Dive Brief:

• SpartanNash reported consolidated net sales of $2.4 billion and operating earnings of $29.6 million for the first quarter, according to a company release. Both figures were an improvement from the same period a year earlier, with net sales rising $123.7 million and operating earnings increasing $7.9 million. 
• The company’s acquisition of produce distributor Caito Foods last year, coupled with 4.2% organic sales growth, drove gains in the wholesale segment.
• Retail sales and sales to military commissaries were down. Same-store sales at SpartanNash’s 153 retail stores declined 2.2% due to deflation, new store openings and a warmer-than-average winter, according to the company.

Dive Insight:

With deflation and competitive pressures bearing down on the wholesale industry, companies such as SpartanNash are driving sales increases through acquisition, particularly in high-growth fresh and specialty food categories. The distributor/retailer’s November purchase of Caito Foods was a key move that helped boost the company’s first-quarter financials. The acquisition should continue to benefit SpartanNash.

Founded in 1965, Caito delivers produce and prepared foods to retailers in 22 states. Its fresh-cut fruits and vegetables have been a major sales driver of late. In addition, the specialty distributor opened a 118,000 square-foot Fresh Kitchen facility in Indianapolis that turns out fresh prepared meals.

The $217.5 million acquisition, along with strong organic growth, were positives for SpartanNash’s wholesale business. But the company’s retail segment, which includes 153 stores across various brands operating in the upper Midwest, has struggled with deflation and increasing competition. The company’s conventional supermarkets, including Family Fare Supermarkets and D&W Fresh Markets, are having a hard time differentiating themselves in a crowded market. They are under pricing pressure from Wal-Mart, discounters and dollar stores.

But SpartanNash — widely viewed as a company that delivers solid results despite operating in a slow-growth Midwest market — has taken promising steps of late. It’s made a few impact hires, including a new marketing lead and a supply chain VP poached from Wal-Mart. The company also is remodeling some stores, focusing on sustainability and implementing a chain-wide e-commerce platform that offers personalized promotions to shoppers.

SpartanNash predicts these moves will ease same-store sales declines in the coming quarters. The company may also see its fresh advantages in wholesale, not to mention cost savings, come through distribution to its retail stores.