Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 28 Jan, 25 | SPTN | Buy | USD 18.3 | USD 19.3 | USD 20.0 | 15 days | 9.3% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
SpartanNash Company distributes and retails grocery products in the United States of America. It operates through Wholesale and Retail segments. The Wholesale segment offers grocery products and perishable food products, including dry groceries, produce, dairy products, meat, delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care, and pharmaceutical products to independent retailers, national accounts, food service distributors, e-commerce providers, and corporate owned retail stores. This segment offers various support services to independent retailers. The Retail segment operates retail stores, fuel centers, and pharmacies primarily under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery, Family Fresh Market, Supermercado Nuestra Familia, Forest Hills Foods, Dillonvale IGA, and Fresh City Market. It supplies private brand products to military commissaries. The company was formerly known as Spartan Stores, Inc. and changed its name to SpartanNash Company in November 2013. SpartanNash Company was founded in 1917 and is headquartered in Grand Rapids, Michigan.
Increase in Retail Segment Sales: Retail net sales rose by 1.9% to $674.6 million, driven by incremental sales from the acquisition of Metcalfe's Market.
Improved Cash Flow: Cash generated from operating activities increased by 28.8% year-to-date, reaching $123.3 million compared to $95.7 million in fiscal 2023.
Decline in Wholesale Segment Sales: Wholesale net sales decreased by 1.6% to $1.58 billion, reflecting reduced case volumes across key customer channels
Lower Adjusted EPS: Adjusted EPS dropped to $0.48 in Q3 fiscal 2024, compared to $0.54 in the same period last year, indicating a decline in profitability.
Key investment risks include declining wholesale volumes, rising operational costs, potential inefficiencies in transformational initiatives, reliance on acquisitions to offset weak demand, and sensitivity to market conditions affecting consumer spending.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 18.3 | 16.8 | 19.3 | 20.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
During the third quarter of fiscal 2024, net sales declined slightly by 0.6%, totaling $2.25 billion. This decrease was primarily driven by reduced volumes in the Wholesale segment, partially offset by higher volumes in the Retail segment. Wholesale segment net sales fell by 1.6% to $1.58 billion due to reduced case volumes across both independent retailers and national accounts. In contrast, the Retail segment experienced a 1.9% increase in net sales, reaching $674.6 million. Incremental sales from the acquisition of Metcalfe's Market stores offset a 0.7% decline in comparable store sales, driven by lower consumer demand trends.
The Company reported net earnings of $0.32 per diluted share for both the current and prior-year quarters. Improvements in the Wholesale segment's gross margin rates, supported by merchandising transformation initiatives, along with lower corporate administrative costs and reduced LIFO expenses, were counterbalanced by lower case volumes, higher restructuring charges, increased healthcare costs, and elevated store labor expenses in the Retail segment. Adjusted earnings per share (EPS) stood at $0.48, compared to $0.54 in the prior year. Adjusted EBITDA amounted to $60.5 million, slightly below the $60.9 million recorded in the same period last year, reflecting restructuring charges and the impact of LIFO provisions.
For fiscal year-to-date 2024, cash generated from operating activities increased by 28.8% to $123.3 million, compared to $95.7 million in the prior year. This improvement was primarily attributed to effective working capital management initiatives. Capital expenditures and IT investments totaled $106.3 million, up from $90.3 million in fiscal 2023. The Company maintained its commitment to shareholder returns, distributing $37.7 million through $15.1 million in share repurchases and $22.6 million in dividends.
The Company reported a net long-term debt to adjusted EBITDA ratio of 2.4x at the end of the third quarter, compared to 2.2x at the end of the second quarter. This increase reflects ongoing investments in capital expenditures and shareholder returns. The Company's focus remains on maintaining financial discipline while pursuing strategic growth initiatives.
The Company has revised its fiscal 2024 outlook based on year-to-date performance and current market conditions. Total net sales are expected to range between $9.5 billion and $9.7 billion, consistent with previous guidance. Adjusted EBITDA has been revised to a range of $252 million to $257 million, down from the prior range of $255 million to $270 million. Adjusted EPS is now projected between $1.85 and $1.95, compared to the earlier range of $1.85 to $2.10. Capital expenditures and IT capital are anticipated to range between $135 million and $140 million.
The updated guidance reflects the Company's ongoing transformational programs and tuck-in acquisitions aimed at driving long-term growth. The management remains focused on aligning its strategic initiatives with prevailing market conditions while balancing investments in growth and profitability. These efforts include leveraging merchandising transformations, optimizing supply chain efficiencies, and enhancing customer experiences across Retail and Wholesale operations.
Looking ahead to fiscal 2025, the Company expects low single-digit topline growth and mid-single-digit adjusted EBITDA growth compared to fiscal 2024. These projections account for anticipated market conditions and planned investments in growth initiatives. The Company will provide a more comprehensive fiscal 2025 outlook when announcing its fourth quarter and fiscal 2024 results in February 2025.
The Company remains committed to its long-term strategic goals and growth objectives, supported by disciplined financial management and strategic investments. By maintaining a balanced approach to growth and profitability, the Company aims to deliver sustainable value to its shareholders while adapting to evolving market dynamics.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on SpartanNash Company (NASDAQ: SPTN) at the closing price of USD 18.30, as on January 27, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Food Distribution
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| SPTN SpartanNash Co |
0.34 1.68% | 20.60 | 13.50 | 7.78 | 0.07 | 0.83 | 0.15 | 7.16 |
| SYY Sysco Corporation |
-0.035 0.05% | 75.00 | 20.66 | 16.72 | 0.48 | 17.38 | 0.63 | 12.66 |
| JRONF Jerónimo Martins SGPS S.A |
- -% | 21.50 | 18.10 | 22.22 | 0.53 | 5.17 | 0.62 | 8.78 |
| JRONY Jeronimo Martins SGPS SA ADR |
1.15 2.71% | 43.56 | 19.98 | 23.09 | 0.54 | 5.70 | 0.62 | 8.86 |
| BZLFY Bunzl plc |
-0.29 1.51% | 18.86 | 12.45 | 17.09 | 1.31 | 2.10 | 1.20 | 11.87 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 27, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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