SPTN - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the SpartanNash Company’s second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. please then question, your withdraw press two. star To being note this is event Please recorded. like conference turn Campbell, would to I now the Investor Head Relations. over of Kayleigh to Please ahead. go

Kayleigh Campbell

quarter to Good and the XXXX earnings SpartanNash morning conference welcome Company’s everyone call. second

approximately earnings company this now On President am Executive access everyone X:XX Executive President should and and morning Officer, Financial the are and the have Sarsam, from Chief Tony release Jason time. Chief issued today Vice call at which the was Officer, Monaco. Eastern to By

For of supplemental company’s is the will copy www.spartannash.com/investors. SpartanNash’s the a replay as release on call the earnings website website. as company’s being This visit a available well recorded and presentation, please be at

discussion a will forward-looking statements. Before of include to begin, we company today’s would number the like that remind you

earnings that refer will these company’s filings, cause be SEC to the the no most release this provide will forward-looking most in the to SpartanNash a or believes growth measures make measures. remember on the factors measures, perspectives release company a also website investors found morning you actual statements. earnings can obligation underlying the SpartanNash’s non-GAAP business as of forward-looking on to measures The comparable you materially to to with undertakes of references financial of will trends and financial these it useful at included company revise as could company’s www.spartannash.com/investors. update number discussion non-GAAP of has which from from reconciliation full well If these differ statements. recent Please results The the see a SpartanNash’s GAAP

to Tony. pleasure my the turn is to call it over Now

Tony Sarsam

everyone. Thank you and morning Kayleigh good

increase. and to for XX.X% net and sales million, earnings, strong adjusted continues recipe we billion create to impressive this of shareholders. achieved by past reflected quarter Compared increased second drive our our X% an nearly $X.X we year, prior As to EBITDA value quarter winning our in $XX.X results

gross our food we quarterly Turning and military. to performance, profit distribution both rates our improved segment in

military were a by X.X%. positively increase of our Additionally, sales impacted case volume

our the margin that pleased also in military are improved year-over-year again quarter. EBITDA We second

to our the maintained strong business, Michigan chain. to Centers, newest of exited of re-affirming family. range an are same the We completed on acquisition Shop-N-Save impressive retail we of rate Overall, improvement throughput chain to goals. XXX Moving We gained with continue million. cost annualized welcome in share make transformation three-store X.X% Food current quarter to savings momentum $XX supply and store with the $XX grocery associates a the our progress a and we X% year-over-year we sales our we and SpartanNash our million

success of Following our energized chain our supply This winning adds recipe. are ingredient launch transformation, the the about another we to transformation. merchandising of our

in categories. Over the past cost year, outpaced price increases underlying commodity have many changes product

these tracking actively been has and team Our industry trends data.

wins, includes all additional robust had that line provide new are we we’ve are these a retail which cost find due always our negotiating combat The with for the unprecedented checks costs, but are ruled to the stages, will new doubling to rising partnering planning early process to many creative the have cost program we efforts margin day and consumer us strengthening business. competitive these program. vendors customers the balances policy To category growth ensure offering of during we the These to of while We our to leading these win. Even price are more when shoppers At lead a actions expansion. impact a enhanced increases and a allows solutions. down top pleased end to report and out to proactively us and on inflation. justified,

Importantly, merchandising management, capabilities, and automating and upgrading pricing. category components: improving promotions the includes transformation merchandising three key

providing more discuss the momentarily. to initial stages the upcoming expected Day, in I during our benefits are We information this Investor will look on forward of We which initiative.

Over the in insights that excellence, three our year, drive and people, solutions. operational capabilities: core we invested have past

well culture, As are a drive of to on momentum reminder, people-first which transforming execution supply and for to the and second win to $XXX growth, driven we Jason will the recipe now The call capturing solutions. these three benefits by from results, $XXX and we are costs raise merchandising the day, acting associated of the our into core consumer-centric, capabilities margin EBITDA gross our elevating adjusted five chain, transformation our as strategic initiative. is time the our inform go guidance to winning out further but food a new million increasing Due range I innovative year. insights in this distribution which our creating the wanted that includes our launching as success military priorities, expansion initiatives. the the with detail, are million,

we our targets we term turn confidence recipe XXXX compared by grow to financial XX% million. targets. of expect and EBITDA the in review, $XXX than growth increase expect least long To billion year. to May to in at more by XXXX, by to least than net Now we adjusted announced success to let’s at this gives $XX us sales our The more fiscal XX% ongoing winning to

a planning will X. targets? Our Now Great to will we Q&A, The formal how for November in-person scheduled Wednesday, presentation are also which include investor event day live team diligently going and an question! these be achieve is streamed.

will interact a a executive analysts one-on-one be can mini-trade where with and team Additionally, show investors on our hosting basis. we

all-star capture we projected long transformation, chain in-depth event executive include details expect changes recipe investors term details We the will for making over update benefits. share with exciting This team invite winning way to can built I’ll I quarterly team. are an great will in recruit excited more a which supply you firsthand don’t detail. we this opportunity in recruit on in and see is KPIs, on so but our call simply the past transformation, to strategy turn winning I and our very be rather at recipe. including to which to That of financials analyst benefits have the the couple greater them interact the merchandising leadership our from right the and excited a to the part now the have are of I’m staffing to through meet we so very Jason leading team. executing the this and to you walk I why years. I players team over initiatives’ deliberate be fine the

Jason Monaco

us joining Thanks today’s welcome everyone call. and Tony to on

second Let’s by all net almost three growth inflation. segments, The X% across results. was jump of sales second sales the versus prior impacted into of year sales for were each driven favorably billion. increased detailed $X.X billion Net the XXXX $X.X quarter which quarter to by versus

lower retail food year due the partially was driven gross period. the margins. volumes X.X% in sales Approximately while to The segments. fuel the $XXX.X offset was the gross distribution case for decline Additionally, decline within sales. to decline million by one-third increased within profit segment. retail or to improvements was net prior increase the of XX.X% rate and was last lower rate year gross of by compared second margin Gross both the quarter by military rates margins The profit was higher military compared driven profit

representing basis prior to million, $XX.X points a the quarter. of year gross compared increased expense LIFO profit Additionally, headwind XX

rate due our of shareholder higher included administrative expense. as costs the X% $X.X prior the a of benefited year-over-year, to and we like supply headwinds increased improvement costs, higher Despite with chain percentage incentive activism million XX sales, operating basis exiting related transformation, throughput to expenses As the quarter, in reported in realized Tony including chain in which from year compensation costs a points including from fuel, supply quarter efficiencies earlier. mentioned the

in impact quarter, primarily of Turning to segments, billion inflation $XX.X the favorable distribution our X.X% food $X.X million on net pricing. increased to the by on sales second driven or

items, quarter. quarter versus million the for higher XXXX, other LIFO to in year higher rate. operating in-sourcing administrative in of as reported trend quarter inflation We by quarter as the million progressed impact profit compared continued an decrease which among of to quarter million in excludes, channel. second upward operating in second due $XX.X $XX.X costs second XXXX gross which in partially the on $XXX the the volumes The sales increase exceeded fully to partially $XX second increase Reported related of operating the quarter. $XXX.X was lapping lower earnings increase offset in in by volumes million year. earnings case million. the quarter. well of cycle totaled XXXX’s prior earnings totaled in The for $X was overall sales to million X.X%. offset in independent Adjusted $XX.X The modest decline in quarter see to the will distribution from food in-sourcing initiatives an DG’s year Retail the adjusted current million The unit operating quarter DG’s at as earnings of in expense XX.X% came inflation increased this compared September

Our comparable for store strong remained at the second quarter. sales momentum X.X%

We the share private is performance brands. two of our are gaining times label rate and at growing in national

to up LIFO LIFO excludes costs. was volumes. in year increased impact year volumes. increased second sales military the help Our $X.X The the year. the million both operating essentially is quarter in both along segment retail offset to favorable was benefits rate related From the adjusted This expense. trends Each year case to in and $X.X loss partially million $X.X operating of million are higher of shareholder sales case million The the to of a inflation the $XXX.X costs. combat higher second costs million million segment a costs. compared compared in as corporate at the by the commissaries adjusted quarter product in of decrease $X.X increase XXXX improvement second operating earnings rate by a loss second supply was excludes higher quarter. rising gross patrons in $XX.X to reflects in increase U.S. was Military perspective, demand operating utility prior and of which segment’s were $X.X effect lower quarter. earnings prior $XXX.X million adjusted activism quarter More quarter operating a evidenced million, the reported expense million gross profit flat were $XX.X administrative years the a the in the earnings reported The increase net from to X.X% profit compared compared $X.X prior in and of These due $X.X current million. earnings of loss XXXX shopping by with of to million and in XX.X% quarter. results Retail operating to for the related segments’

million. retail we compared million $XX.X our XX.X% to the in Overall, our charges results and asset exclude achieved in million EBITDA Additionally, $XX.X reported both was years. increase an year, of adjusted impressive second net earnings restructuring impairment $X.X and quarter last

to debt prior was to generated X operations term long inflationary X.X million changes to this year period. changes The in to net million the end. capital. compared adjusted the EBITDA half $XX.X in times of cash at of from to capital support to increased The in due ratio working Our $XX.X slightly times decrease environment. increase first in needed compared year, was to In operating primarily we prior year working activities the of due

the we half first $X.XX share. to equal of the During dividends, per $XX.X paid cash year, common million of

first We also in In XXXX. to of for a million. back bought company XXX,XXX than returned half the $XX.X the total, more shares million $X.X total shareholders of

our second quarter, to the shareholders and approximately as on returning well repurchase million share of continued dividends. are $XX repurchases to committed have the regular authorization remaining of through end we share value our As as we

our As guidance second press today’s covered half. into as we raising continue the we momentum XXXX are release, in

and margin expected range to associated growth. EBITDA to rising to remains merchandising recognizes Our incremental EPS EBITDA This billion new of which range EPS food million. retail interest rates full-year is $X.X be adjusted headwinds is $XXX and our million, to $X.XX same by in as $X.XX billion interest is supply is benefits net the to update in the expected between range weighs $XX per on expense be to investment currently incremental and, profitability but sales related a Tony with from as range transformation realizing diluted estimated between million million gross $XXX military mentioned, are now net distribution tempered $XX share chain transformation, the inclusive investments. merchandising initiatives our and we the impact transformation and of expansions from segments to our some of $X.X and Adjusted margin

relates from now it full We are also guidance net expected Military net our are increase sales. increasing year as XXXX to last X% between year. to and sales consolidated X%

from expect sales We X% food year. increase to distribution will X% last

expectations. expect positive both that an previous from to segment, as remainder the the X% share we observed the and in updates X% continuation reflect sales comparable inflation our year. trends of now of X%, increase retail for our as gains to quarter of retail With updated the These in increase expectations well X% will the

are outlook reflects inflationary the do we third inflation We continue uncertain an our there flatten this operating increases quarter. the but for know time, quarter will and environment, term. fourth into near the will that in be into At inflationary

our pleased teams’ results remain on execution shareholder of to volatile and to our continuing and recipe. winning focused extremely sustainable with are the We laser managing value. date through conditions drive We

to to like I’d call Now turn Tony. back over the

Tony Sarsam

Jason. for started. shareholders, I’m recipe ecstatic that is increasing results comments, we’re which continues getting to you To just value echo winning Thank Jason’s drive our our and

say share are to propelling Investor we I to our understand our by clarity living people our we all keenly of our the as first live They company look this because positive of the day and winning ingredients forward. I for All that seeing the without and forward on and in you focused say, during our better that I is deliver can’t life, X to who they leaders. are want and long and our driving demonstrate term serving they a when group possible forward vision have recipe Day. and this too, we going, are are thank our the We day communities, results have of targets life that to further November mission to them. associates right customers culture, where look bringing our associates to

hope the open With it If the to in questions. We any see person. event, for you to to you all Operator like questions up about contact Kayleigh. turn the please I’d there back have your that, to over call

Operator

instructions] Research. Spencer comes today ahead. [Operator Please Wolfe Hanus The first with go from question

Spencer Hanus

I new because or more, question. step-up could last you that’s the EBITDA it’s the you one-time in the going just rate, were in the the so EBITDA Could talk in think five that segment the there pretty - for think led for or run strong the quarter military? military minute, has to the thanks be been years highest performance about just performance Great, about talk if you a impressive there any factors to in

Tony Sarsam

Yes, thanks question. Great Spencer.

a things. Just couple

in been made the As strengthening with performance elements done into DeCA business. those lot directly ways of other to there. new work to of we of improve to improve that DCs in couple previous changes we’ve operational talked operationally we’ve to that on quarters, network so and the the efficiencies the business’ profitability. and lot There’s We’ve business we’ve solid, the the of done through a will maintain support worked a elements work work that that profitability we future actually just continue more strengthen

during We back place inflationary because shopping COVID in permanent. great growth we’re term believe seeing advents great commissaries, the we there. finding commissaries growth, see the shift case folks we’re of That’s We military seeing the performance back there growth we There’s closures to of are have taking their in but Additionally, be that now the necessarily back. this things there, segment. base being stopped a is that could as that at underlying long may one don’t time, who that growth believe of those a stay. that will think way shift number and

the getting a as we’re this back think also in We people base. boost transition come to here

Jason Monaco

the and the about in is and trends transaction little count we’ve that year, low performance. great single commissaries. our kind in of Tony, from on at an seen standpoint growing on so acceleration demand are nice single Thanks to business, expect that elements sustainable low Spencer, in the and building positive is what some you transaction the commissaries a standpoint really question mid count, we’ve that growing broader digits trajectory. digits a throughout which from when sign business, seen The bit, the of just maybe the an of for forward in there think an EBITDA or To earnings the lots we do at

ago. We’re over hurdle clearing we margin that year the X% a out laid EBITDA

clear core one-time to knows demand continue, are performance inflation supply hurdle. and in label There’s from impacts change, going really margin continue who there to We but going the forward. that elements of this and expect to of when X% some that underlying of chain, business the we’ll that’s to going end, hurdle I expect private the execution benefits clear

Tony Sarsam

It’s work to to the team hard been military our a of and done has very, of very proud I’m lot place. this get work, that

Spencer Hanus

Got play moderating it, making those having you that you the units, increased you and an that more with make we then are from In more spend little those openness does are that conversations that on in think to about pressure how increases guys in trade then sure focusing sense? and the do seeing put a really what XQ helpful. XXXX you the them, as justified. these cost really support from and where mentioned to CPGs cost inflation for Then your sure you’re you’re into script, make on and outlook bit increases standpoint land to inflation

Tony Sarsam

Great, The of had so increases with mentioned amount terrific. as our discussions of we’ve a pricing seeing we’re vendor unprecedented in coming we’ve an been has partners through. early times, couple

encouraging, so is, receptivity pressures would say everybody and understand the the XX,XXX getting user, think to also negotiate to a we’ve performance that hard entertain as a customers about and our we pricing, believe and better The in here XX,XXX idea capability better industry feeling, our the the for of we system to I but great that. increases, We’ve into end that built and year for so it, really has that for we way sharpen X,XXX had--we’re consumers our to better increases finding every a will feel XX,XXX pricing consumer they early to to its way get is we’re course, pricing. the well. I as see there, day price been and price

Spencer Hanus

thank you. it, Got

Operator

next question Deutsche from Katai The Please comes Bank. ahead. Krisztina go with

Jessica Taylor

was wondering causing unpack a seeing this have Thanks Are Jessica on environment be if a to morning, you. the is competitive for performance you I for Thank just Taylor retail bit little the more. could margin is pricing question. to to Krisztina. Good gross the promotional? you for that you take more minute

Jason Monaco

to what the Jason. you’ve space gross seeing similar morning and other come respect retail in in the others Jessica, With to are we’re performance, experiencing Good this retail margin continued margins retail from is out seen pressure what players.

think I to our may with through we’re pass slightly respect have passing about rate. more to it we broadly XX%-plus, increases passed ability generally, through a where through at price lower historically

value. that and this particularly right ensure of for and doing we’ve staying equation high our environment We’re consumers, that to that and them sharp way strategic good in value smart giving in a got the inflation, we’re

areas where label. of One private to really on is I’d the been work point we’ve our strong

brands’ Our about times. own has national rate two terrific outpacing that’s been performance of brands with at growth a

Jessica Taylor

Thank you.

Operator

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

Ben Wood

for Ben Hi, Thanks on taking our questions. Kelly. this for Wood is

pushback pressure segment, a dynamic? given expanding curious on retail if that margin gross just core retail unique are you customers your banners? more getting think follow-up is Just having seems that similar distribution, from is your margin or margin to to so your question. customers are geographies any your retail It or food this Then, at you like

Jason Monaco

other any wouldn’t grocery situation than performance different whether are the customers in space. I more margin players, broadly they or and retail as characterize Yes, gross of ours our our

I this I to would pressure that line is with transformation of bring elsewhere, seeing and gross back merchandising so of earlier. say the performance notion Tony we’re mentioned about margin under kind Our is everybody what in it

win, through to others that through this process want that it’s and is You space, just pinch and to in chain, because a sure winning program we what for going and ensure know, this work for we it’s targeting everybody really gross retail throughout when we make win not we’re margin us when supply and that’s the pinch a consumers all consumers here. the we’re

Ben Wood

Okay, awesome. that’s

three was say press that to to in coming then, Then seeing that, the your maintain from competitiveness. transformation, mentioned competitive the are or that--your your you going pinch merchandising it safe that is the release hit price to is environment? following merchandising Just segments? something that all Is customers, is transformation more that’s

Tony Sarsam

all little corporate because segment answer our think a issues little less will is segments, but Yes, first distribution more so the their will in everybody effect customers yes. feeling the our that all is sort geographies. I in dealing will impact first competitive only that pinch, impact I a and your in same It are not who The little transformation of bit the them, but question be with It local retail you’ll to not business military, it model our is retail will also foremost, but and Ben, a our the is also broad retail our shoppers so impact that an food guess see primarily that’s a and of impact of military. different. our

Ben Wood

one from then at food thank Great, you, inflation last retail? one quick Did and just distribution you mention guys the us. and

Jason Monaco

inflation XX.X% the distribution quarter. food in about Yes, at ran

see squeeze on and impetus that’s merchandising inflation pass that the this catalyst down the us margins where transformation that of driving had It’s be to and inflation. seeing to shelf to We that that At food really we the at kind together. what of discussion look that a continued data we’re and than doubling through. goes it, retail, previously, back at it’s reported consumers, the so performance--of all challenge full and really--it’s as an publicly wildly the is take with and respect home than in to of a XX.X% less different not I at you’re seeing retail continuing for increase, inflation winning it’s for we’re acceleration that not

Ben Wood

Great, you. thank

Operator

next then question King. a ahead. Please Again, star have you comes Wolf one. if Andrew with from question, press go CL please The

Andrew Wolf

little that that external folks about others, are hired things fairly talent, for talent or to new so the merchandising idea know the ask morning. to--you agent, they’re good I how and market a but know, little like to this the lot transformation. on I the you’ve of change and the they’re of hired undertakings. complex execution, learn particularly just automating the planning, you’ve executive in promotions, Some to mentioned, from wanted about you’ve want Thanks, I a consulting? the is you you the a the come process using

a background Just on that. little

Jason Monaco

Sure, yes. Great merch in we this on. was question. our on brave live of that wildly was guess new actually other to chain had I this genesis our sharpen we right world in on with It the capability this to transformation, unpredictable the clear now going merchandising pricing. supply area us because world etc. inflation it’s are in disruptions, and that a ramp just

lot brought have We a folks. new of on

actually this. idea. has Our Morgan design of the for sort SVP of the Merchandising, Bennett program his and It was spearheaded

phase that consultants, elements you team as does working well get with comprehensive, is training very some really We our so team our and with after cycle energized It big, both lot technological and it’s engage this life of we as as noted. are a very ourselves, vendors. include for of new as to for our

Andrew Wolf

in the a million Great, - to prior of kind a $XX is deduction financial thanks. suppose? bit that’s all that I follow-up sort in your all guidance this informally million or of Was year, from A the $XX guidance sense? any a this cost, of new contemplated

Jason Monaco

that’s and new $XXX guidance is so was to the million million, all also million merchandising it raise transformation is that we’re of $XXX merchandising million on just million, the and clarify, and We’ve to where round programs least $XXX range. term momentum, $XXX bottom spend end if end out gain new but to $XXX our I to range way old really, of the value feel that the transformation with transformation, term the creation but this that old Yes, about transformation, importantly, great stripped really guidance seen ex guidance merchandising The good momentum at, and on that million is a $XXX the long EBITDA. high build we This continue at of new want confirm about question. and we’re to that shareholder good the progress. we frankly, to and on the good merchandising about think is we for so the build that guidance, the investing opportunity feel range you this like is long year, ex kind new about

Andrew Wolf

your facility going is could so there be two be number their productivity Those the per up, getting it efficient, are folks I ask just I want As have more it. you think, that case It I either question cases I could bit? in rate Got are, also or it’s while X% throughput, you, understand I’m could in the versus increase could the individual per up. hour, a going it, If - assume about just of a just rate, thinking that. a is things I productivity, that. more the to unpack so one just so sense it’s of

Tony Sarsam

Yes, do It’s how efficiently much out. it’s we get. we you’ve complicated that pointed than process not simply orders more those

efficiency bit, driven is down rate so processing doing we’re of our of we that because work. is now our really--it’s a Now, all were that the the impact by way less just case wee right few the--essentially cases a it’s

of single sort, in It’s a the SVP the the continue. practically being done great done to expect every and efficiency effort of our way of Chain, to on job largely Petko focused warehouses. and some of Dave from finding period and Supply to work’s and seen our improvements the everything really we’ve this has Our in on that the we warehouses, improve getting led ways hour winning touches people steps every

Andrew Wolf

it, Thank Got okay. you for the color.

Operator

like conference back turn over This closing remarks. to to I would concludes the question for our session. Tony any answer now and Sarsam

Tony Sarsam

everybody you very speaking a with at call. thank wish I’d all well upcoming you Day. our right, good to All pleasant today’s like morning. We that, participation to look for everyone Investor your of forward With again on

Operator

you concluded. today’s for has attending Thank conference presentation. now This

You may now disconnect.

SpartanNash (SPTN) 18 Aug 222022 Q2 Earnings call transcript