SPTN - Earnings call transcript Q3 2024

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Operator

Welcome to the SpartanNash Third Quarter 2024 Earnings Conference Call. [Operator Instructions] I would like to now turn the call over to Kayleigh Campbell, SpartanNash's Head of Investor Relations.

Kayleigh Campbell

Thank you, and good morning.

On the call today from the company are President and Chief Executive Officer, Tony Sarsam; and Executive Vice President and Chief Financial Officer, Jason Monaco. By now, everyone should have access to the earnings release, which was issued this morning at approximately 7:00 a.m. Time. Eastern

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

the to begin, to like in uncertainties actual could certain will risks would today's statements. These results remind of cause materially expressed a and the number company forward-looking that from to statements discussion we Before you include statements. are those differ subject forward-looking that

measures can is website financial most non-GAAP certain number made If no trends our of useful underlying Tony. a the turn refer SpartanNash as results The materially only, and see to reconciliation actual to could on today non-GAAP pleasure measures, at obligation company expectations which will the a release filings, most to from you the that these believes the of to forward-looking from forward-looking GAAP reflect be will SpartanNash's company's spartannash.com/investors. will this company well recent Please to earnings comparable differ and these on current my perspective investors forward-looking And The undertakes growth statements. morning a measures or to remember you company's update earnings measures. provide it the revise has that these included with business make factors full SpartanNash's it in the references statements. of found financial now release discussion of as the call also statements all cause to over SEC

Tony Sarsam

Circle Awards. good people-first highly retention. that few associates cheered associates excellence. senior today's coveted with I we more implemented watch to company's SpartanNash recently and our culture. them past morning, carpet, one us a of several annual Excellence and focus this green recognition the These helping into hourly with Glad everyone. you, here. needle start programs our the XXX to than call The the our circle years of frontline of want inducted while on, are Excellence now We of have leaders celebrated associates Circle on the with to move engagement associate Thank be we is in Kayleigh, have

our In plan. nearly since has fact, improved retention strategic company we XX% total rate by our launched

Turning to Encounter begin serving on about XX add we our are retail stores our to moment made for allows to the portfolio, October. pleased other Ohio news, the month. recent close I'm I Indiana wanted deal to will in to acquisition acquisition us announcements a that in which Fresh say and expands to The this speak we track and Kentucky. footprint

winning expanding In addition we wholesale Fresh by Encounter's capturing from are in sales our new other retail footprint, distributors. to also

Markham fuel acquisition announced we week, consists and stores in Michigan. of centers of the X last Additionally, convenience which Enterprises,

of associates. the are energized welcoming look especially transaction space, demand. the the end by this we We by the members to the is opportunities into forward our expected team due C-store close stable within family and Markham to of to year, This channel's

disciplined which are M&A evaluate framework, to ahead, our is we Looking based continuing value. on shareholder to opportunities maximize designed M&A

was outlook. Before grew only some grocery operate an basis we market we segments. to syndicated provide the weighed retail industry slower on X.X%. compared QX up recent XXXX, U.S. growth where The geographies to points wholesale According of during results, the markets grocery both and on on and about our want has the jump color other in while update total the into provide data, our XX I past quarter to

But the updating earnings read our we an and first, into some year. into context. will we to today are announced I this release, in our what want early Jason mean next moment. a also dive does As So, guidance for provide XXXX SpartanNash? in giving details

So, persist outperforming while our headwinds XXXX, our are we expectations, previously that impacting transformational expect to are these plan. pleased our we into long-range to our communicated initiatives see targets in

mitigating approach results a and the third pressures, macro commitment taking and our to to value. the driving steadfast gears and are in We are quarter. growing we Shifting recap practical methodical shareholder to

in net XX $X.XX sales segment. partially decreased consolidated to by Lower basis volume higher the was offset Wholesale Our points in billion. segment retail volume our

Amazon of wholesale a volumes, lower X.X% was segment inclusive On from decrease side, within a due to our the business. the headwind X.X%

quarters within bolster to consecutive One year our the of is the business. military continues past sales spots quarters, over prior wholesale segment growth. military to our has grown the continued Compared and the XX bright channel

to our turning Now Retail segment.

bolstered Our retail starting a recently sales trends. are positive comp the to some see standpoint, Metcalfeâ€™s incremental business From we by from X.X%, acquired grew stores.

Although periods our and were our sales down comparable period XX so same-store had quarter, the X sales best of points, sequentially each past the during far in improved store QX. basis we the year

Turning to profitability.

adjusted year's flat while last X.X% margin to EBITDA was quarter. EBITDA Our adjusted third QX of compared $XX.X million, was

transformational previously So, as ahead we initiatives of our delivered benefits entire an have schedule. year discussed,

I All in by we the rate to partially XXXX savings to discussed initiatives procurement generate end of includes the of this our run headwinds benefits plan from are to investments $XX and these by the capture shrink nonproduct expected earlier, offset and year. year-end. helping reduction million This more benefits

with long-term value-add in associate in win for our to their retail expanded wholesale people. and customers helped make our to allowed us team over us executing operating commitment safety our Jason, have I retention, and has Since outstanding plan. we further improved and increased investments delivered call progress. the XXXX, significant turn our and increased to our service made business, shoppers captured to in its enabled This thank I to progress savings, and strategic productivity, new products cost collaborate Before to margins steadfast us suppliers, want inception

We to into beyond. expect these benefits generating initiatives and XXXX continue

value. And elements through you the to financials growth, the with shareholder to All grow have supporting detail. that, foundation turn solid over for Jason in our and I'll results of a quarterly drive now organic to walk built and greater these effort also call inorganic

Jason Monaco

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

$X.XX X.X% billion. to versus Turning sales quarter XXXX results. quarterly by $X.XX quarter billion to the our of decreased third Net sales in

mentioned, lower third Wholesale Retail of by XX.X% to Tony volume Gross for net or sales our in compared segment. quarter to prior net was As $XXX the profit million sales segment higher million increased XX.X% of partially in volume year's the offset or $XXX the quarter. in

the declines, by funding Our in by was accretive and driven gross while offset was vendor profit reduction dollar increase point margin somewhat mix, increase an higher sales a volume expense. LIFO XX-basis

corporate as and led health charges reported basis costs quarter. offset increases the to These SG&A XX operating benefits in As care store increased administrative a the from year. were, as the retail higher our labor costs realized merchandising by well transformation. and of points prior expenses percent partially Higher sales, from third however, lower restructuring

prior prior $X.X prior to by an expect net decreased or decreased share the EBITDA quarter. X.XX% We per to diluted $X.X by flat quarter million by On the to end $X.XX to last was year. returns share. decreased compared million Net million. margin the flat compared diluted $X.XX to EPS while year the materialize to $XX.X this $XX.X $XXX,XXX compared earnings per from investments adjusted year. basis, year to made million, last to of Adjusted the quarter, $X.XX expense year in of net to increased Compared we've $XXX,XXX $XXX,XXX interest to was year XXXX earnings Consolidated million. at $XX.X

in EBITDA segments. $XX.X administrative and growth Now year partially initiative, driven rate, which million the to customer, the benefits turning sales from or million case independent lower current favorability in prior other restructuring account $XX the to account by in reported and our an gross quarter. military wholesale X.X%, compared was million $XX.X prior third third in to than was sales corporate quarter Wholesale national results declines. improved offset more due Compared adjusted costs quarter. partially by by volumes charges offset decreased transformation the XX.X% higher customers increase net to the The earnings million, year's compared and were year's the operating with quarter, channel. The to Wholesale primarily offset higher million. last of profit $XX.X reduced $XX.X a retailers merchandising were national

Now the Retail moving segment. to

$X.X to health were $XXX compared to compared prior corporate the was in profit reported to care from costs, grow of as the year XXXX. sales adjusted And due sales earnings wage contributions by store Metcalfeâ€™s, our third administrative of off increases for quarter. X.X% X.X% segment remainder quarter, to to saw higher comp supermarkets with million by $X.X lower versus prior and operating gross higher the Retail rates and due sales earlier. quarter mentioned prior the we higher About were Retail up our the Tony million the in offset were X.X% million partially volume million were a While $XX.X rate. ex year the store driven was to centers quarter fuel year's $XX.X compared These quarter. lower expenses. half change million EBITDA

turning Now balance our sheet. to

generated debt end increase increase ratio the largely earnings from second the leverage of activities, year. X.Xx position. Year-to-date, net working our than the compared was quarter Our an EBITDA operating of and efforts of ongoing adjusted to to to due million of capital our the same improve to at more increased to period last in cash $XXX.X long-term to X.Xx compared The XX% quarter. third we

and giving of end to about us Our million, our fund the plan the is M&A. liquidity at quarter third strategic capacity $XXX

our transformational performance expect partially full which As been benefits reported and and our on from we we have initiatives. earnings by release, current our year offset to our date guidance in market narrowed ongoing the updated realize conditions, to based operating

the of EPS with guidance to is guidance our $X.XX within $XXX date, $X.X We to $X.XX guidance share $XXX the to to the adjusted to we $XXX ranges. EBITDA narrowed bottom million. to range. billion. $X.X sales also now guidance midpoint range. net million, billion on And $XXX of and expected be it still of the expected new prior spending in expect million per to be the million Adjusted previous our is CapEx Turning be diluted be range to expect the Based about to now the to

continue to also X% to food fiscal about We year. be for inflation the expect

As tuck-in year the benefits guidance acquisitions. a reminder, our of includes full

color over to year. next provide Before on I his turn Tony, comments about the I call back to more wanted

our for your For our we typical earnings full next during plan report QX. still year reference, give guidance to

that $XX revenue adjusted expected. Since the When team industry than volatile time, you the in on XXXX, market operating has based conditions dynamic set at earlier, industry our of with Investor our mentioned Day, Tony market long-term the in more late environment. in met at trends million XXXX to growth been and resulting conditions been the have $XXX a we As EBITDA. targets many our and in billion in

the includes softer of While execution our transformational manifested This market outperforming recently focused back expect low geographies, our fiscal we EBITDA updated acquisitions. the in versus on conditions line Circling are deliver of single-digit growth we which annual expectations. of would the around, have X our Achieving and remain in margin-enhancing XXXX, controllables. are top approximately ranges. in Included tuck-in adjusted our expectations outlook XXXX benefits guidance this growth growth XXXX to mid-single-digit X% initiatives, rate a compared the compound XXXX.

more million $XXX $XXX about Fresh total to First, contribute after or basis retail is million than Encounter in eliminations. company on expected a wholesale segment sales

As for our volume since the is transaction picking distributors, return business to we will which from other contributes investment. also be from Tony benefiting this mentioned, wholesale this up

are close this and to Encounter deal on the progress expect We month. Fresh making

than by sales of deal the more acquisition add second net an aggregate, This we this in basis, track on basis. Markham, million we to In on is that year. an The end Tony. of than with these annual add close in $XX our expect to to on like $XX is I'd announced, to annual call expect to more funding existing accretive and acquisitions acquisitions them both turn over adjusted XXXX. back to EBITDA. And million be the credit these through in line that, We're expected

Tony Sarsam

you, Jason. Thank

really the we are pleased are We making. with progress

we are M&A that support Our One that to strategic our Retail organization preceded Executive Djouma core and Tom criteria. operations President, oversee will strategy company Corporate the business, Officer. Tom as deals Furthermore, as retail transition. within stepping the Senior work Retail, depart initiatives Vice a that for fit by years. through welcome across our to Swanson, smooth I'd leveraging of offer to to SpartanNash's foundation and are will strong I'm area progress announce Chief into our and his Djouma SpartanNash our to retail key warm is Barry Vice our footprint. growing President retail a like a pleased welcomed capabilities growth. thanks Djouma is contributions Tom for growth pursue this providing offer recently company and position Djouma throughout the to into our the and to we and new

would can Q&A, who to associates XXX the military to we and veterans, that, worldwide. want thanks Veterans open veterans. distributing take veterans. by like to sacrifice the veterans so I live and has and SpartanNash on who back so to thank call the more SpartanNash are exchanges of extend up heartfelt our members we privilege groceries XXX gratitude, for questions. call our and a honor hundreds of active to their This With to the Monday for of all the to freely. much operator serving With veterans my your I'd for turn Day, over it open moment I like than commissaries including we families Before

Operator

Research. [Operator first comes Instructions] from Our Northcoast Cerankosky from question Chuck

Charles Cerankosky

importance about you and being you're how the much in doing strategic that the fuel side distribution bring Markham the of cost can does talk SpartanNash? it, the to what business? there, at savings And Looking of fuel acquisition

Tony Sarsam

Chuck, so sure.

consistent As or are of good fueling attractive. about up as of call, right revenue we I product those and for actually for the the mentioned XX margins good really and that we that run well. overall that's shoppers is on we previously, them find stability is The the something centers. now folks And ran fuel and

grow as change that's think looking an opportunities a and us. and we'll we toward really place up looked of for one our came like those we're things. to So, types deal This where a attractive footprint, have eye for

of more we for as look possible we we think expand well. as do do that's do we and we actually what ways and to those So, what we'll in, jumped

Jason Monaco

between Chuck, supermarkets Michigan. co-located that Jason. X relatively the in is here on and their supermarkets, opportunities are see huge, loyalty see opportunities I'd have locations. thing stations the in market stores. in our to that And based those this we we also space, add only is not synergy The fuel is exist C-store and which programs just we here these They're in traditional existing the convenience but the stores

fuel and inorganically the So, see space. and about convenience you about excited to we're Markham organically both continue invest excited us and to in We're acquisition. should that expect stores,

Charles Cerankosky

in switching did do be that's the label, another there private competitors? to you how And your subject, doing that And different quarter? might from what

Jason Monaco

Chuck, stable again. a had it's Jason this quarter We quarter.

about offering we family, primary our continue strong see but Our also, in the we've really penetration XX%. family, on of our not remained Finest has extension strength our we're high progress year brand our going that owned forward. nice a in very brands our in ago seen now, brand of to just And prospects Reserve excited primary we launched private about the and label

what give them family for to that So, a And the continuation environment, for traffic our label. the do but offering foot We private brand it's to still competitive into we as in entire improve continuing we've attribute they premium Reserve want to breaking they're make aren't need. with me, an consumers improvement sure offering flow be in opportunity to offering includes meeting traffic, been consumers a traffic, have discounted seen at, looking bank. sure to giving we sequential looking in which our or our and groceries work offering, they're where of a it's that want of we We pleased value helped Finest with whether where today's to make us and we've stores. on our

Operator

comes Our from Alex next question Jefferies. from Slagle

Alexander Slagle

or move. just to in are period, that ideal what really this kind Iâ€™m X acquisitions time valuations available opportunities whether it for I maybe was Spartan guess the changed, make high of wondering or reached became level, that fairly short specific a better

thoughts the high-level timing. that and on Just

Tony Sarsam

is again. bet; You Tony this

all of it's what said. So, you

the these And encounter, is are be opportunities of times the them growth always overall is are Fresh have that opportunities support in sort of said XX owners, M&A for, served calls, for know was for correct that grow to these vigilant right we're of I time number strategy. believe, what going particularly they that well. the X in And a that years. mentioned previous we and folks we to in case we've ways through As actually precisely our you

deep have to geographically and of to that we expand to to the be ways going said if for current expand, industry, expand the have we if what So, with look looking makes for stores. of earlier I sort the organization, we're within that overall is ways think even baseline the you I sense, very a And and link for geography. ways our to growth this in density you with those about relationship that look

we'll types on So, these And basis. ongoing we're for always opportunities be looking going vigilant. of think I an to be

Alexander Slagle

we're Amazon or closer and setting I'm initial the Fresh on start to stage we look if sure sense how as that getting there track outlook And the business, the changes 'XX with you're in reaccelerate any on to that you of formatting any And not assume back ahead. the that.

Tony Sarsam

of forward about counting over a customer. grow In and been place quite with getting us both a -- as relationship a business the we're realities these and working in greater calls that think ways that with way about well. great to the our in we're and for a talked on having counting Amazon a finding there. the to I And stability a current future, We're bit of there, moving partnership productive on not years declines growth of on and other years. we've our of grow the candidly. businesses couple It's of we've lot more be Amazon for talked on we're

Operator

Our Markets. next BMO Wood question from comes from Capital Ben

Benjamin Wood

like the consumer perspective. sales retail behavior? maybe some you got Ben incremental as us you're improvement here. the quarter volumes? and on inflation any the on promotional Anything with happening maybe It of seeing side, Can volume as Kelly for and on you like through This seems cadence is far talk quarter-to-date update

Tony Sarsam

just I'll talk I proposition. one And Sure. we more what in about on backwards. customer stores our this questions more we're as about value make working have can doing

things a of the price points mentioned sense and overall the just is for shoppers. that you those finding makes price One value minute ago

thinking as about as depth are for bit doing to so, both And doing deal our speaks the little and testing stuff as we actually looking well on shoppers. more we're deals ideas, testing sold and that more that a

with the quarter, in again, deals our we some and some last and of geographies for. that stuff this resonates work looking to going with the more looking and of So, types depth they're in for, did shoppers

be we'll that grow tool a we for business looking as how at So, certainly our organically.

Jason Monaco

Ben, Jason. this is

Tony in earlier think the throughout I improvement was the to in at cadence alluded quarter, just finished our the sequential X.X%. minus growth call. under X%. the had retail Overall, We comps

Our business. of and a a We about want ex nearly impact. bit wholesale up sight Amazon. I little of X%. north supermarkets Amazon business, its X% little our don't earlier were the In were And lose to talked we wholesale

line space. our us of growth. learning low confidence a elements mid-single-digit kind with despite markets growing our some on pleased growth, looking say out early thus stabilize. been CBP, see on some and got through of year performance. at that's bottom building far. like and the starting particularly And had continuing EBITDA with the growth to our us And at building in programs see we've growth that to gave successes, we've single-digit really past to forward and growth to operating and growth the X.X%, drive fresh we're Amazon, on with drive we and we've Obviously, nice we've we're really that So, we headwinds come pleased and why leverage we're working you to And continuing next see that been where focusing that's in

initiatives continue programs, good to we success to got about recent we growth in underway So the despite the continue we've on where at, feel we're that to challenges the and marketplace. build drive to margin-enhancing the together, want the

shareholders. we what can for control delivering focus on and we then So, control line bottom value

Benjamin Wood

with helpful. value-added wanted digital here talk and services the then stand particular, and switch to digital. in just about That's And independent then and gears I where customers your maybe

I think peers. growth some tremendous in space, national the from digital we've the seen of

you're for hearing customer looking of commentary from wanted seeing, to is that the more what that? hearing that know learnings you're digital omnichannel? you in the of there's front? I you're that a on anything Are that, any that digging more for Just demand So, or

Tony Sarsam

team our Well, that to we stores work customers have for growing what overall offer doing great on digital our is well. wholesale our we as a and capability can

of anywhere merchandise digital the we exploiting some are see grocery. of think that folks are general well, most I the really is the it of stuff -- combination and

and typically growth more of will our we've going the of some soft Our folks and it. are seen stores the to services given a customers combine are of that probably well. desire be for goods some there's those to -- typically our types that, we're and merchandise. not in growing customer growing general rural. But typically as smaller, stores They in to stores with big our metro providing We're we can be

Jason Monaco

I'll take Maybe half question. Great a Ben. step back,

we And capabilities as individually Our can our package. services that and where our grow with services. and suite value, they bear retailer just of value, And create in the come customers value their help an as because bring skills suite proposition a win develop customers entire is but business we independent includes them not make of and spaces. something a and to have

couple certain maybe the We've rolling customers. roll to around lot those out electronic call had relates interest it as those space. things out our customers from specifically, We've digital in media and the with been a we've labels, beginning, space media and work out. a more broadly, to more had shelf of some Now enhanced digital I'll or

services providing when offering that entire of more way to a were online customers value. the build helps digital, think in in, to ordering, you and we I broadly, play an that alluding our or digital and broadly, just So ecosystem you but more those think about package we're

helping electronic enhanced but digital reach ways. So, early in customers people new shelf media, our and tags phases,

Operator

next question Our Instructions] [Operator Capital. from Scott comes RX Mushkin from

Scott Mushkin

is one there's outside broadline Walmart, emerging first the in where the as then Amazon Amazon the two, definitely just X. look at some had is is Fresh. I the companies, specialty. guess industry, And thing I organic growth So, and trends you

how these So, sits? do I business with you guess future my with as think trends your question about you is, M&A? then combat/address trends how And do currently these it

Tony Sarsam

question. here. I'll a offer And Great I thoughts couple think of

think consumer or eye we have market. value eye hard -- well looking our toward both shoppers we're those thing we our as as local about types our a a are of that So, is keen the at as toward for, proposition acquisition, for looking particularly in big looking products

how are same as rural, these think often So, you will. to local we very if specialized going stores, again, bringing about suburban and impact, products which and that are be those skewed and products. toward more unique for more market we specialty more They're in that have

on So, local that wants. example, seeing and very more for about a that did what and specialty type community think acquisition you And with items focus significant has take the we're more we the that. on if Metcalfeâ€™s, really

sure value think the of we because as we're of overall of articulated kinds our in more same future an fresh, learnings eye be will exploring we speak something and that. elements types more well to think how of toward more our and thing as seeing that and we'll options as we overall going about get acquisitions and portfolio actually So, desire. we And part about customer local making around think that and a think those and boundaries about that have be it more the you really that's important to our proposition those stores actually healthy just

Scott Mushkin

coming lot relation if there's more a as into to step-up would how we should of if think our get -- from question, at agree your -- second you're say 'XX. with look a in that I we My in how we probably it as business we And should me, CPG. research thinking you don't know what further that's promotions 'XX?

Tony Sarsam

have As differentiated at desire we are as a more I around growth price having looking ago, as more items ideas same the and differentiated suppliers for of little points. our do. well bit as types mentioned we And

to to find find way deals, with them in right actually So, price those to ways speak them merchandise the points we're those lockstep and working consumers. find to that find

buy kinds more X ideas at actually those And of X, around things. kind shoppers with of our some get starting multiple X, around buy of to that some items our looking resonate of the in seeing we're bundling, So, get around X communities. we're

So, I would of say, more of what you you're this to year had we're I think sequentially and anyway, course see more depth doing what we've over likely that, going see you exploring ideas us and the again, -- as get from us those our right, people to, desirous keenly food coming value into as the trying of manufacturers right precisely the course, well. for points of is right And also are the finding said you stores. price those as

So, more you'll see that. of think I

Jason Monaco

continued respect we'll tighter vendors all across with and capabilities for last few when -- way is transformation. and that. say to those relationships. Scott, building States with you've win sorry win this I'd years, us expect continue activity the will our this best so the this We vendor And the heard building Scott, in relationships before, along win, this is This the consumers promotional along the alley but value And will really right about engagement our across we way customers our our right and win, up particularly think our our about win vendors to as way, and the the we bring environment entire to that we from want think the sure and to our win. with supply our chain. our investments on our shoppers. well. we on out it up And together. suppliers alley that's volume geographies, merchant focused the merchant will United We've In been make the

Scott Mushkin

EBITDA volumes their 'XX will Jason, accelerate is that there? the why Is be get of as on try back will they track? that to in vendor growth funding your continue to part you think thoughts

Jason Monaco

particularly our margin-enhancing around counting deliver value. the programs, we're activities to on continuing Scott,

believe transparent recognize want now of come why an market than it's also latest conditions And growth out the be or We on starting in out believe We national the off in our with programs and of we the base long-term a growth. geographies, We're coming most create is changes XXXX. just point work. say, market building to they backdrop our the and market with it recent environment value. that's less we the that where lower

Operator

I other to call There closing Tony are back over for this at time. now questions remarks. the will turn Sarsam no

Tony Sarsam

a thank today's wish to Well, you and right. like SpartanNash. your family very certainly thank all in to We all yours, interest And your for you, participation from day. appreciate in you our All pleasant call. we'd good

Operator

you conference today's concludes Thank attending. for call. This

SpartanNash (SPTN) 7 Nov 242024 Q3 Earnings call transcript