Spartan Stores forecasts weak 3rd-quarter results, may close warehouse

Spartan Stores predicts weaker-than-expected 3Q

GRAND RAPIDS, Mich. — Grocery distributor and store operator Spartan Stores Inc. said Tuesday it expects a weak third quarter because of the soft economy in Michigan and lowered its outlook on sales in stores open at least one year.

The company said the Michigan economy remains challenged amid high unemployment and low consumer spending. It now expects sales in stores open at least one year to be in the negative mid-single digit range for the third and fourth quarters, down from a previous expectation of negative low-to-mid single digit range.

Sales in stores open at least one year are considered a key measure of a retailer’s financial health because they measure sales at established stores rather than newly opened ones.

Spartan Stores, based in Grand Rapids, predicts fiscal third-quarter earnings of 21 cents to 25 cents per share. Analysts surveyed by Thomson Reuters, on average, predict a profit of 31 cents per share.

Shares fell $1.66, or 11.5 percent, to $12.75 during morning trading. The stock has traded between $11.54 and $24.04 over the past year.

Separately, Spartan said it may close its warehouse in Plymouth in a cost-cutting move.

The company plans to operate all of its supply chain activities from its distribution center in Grand Rapids.

The dry grocery warehouse in Plymouth will close by the end of the fiscal 2010 fourth quarter. The lease is set to expire in October, and the company’s current collective bargaining agreement with employees at the warehouse will expire in April.

Spartan plans to offer jobs for union-represented staffers at its warehouse in Grand Rapids and will begin negotiating with Teamsters Local 337, which represents about 140 staffers, before making a final decision on closing the warehouse.

The closure will cost $1.5 million to $2 million, to be recorded in the fiscal fourth quarter for severance, warehouse and asset impairment costs.

Spartan said it will receive an accounting benefit of about $200,000 to $600,000 related to lower inventory. Excluding the closure costs, Spartan expects to save $2 million to $3 million per year due to partly closing the warehouse.

Spartan Stores distributes private-label and national brand products to about 350 independent grocery stores in Michigan, Indiana and Ohio. It also owns and operates 97 retail supermarkets in Michigan, including Family Fare Supermarkets and other stores.