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SpartanNash (SPTN) Beats on Q3 Earnings, Revises Outlook

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SpartanNash Company (SPTN - Free Report) posted mixed third-quarter 2020 results, wherein the bottom line beat the Zacks Consensus Estimate, while the top line missed the same. Nonetheless, both metrics improved year over year. Further, management updated the outlook for 2020.

Impressively, shares of this grocery retailer have surged 38.5% year to date and outperformed the industry’s 0.9% dip.

Quarter in Detail

This Zacks Rank #3 (Hold) company posted adjusted earnings from continuing operations of 70 cents a share that outshone the Zacks Consensus Estimate of 62 cents and surged a whopping 133% year over year. Higher sales and margins fueled the bottom line. Notably, this marked the company’s fourth-consecutive beat.

SpartanNash Company Price, Consensus and EPS Surprise


SpartanNash Company Price, Consensus and EPS Surprise

SpartanNash Company price-consensus-eps-surprise-chart | SpartanNash Company Quote

Consolidated net sales of $2,060.8 million grew 3.1%, marking the 18th straight quarterly growth. Increased sales, attributable to higher consumer demand due to COVID-19 in the company's Retail and Food Distribution segments, coupled with continued improvement with existing Food Distribution customers. This was partly offset by persistent impact of domestic base access and commissary shopping restrictions owing to the pandemic in the Military segment. We note that the top line lagged the Zacks Consensus Estimate of $2,152 million.

Gross profit rose 11.8% year over year to $324.8 million, with margin expansion of 130 basis points (bps) to 15.8%. Gross margin expansion was mainly driven by higher margins across all segments, and increased proportion of Retail and Food Distribution segment sales.

Moreover, adjusted operating earnings came in at $35.8 million, increasing significantly from $20.3 million reported in the year-ago quarter. Furthermore, adjusted EBITDA jumped 37.2% to $57 million in third quarter, with margin expansion of 70 bps to 2.8%.

Segmental Analysis

Net sales at Food Distribution jumped 7.8% to $1,012.2 million owing to higher sales from existing customers and incremental volumes associated with the pandemic, somewhat offset by the effect of the management’s decision to exit the Fresh Production operations. The segment accounted for 49.1% of the company’s consolidated sales in the third quarter of 2020.

Retail’s net sales grew 6.2% to $596.7 million in the reported quarter on incremental sales volume from higher coronavirus-led demand. Further, comparable store sales rose 10.6%, thus marking the fifth straight increase. This was partly offset by the effect of reduced fuel prices and store closures. Additionally, the company registered e-commerce growth of over 175% during the reported quarter. The retail segment represented about 29% of total sales in the quarter.

However, net sales at Military Distribution, which constituted for about 21.9% of overall quarterly sales, fell 9.5% to $452 million. Higher private label and export sales were more than offset by the impact of domestic-base access and commissary shopping restrictions related to the pandemic. This resulted in a significant decrease in the Defense Commissary Agency sales as a whole.

Other Financials

SpartanNash ended the quarter with cash and cash equivalents of $26.9 million, net long-term debt of $519.4 million and total shareholders’ equity of $723.5 million.

Furthermore, cash provided by operating activities was $223.8 million for 2020 year to date. The company also generated free cash flow of $178 million in the same period. Moreover, capital expenditures and IT capital totaled $53.5 million in the year-to-date period. For 2020, management now projects capital expenditures and IT capital in the band of $80-$85 million, compared to the prior anticipation of $80-$90 million.

Additionally, management declared cash dividends of 19.25 cents a share for a total of $20.8 million through the reported quarter. It also repurchased 860,752 shares worth $10 million in the in the first quarter.


Management remains encouraged about business opportunities to drive growth ahead. It will identify opportunities and make investments to boost efficiency and effectiveness across supply chain, and is focused on driving shareholder value. Further, the company updated its outlook for the 53-week year ending Jan 2, 2021.

Adjusted EBITDA for 2020 is likely to fall in the range of $237-$242 million, compared to $232-$242 million anticipated earlier. Depreciation and amortization are likely to be $88-$90 million while interest expense is now forecast in the band of $18-$18.5 million. Adjusted effective tax rate is expected to be 23.5%-24%.

The company estimates reported earnings per share from continuing operations between $2.09 and $2.17 compared to the prior projection of $2.13-$2.41. Adjusted earnings per share from continuing operations are now envisioned to be 2.42-$2.50 versus the earlier guidance of $2.40-$2.60. The Zacks Consensus Estimate is currently pegged at $2.52 for 2020. This latest outlook includes the continued gains of sales trends owing to the pandemic and higher consumer demand, mitigated by anticipated non-cash stock warrant expenses of $6-$7 million or 13-15 cents a share.

Better-Ranked Food Stocks

Hain Celestial (HAIN - Free Report) delivered an earnings surprise of 24.6% in the last four quarters on average, and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Natural Foods (UNFI - Free Report) , also a Zacks Rank #1 stock, delivered an earnings surprise of 49.3% in the last-reported quarter.

Kroger (KR - Free Report) has a long-term earnings-growth rate of 6.2% and a Zacks Rank #2 (Buy).

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