Spartan Stores, Inc. Overview


Spartan Stores, Inc. (Spartan Stores) is a regional grocery distributor and retailer which operates in Michigan and Indiana. Spartan employs 8,800 people, distributes to 375 independent retail grocer locations, and owns/operates 96 neighborhood locations. SPTN's distribution segment maintains 43,000 SKUs(Stock Keeping Units) and provides approximately 3,200 private label and general merchandise items.

Spartan Stores is a retailer that operates under these names depending on the market:

Store Names

  • Glen's Markets
  • Family Fare Supermarkets
  • D&W Fresh Markets
  • Felpausch Food Centers
  • VG's Food and Pharmacy

Private Label Brand Names

  • Spartan Brand - flagship brand
  • Top Care - health and beauty care brand
  • Valu Time - value brand
  • Full Circle - natural and organic brand

Direct Competitors

SPTN competes in both the wholesale distribution and the retail grocery sectors:


In the wholesale distribution business, SPTN competes with in-house distribution operations of large food companies, small local distributors, as well as the national grocery distributors including:


In the retail business, SPTN's major competitors in the state of Michigan includes

  • Meijer (Private)

Meijer is a major competitor to SPTN and has a dominating presence in the Midwest United States; especially Michigan. Half of its 195 stores are located in Michigan and the company overall generates 14.25 Billion in revenues. This business is private and still is family owned. Their competitive advantage lies in pricing, high quality private label products, and economies of scale through its Midwestern supply chain.[1]

Kroger is an American retailer operating 2,460 supermarkets in the United States with 134 stores located in Michigan.[2]

Wal-Mart is the world's leader in retail and grocery stores. They are heavily reliant on Chinese imports for their retail segment and favorable exchange rates. However 50% of their revenues are tied to grocery sales, and thus are a big competitor for Spartan Stores in Michigan. Wal-Mart Supercenters carry over 100,000 SKUs while Sam's Clubs carry 4,900 SKUs. [3]

Wal-Mart has 79 Supercenters, 10 discount stores, 1 distribution center, and operates 26 Sam's Club locations in Michigan. [4][5]

Costco operates retail membership based warehouses, with high turnover, high volume, low cost inventory. Costco only carries 3,900 SKUs on average which keeps turnover high. Costco operates 11 stores in Michigan.[6]

Financial Considerations

SPTN vs. Competition

SPTN is the laggard in this basket of grocers, although take note that SPTN has 100% exposure to the Michigan economy while the others have much less. Firstly, the YTD return is negative while the other 3 are positive. The revenue growth and YoY EPS growth are both negative while the others are climbing.

SPTN carries 43,000 SKUs in its stores, which is substantially more than Costco's 3,900, Sams Club's 4,900, but is dwarfed by Wal-Marts 100,000 SKUs. This is crucial - Wal-Mart is in better shape fiscally, but has more SKUs. Only with the bargaining power of Wal-Mart could a company keep track and maintain the cost of keeping 100,000 SKUs in its stores. To improve its financial metrics, SPTN could try to downsize its SKUs to a number closer to Sam's or Costco's and in effect attain better inventory turnover to improve on its grocery businesses' operating income numbers.

Operations Cash Flow Breakdown

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Operating income for 2010 was carried by SPTN's distribution segment(as well as in revenue), suggesting that at least in 2010 it was more profitable to service other customers instead of being the point of sale retailer. SPTN is unique in this fashion in that its exposure is uniquely concentrated in Michigan, and they benefit when stores that carry their private label brands and/or use SPTN as their distributor do well in much the same way as their owned stores do.

SPTN has increased gross margins every year, yet that hasn't translated into net earnings which decreased during the same period.

Percentage of Net Sales (%)
2010 2009 2008
Net Sales 100.0 100.0 100.0
Gross Magin 21.9 20.8 20.0
Restructuring and asset impairment costs 0.2 - -
Operating earnings 2.3 2.8 2.5
Other income and expenses 0.6 0.5 0.6
EBITD 1.7 2.3 1.9
Income Taxes 0.7 0.9 0.7
Earnings from continuing operations 1.0 1.4 1.2
(Loss) earnings from discontinued operations, net of taxes 0.0 0.0 0.1
Net earnings 1.0 1.4 1.3

Customers, Suppliers, and Economic Considerations

Only 1/3 of SPTN's incomes come from its own retail operations. SPTN is first of all a grocery distributor. Analyze the grocery distribution business separately, and spend at least twice the time on it as you spent on the retail business, since that's about the relative weight of wholesale vs. retail revenues in SPTN. -- RH Now who the heck is RH??

Porter's Five Forces

Bargaining Power of Customers

Customers have a high level of bargaining power. There is virtually no cost to switch from SPTN to one of its competitors. SPTN does differentiate between its competitors through tailoring their stores to each market’s tastes and branding itself as a unique and niche store to its demographic region.

Bargaining Power of Suppliers

SPTN owns its distribution network, so its exposure to bargaining is through its raw inputs: labor and goods sold.SPTN doesn’t have the bargaining power of Wal-Mart because of its relatively small sales volume and therefore its suppliers are the market maker and SPTN

Threat of New Entrants

There is always the threat of new entrants to the grocery business, however businesses and go all the time. SPTN is an established company and has a reputation that a new entrant would have to overcome this as well as SPTN’s competitors. Margins are thin in this industry which makes it less attractive to a potential entrant.

Threat of Substitute Products

There is no substitute for food and water. However, there are many ways for customers to shop for food and water, other than the retail format currently offered by SPTN. Customers can switch to neighborhoods stores smaller but closer to home than SPTN stores, or to big box stores (such as Wal-Mart) that are further away but cheaper.

Competitive Rivalry within the Grocery Industry

Competition is fierce in the grocer industry. Wal-Mart can enter a market and lower the prices by over 10%. SPTN relies on its edge in remaining a neighborhood centric and locally owned grocery store, without the headline risk that a company like Wal-Mart has. Also, SPTN is diversified in the sense that much of its operating income comes from distribution operations supplying some of its competition, buffering it from a decrease of market share.

Regional Economy

Michigan businesses, and more susceptibly, razor thin margin grocers such as SPTN were hard hit by the Michigan Business Tax instituted by then governor Jennifer Granholm. The Michigan Business Tax was recently repealed and grocers will see a tax bill 1/4 smaller than they did before the MBT was instated.

As well, Michigan Governor Rick Snyder has announced his intention to abolish the states pricing law which requires grocers to put a sticker on every product on its shelves. This allows grocers to spend less on workers arbitrarily tagging every item in their store.[8]

As Michigan recovers from a protracted recession, SPTN will benefit disproportionately compared to most other competitors. An investor going long SPTN is one that is going long on Michigan's future.

Human Resources Considerations

Unions comprise of 8% of SPTN's workforce comprised of 720 distribution center and transportation associates. SPTN hasn't had work stoppages due to unions in over 20 years.[7]

Key Players for Spartan Stores

Name Title Compensation Previous Employers Age
Dennis Eidson Chief Executive Officer, President, Director (2008) 1,689,170 Great Atlantic & Pacific Tea Company 66
David Staples Chief Financial Officer, Executive Vice President (2000) 813,350 K-Mart 47
Alex DeYonker Executive Vice President, General Counsel, Secretary (2006) 608,091 Warner Norcross & Judd LLP 60



  1. Meijer, Inc. Company Profile
  2. Kroger 10K
  3. RetailingWorks Why Sell to Wal-Mart
  4. Wikinvest Wal-Mart (WMT)
  5. Wal-Mart 10K
  6. Costco 10K
  7. 7.0 7.1 Spartan Stores 10K
  8. Gov. Snyder is on a roll with Michigan grocers 2/18/2011
  9. Spartan Stores Inc (SPTN.O) People | Reuters.com
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