SpartanNash Company

SPTN Details

SpartanNash Company (NASDAQ: SPTN) is a Fortune 400 company focused on distributing fresh produce, grocery, and pharmaceutical products to a diverse group of independent and chain retailers, US military commissaries and exchanges, and its corporate-owned retail stores. The company currently has 150 supermarkets across the US, Europe, South America, and MENA regions, and operates under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery, and Dan's Supermarket. As of June 09, 2021, SPTN’s market capitalization stood at USD 747.27 million.

Launch of Affordable Care for Pharmacy Guests: On June 07, 2021, the company announced a partnership with Bonum Health to provide affordable and convenient telemedicine services at all of its pharmacies. With this initiative, SPTN’s various pharmacy customers can have direct access to health providers through the Bonum Health mobile app and website.

Q1FY21 Results: The company reported a slight decline of 6.95% in net sales to USD 2.66 billion in Q1FY21 (ending April 24, 2021) as compared to USD 2.86 billion in Q1FY20 (ending April 18, 2020), primarily due to the COVID-19 pandemic related increase in consumer demand during Q1FY20. Sales from the Food Distribution segment were USD 1.33 billion, representing 50.19% of the net sales in Q1FY21. Net income for Q1FY21 was USD 19.52 million, vs USD 15.40 million reported in Q1FY20.

Key Risks: A significant portion of SPTN's sales comes from a few major customers, with just one customer accounting for over 15% of reported net sales in FY20, FY19, and FY18. As a result, the company's success and financial standing are largely dependent on retaining this business. Moreover, SPTN relies heavily on information technology and employs mobile devices, social networking, and other online activities to connect with its customers, associates, suppliers, and business partners. It also receives, transmits, and stores many types of sensitive information on the digital cloud. As a result, the company could incur significant losses in case of a security breach, system disruption, inadvertent release of information, or any other technology-related disruptions.

Outlook: A supply chain improvement program, which will begin in the second quarter, is in the planning stages at SPTN. The program will be focused on implementing long-term supply chain improvements across the Company's network.

FY21 Guidance (Source: Company Press Release, June 02, 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

 (Data Source: REFINITIV, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SPTN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: SPTN increased by 10.40% and 12.79% in the past 6 months and 9 months, respectively, and is currently at the higher end of the 52-week range of USD 15.75 to USD 23.94. The stock is currently trading above its 200 DMA level. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 18.12. Considering the rise in the stock price in the last 6 months, decline in sales and earnings (compared to prior-year quarter), and valuations not justifying the current market price, we recommend an “Expensive” rating on the stock at the closing price of USD 20.28, down by 1.65% as of June 09, 2021.

* The reference data in this report has been partly sourced from REFINITIV.