talked the say any group I about them or on number potential as it overall still X% although talked business when win would it holds and think closures. as I for core offset

get I would a larger of from and the coming gross operating to we’re how of versus going margin may have similarly play to function it’s growth but have out a margins lot the on of the operating but that they a say you they those that When to they customers able customers. much is lower locations lower truck in put So we expenses. some a that’s maybe other regard also

growing minus mentioned. when have reasons the being the that to continue range they may we the be driven independents I’d we’ve of minus say or obviously just independents highlighted versus that positive sales the look topline well X% independents customers that any customers comps but We is at by and larger to probably smaller X% are are sort pressure outright. due competitive on margins other the in gross they’re that X% the we below whether it’s that and certainly range we that openings have have to that comps sales

Kelly Bania

And just the on guess transition costs. a helpful. that’s Okay question I

EBITDA you – there? bit your that adjusted excluding maybe are little process thought just can guidance So from the you that a explain not

Mark Shamber

a our accordingly to we’re second occurred. much that going similar package for it adjust and the could currently consequently were is mentioned where – CEO we that the you to look an supplemental that would two any. that to as of next might what or we year trending know But pay look once have half run in the uncertainty search well experiencing expectations that original out if off like if we and the laid and we program at don’t we’re for we’re holding be is we XXXX for out it. the One and and obviously budget thoughts rate guiding that individual’s our factor toward so our have not as we what the There into guidance we accordingly unlikely we’re currently of it incentive relates we then incentive at are annual beginning to of compensation

components standpoint some a have financial earned. But we have from that were people a standpoint to from performance payouts. There were any not going strategic may certainly

fill there place So to XXXX the but to the as stabilize sort program the bucket payout XXXX into drive in improvement XXXX a for positive some standard get target us AIP. of we give guidance at look end XXXX our to at momentum or back business a supplemental some going in to and put we’ll significant to was payout have of try a

– received would I I of million incentive our year $X standpoint fill because the be this it bucket out for and for of purposes then or million $X to $XX as it year having so a analyst that felt and $X this from number think next that that penalized us year $XX adjust an then investor next seem the little if to million to million. a be well AIP guidance year. out million we would I for say it for instead disingenuous it is the million have don’t number let’s help year maybe year. for said, exclude that if maybe $X.X get If an from million are pull Like and using an to to I even million standpoint not this had then And bucket it bigger $XX number would to to next it and $XX

XXXX that reoccur greater would the targets it felt it for and Does probably will some program – make purposes better sort that there’ll current in greater year felt than for we even sense? should be and in. in be that – this was would so not incentive people annual particular though next keep that have for is of even it that amount we though we we leave comparison to So it guidance

Kelly Bania

that’s very helpful. Yes

rest for Because is is fresh X.X said and somewhere So it the I quarter think that supplemental. this so range? was X like kind to you I guess of the last kitchen the

Dennis Eidson

Well no.

– switching you’re is we’re between or adjusted So what what I think we’re and isn’t. mixing

So what earnings would we’ve kitchen did that that of the the same the the for the kitchen adjusted year that as reported. fresh in X operating results Table adjust it’s and this out out and we fresh range release fresh think kitchen the are on numbers left we be but to we

the how when call who program we gave be finalized calculated and going the had excluded the and and been incentive second on to it our be was to achieved. However was program guidance quarter going not earnings –

had that finalized. package the we determined CEO before because when as into because guidance. weren’t that’s and subsequently put them those well yet yet numbers you the so None of we been would Those Had both were to as known formalized gave as they hadn’t done cost back we had are excluded the up so in guidance we for range a reflected give August they have firmed our been where then. and or able quantifiable we

Kelly Bania

thank Okay you.

Operator

Please Northcoast question Research. is The ahead. Cerankosky with go from Charles next

Charles Cerankosky

you. Thank morning. Good

what of improvement be food margin. the selling the idea an sense of in distribution us the then give timing you of about what from facilities? could kitchen the inflow off cash secondly First a fresh And might

to lot got but how You’ve months see XX the previous there unfolding over going to to a back on next that get do XX you months? levels

Dennis Eidson

On kitchen the along love far a that could number. you to give be guide enough share I I’d crush

and is got number offer of point of assured. but sort one we’re number interested I’d we’ve we until feel I think to parties got a a with that where the and ahead at get to party all time process up be that a signing but on moving this in focused we we’ve point reticent

it’s in diligence something early that of little nature. to offer able to folks I be bit a for still think

from doing and you relates in not warehouse. our chain I lift. things as distribution that to it’s that think food the is are it’s make supply that few that individual moments one ago soon suddenly change a my are – comment it can big improvements is the the that easy we of it’s that you get challenge there As – just could a not folks processes as and Is modest it’s

So the power select a how and Jack you off step case.

sudden in lot the and doesn’t like the that a but jack around step-off to versus it’s walk seem you up picking the efficiencies you’re lost that other get do step that meaningful. of two day those in If power side XXXX isle the XXXX you side having three you’ve improvement. productivity a now and Similarly which and all to you meaningful you is times a of see cases

am point materialize. those to improvements that know see a say as don’t to I I at I So could right now where we’re start to when going

months some to eliminating virtue parties. improvements bit get for of third We’re XX But a to an where it’s think starting back some to and “green to months. certainly little see starting of to I optimism cause we the give of by the see that exact months we’re us XX use shoots” historically premature whether timeframe were levels give you we’re six or

see need levels. could will before a more we think back I to little be to commit when we we to those progress

Cathy Turner

those Mark it is to expect realistic levels? to returning

Mark Shamber

the for think the of I or is for types changed it’s business what haven’t customers I And timeframe. Well where the say would over real. things that

I of think non-traditional We’ve DCs our added business dynamics. it’s and overall realistic different that but types we into have customers. picked changes some up the

think be serving that DC are I say where customers that’s we’ve But an centers the to should got the able element can those levels. the think distribution the if I to get we of mix So a to to same with able they in same I’d levels. that instances return be historical do change same back lot is cautious in to be had there

the DC DC. a to customer a how when it’s if before their that the in example entire didn’t the a business But large put have what work from does that and to customer decide going we that works picking dynamic take the an we we that folks we under-appreciate we’re suddenly military can’t of from changes

And haven’t – to got four center. a customers particular to be get three we’ve where same much mix time so if where in of should a there changed I of period we’ve back they��ve complexity they the we distribution feel input added over able to yes. years

that to a to probably to still get within back that commit not the improvements could standard make to back we once willing operation I’m sure I’m same DC. get level but they

Charles Cerankosky

you. Thank

Operator

ahead. last Please is Mushkin from Capital. with The question RX Scott go

Scott Mushkin

really you helpful. questions. the Thanks guys. really for detail offering guys all my have And appreciate And taking thanks been

what was things. but I couple you are and this think wondering is like question of you about looking when a for? So a CEO soft

Dennis Eidson

operate we bit. question. have we a in the soft we we pretty a little adjacent business space a a a dabbled We segment complex difficult and retailer mean a That’s we are afford space in model military are too. I distributor

skill I business pretty I’d set it’s have experience. person probably to So this to finding we’ll planning to special is going right the kind in very going what this of it’s that early much and process that a that Company the we forward. run the I don’t more can this. be executive phase add lead pretty say diligent think varied know the runs is in of and executive to but

Scott Mushkin

good. That’s Dennis Good the that. going bit sounds to seat with little be for a luck It you’re though. in

with company part dealing where wondering their that a that that then So may wholesale not to How I XXXX, much risk there bit talk are And you thinking customer inflation? wanted a that? you are if question. your of going Inflation the pretty may is the was customers part retail to think wholesale two and as see nearly of question. the little you I about into question is and a large That’s of models clients any your couple noticeable business a XXXX? marketplace with was two large I seeing second. get or think for part could be customers in in with one you as changing be the

Dennis Eidson

side quarter year point. the on it in on the the XXX inflation was at Yes noticeable

is are probably model the prompt a science fresh significant for our Our customers. little side the wholesalers the and been generally allows flow-through a it’s more to both on but model of pretty that I in art directions pretty as to business of stickiness that value little speaking larger of think pass wholesale in models problem typical generally which for inflation than sometimes business general in inflated relates hasn’t it and product

kind independent and very trajectory level our customer from the to attempting We understand been business purposeful of a we’ve and of base. macro diversify

I been think doing we’ve that. effective relatively at

I we’ve increased distribution XX quarters space where the indicated, side that it’s pretty X.X% consecutive number sales today. and think is our on the considering the good increased As I we a

challenges us I think customers best satisfying do supply providing are with unique chain solutions we but grow customers that what always focused there actually have those to more doing I’m they risks the on for business.

isn’t at trajectory business. think customers certainly list. like or the loss loss the looking our of of of those my and top potential radar always near I So sitting here The but on the of is that customers we we most that blocking the And anywhere fundamental back going more day customary what execution our and to to was can every do we’re to of to tackling to operating do. the a stuck where need that level getting us improve of important seeing thing profit is today

Scott Mushkin

the people allowed you guys how me. I queue, tell don’t follow-up? I know more many are Am one in

Dennis Eidson

should we okay. No, be

Scott Mushkin

Okay.

How business, do an at it. looked we obviously challenging, DeCA a understatement. guys bit continues the it’s there? you maybe So be change to little the As trajectory

Dennis Eidson

customers is opportunities hard some with in more of a their brand question number the The well different DeCA They’ve very continue got them. by their with thing top And private We of can received grow working shopping answer. number stores That’s improve a are on think at that difficult to a DeCA. a we been probably, to initiatives. to has model. – line that business

we’re or I XXX to today. up items think, a like XXX

I plus quarter, have queue That’ll think, been that another XXX in out next. we’ve got this already be early maybe the approved. rolling

So us. I probably helps think an that acceleration of

who next shop. some were will some There’s to of at potential there’s kind think, year changes be shop can to I is, and beginning commissaries. allowed going large rules very there be additional see of of that vets – the a group at should we are of what

of not all an are a is be will, them significant plus domiciled number the million think XXX although the $X seen I number X,XXX. will I’ve think I and projections near excess a of commissary,

sales So DeCA to customer through that’s opportunity their for an adding grow base.

And areas system. there improve getting and improvement there then for it’s supply which DeCA us, of the efficiencies on into think we chain, plenty in the with collaborating to continuing of are

one talk we’ll the for at less next with and sure the be to of mean about the ways that is a pull. are there guidance business I XXXX end quarter. to think levers I challenging So

Scott Mushkin

Thank guys. very you much. right, All

Dennis Eidson

Scott. Thanks,

Operator

to [Operator any Eidson turn Dennis Instructions] to session. closing for like conference over This back concludes would our question-and-answer I remarks. the

Dennis Eidson

to you thank all, forward today’s speaking and on our we we’ll call, with and XXXX want fiscal Thank I your all questions participation report in to results and full you. when look for year on February. quarter the again, you fourth

Operator

for you Thank attending today’s concluded. now presentation. is conference The

You may disconnect. now

SpartanNash (SPTN) 9 Nov 192019 Q3 Earnings call transcript