Labor costs offset rising sales from inflation


Photograph courtesy of SpartanNash

SpartanNash, based in Grand Rapids, Mich., Reported that its retail division’s product sales rose 3.1% in fiscal third quarter 2021 and 13.5% over a two-year stack.

This performance represented a continuous improvement for the company’s retail segment during the year: Comp sales declined 2.7% in the fiscal second quarter of SpartanNash and were down 7% from a year over year in the first quarter.

Consistent retail execution, an inflationary pricing environment and a continued trend to eat at home all contributed to net retail sales growth of 2.0% to $ 608.7 million in the third quarter, which ended on Oct. 9, SpartanNash CFO Jason Monaco said on a earnings conference call. Thusday. President and CEO Tony Sarsam said the fresh produce and retail pharmacy departments had a particularly strong performance in the quarter. Company-wide, SpartanNash net sales increased 0.6% year-over-year to $ 2.07 billion.

But significant pressures on the workforce and the supply chain—In particular, the supply of labor and products—serve to offset sales gains, suggested company president and CEO Tony Sarsam. Workforce “is a headwind, ”Sarsam said during the call with investors.

“It has been an extremely difficult working environment,” he said, adding that “the net effect is negative growth for our business”. SpartanNash has raised salaries and another salary increase will take place this fall, Sarsam said-help to produce a improve the flow of candidates. Yet hiring and retention is not yet where the company wants it to be, and “we’re not at all close to closing the gap” to fill the vacancies, he said. .

Beyond salaries, SpartanNash continues to invest in benefits, supervisor training, employee engagement and recognition programsall intended for “make people feel right at home when they come to SpartanNash, ”said Sarsam.

On the supply chain front, declining supplier fill rates have strained the company’s food distribution business, Sarsam and Monaco said, although net sales for food distribution have increased. increased 1.9% to $ 1.03 billion for the quarter (thanks to the growth of some customers and the favorable impact of inflation). Without naming names, Sarsam said order fulfillment from some of the top suppliers has fallen by more than 20%.

“YouUnfortunately, we do not expect these pressures [in labor and supply chains] to ease anytime soon, “Sarsam said, adding that he” certainly “expected shortages of holiday-related products in the coming weeks and wage hikes continuing at least until the first part of 2022.

Investments in operational efficiency throughout the supply chain, including in technologies that will give warehouse teams better real-time visibility into their productivity, will help the business meet these challenges and position for “sustainable and profitable growth over the long term, ”Sarsam said in a statement.

SpartanNash’s military segment saw sales continue to decline, falling 4.1% on the year to $ 433.2 million. Decline in export sales“A result of last year’s high demand cycle,” as well as delays at international ports and lower volumes at domestic stores contributed to the decline in sales, the company noted. The reported operating loss for the military segment was $ 4 million, up from $ 2.5 million in the quarter last year. Over a two-year stack, military sales are down 13.2%.

Despite the various headwinds that the companyLike the rest of the retail and distribution industry, Sarsam pointed outfaces, the overall outlook for SpartanNash is positive and the company has raised and lowered its retail sales expectations for the year from a 5% drop to 3% to a 2% drop to 1% . SpartanNash now expects Adjusted EBITDA to be between $ 205 million and $ 210 million.

“We are proud of these strong third quarter results,” Sarsam said in the press release. “Across our organization, we have shown great determination and discipline, helping to deliver strong performance.”


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