SpartanNash(SPTN) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales increased over 12% to $2.86 billion, marking the 16th consecutive quarter of growth [22][41] - Adjusted EPS for Q1 2020 was $0.67 per diluted share, up over 179% from $0.24 in Q1 2019 [41] - GAAP earnings were $0.43 per diluted share, a 105% increase from $0.21 in Q1 2019 [44] - Operating cash flows improved to $129.3 million from $13.5 million year-over-year [56] - Free cash flow was positive at $111 million compared to negative $2 million in the prior year [58] - Total net long-term debt decreased by $88.4 million to $576 million [59] Business Segment Data and Key Metrics Changes - Food Distribution segment net sales increased by $200 million or 17.1% to $1.37 billion [45] - Military segment net sales increased by $33 million or 4.9% to $704 million [48] - Retail segment net sales rose by 11.5% to $783 million, with comparable store sales improving to 16.6% [50] - E-commerce sales increased over 300% in the last six weeks of the quarter [51] Market Data and Key Metrics Changes - Retail comp store sales were positive for the third consecutive quarter, driven by COVID-19 [23] - Inflation in Food Distribution accelerated to 2.05%, up 66 basis points from Q4 [45] - Military distribution reported an operating loss of $2 million, compared to a loss of $1.6 million in Q1 2019 [49] Company Strategy and Development Direction - The company is committed to long-term strategies to sustain profitable growth despite the challenges posed by COVID-19 [21] - Initiatives include improving working capital levels and exiting underperforming businesses [20] - The company is focusing on enhancing its e-commerce platform and understanding consumer preferences [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to respond to increased consumer demand during the pandemic [19] - The ongoing COVID-19 pandemic has led to significant changes in consumer behavior, with a shift towards food at home consumption [24] - The company anticipates continued strong performance in the second quarter, with adjusted EPS expected to increase 70% to 100% over the prior year [62] Other Important Information - The company has implemented various safety measures in response to COVID-19, including increased compensation for frontline associates [17][18] - The Board of Directors is in the process of identifying a new CEO [38] Q&A Session Summary Question: Can you help us understand margin flow at Retail? - Management indicated that they do not typically provide detailed breakdowns but noted a retail comp of just under 23% for the first five weeks of the quarter [70] Question: What are the trends in SNAP benefits? - EBT sales were negative in the first 10 weeks but increased by 45% in the last six weeks of the quarter and 113% in the first five weeks of Q2 [74] Question: Can you discuss distribution strength pre-COVID? - Management noted that Food Distribution exceeded expectations with a 9.5% increase in the first 10 weeks, but the surge in volume posed challenges for supply chain efficiency [77][78] Question: How is the company addressing warehouse capacity? - Management stated that improvements in working capital have provided additional capacity, but future needs will depend on sustained sales trends [108] Question: What is the outlook for capital spending? - Management indicated that they will adjust capital spending based on ongoing sales rates and potential needs for additional capacity [107]