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==Customers and Economic Considerations== ==Customers and Economic Considerations==

Revision as of 21:31, April 29, 2011

Spartan Stores, Inc. Overview

Description

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

Direct Competitors

Listed are some of SPTN's most important competitors in Michigan.

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 (KR)

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

Wal-Mart/Sam's Club (WMT)

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 (COST)

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

Operations Cash Flow Breakdown

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
[7]

Customers and Economic Considerations

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.

Competitive Rivalry within the Grocery Industry

Competition is fierce in the grocer industry. Wal-Mart can enter a market and lower the prices over 10%




Regional Economy

[8]

Human Resources Considerations

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

[9]

References

  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. 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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