SpartanNash Company

Good morning and welcome to the Spartan Nash first quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kaylee Campbell, Head of Investor Relations. Please go ahead.

Good morning and welcome to the Spartan Ash Company first quarter 2022 earnings conference call. On the call today from the company are President and Chief Executive Officer Tony Sarsom and Executive Vice President and Chief Financial Officer Jason Monaco. By now, everyone should have access to the earnings release which was issued this morning at approximately 7 a.m. Eastern Time. For a copy of the earnings release, as well as the company's supplemental earnings presentation, please visit Spartan Ash's website at www.spartannash.com backslash investors. This call is being recorded, and every play will be available on the company's website. Before we begin, the company would like to remind you that today's discussion will include a number of forward-looking statements, If you will refer to Spartan Nash's earnings release from this morning, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember, Spartan Nash undertakes no obligation to update or revise these forward-looking statements. The company will also make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business. And it has included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. And it is now my pleasure to turn the call over to Tony.

Thank you, Kaylee, and welcome to Spartan Ash. We are glad to have you on board as head of investor relations. And good morning, everyone. Thank you for joining us. On May 12th, we provided our preliminary earnings results. And today, I'm happy to walk you through additional highlights of the quarter. As part of our winning recipe, we're focused on transforming our supply chain. And this past quarter showed that our efforts are taking hold. We delivered an approximate 7% improvement in throughput year over year. We also secured more than $15 million in run rate cost savings, meeting our initial full year commitment of $15 to $30 million in annual savings ahead of schedule. We reached this significant milestone by leveraging data and insights to create efficiencies throughout the distribution network. We now expect to achieve $25 to $35 million run rate savings by the end of fiscal 2022. These two impressive accomplishments are a direct result of our supply chain transformation initiative, which is a foundational element for expanding our profitability. And we are just getting started. I wanted to thank our supply chain leaders for their hard work and dedication in making this possible. Moving to our retail segment, our team of frontline store associates continue to deliver quality service to shoppers resulting in comparable store sales that were up 7.2% in the quarter. We are building on strong momentum in our retail business and we saw our market share grow. We are focused on providing exceptional service and market competitive pricing. This is helping us retain our current customers and shoppers who have recently discovered our stores. We remain committed to our mission of delivering the ingredients for a better life. To drive growth margin and create more value, we are expanding our private label brand penetration. Overall, our private label sales increased 13.7% year over year, outpacing the company's overall sales growth. That is really impressive. Now, turning to our military business. I'm proud to say sales increased over the prior year quarter for the first time since Q1 of 2020. Additionally, we achieved military-adjusted EBITDA margins of 1.6%, exceeding our turnaround target of 1%. We are strategically positioning military for success through a variety of initiatives, and we continue to see opportunities to further increase the profitability of this business. One of these opportunities is around the recent extension of our private label contract with DECA. Our military distribution network gives us the unique ability to service 160 commissaries and 400 exchanges worldwide. We are proud to continue providing America's military heroes and their families with great value and a taste from home. And speaking of our unique global supply chain, we are currently leveraging our military network to provide critical food and supplies to Ukrainian refugees across Eastern Europe. Now, turn to the impact inflation had during the quarter. While inflation was a tailwind for us, our performance also reflects the continued execution of our winning recipe and our supply chain transformation initiative. Looking ahead to the remainder of the year, we expect to continue operating in a volatile and inflationary environment. Our teams are going above and beyond to effectively manage through these uncertainties. Additionally, the impact of inflation on our results should taper in the second half of the year. Turning to the labor environment, in order to attract and retain top towns in the labor market, we have taken several steps to enhance our associate experience. These include investments in wages, additional benefits, heightened focus on safety and training, associate recognition, and streamlined communication. We are seeing the benefit from these initiatives over the past two years, including 2.3 times higher than normal applicant flow and a 48% improvement in our safety incident rate. Turning to strategic growth. In the past couple of quarters, we introduced our winning recipe, defining who we are and where we are going. The formula is driven by our three core capabilities, people, operational excellence, and insights that drive solutions. If you visit the investor relations section of our corporate website, you can view the Q1 supplemental earnings presentation, which provides an overview of our winning recipe. Now, I'll get into some specifics illustrating how we're executing on our plan. Last month, as part of our e-commerce strategy, we announced a partnership with DoorDash. This partnership expands our grocery services and solutions across both our digital and physical platforms. It also enables us to empower our network of 2,100 independent retail customers. We're now providing them with additional tools and resources they need to grow their businesses and expand their digital footprints. Additionally, we'll be offering on-demand grocery delivery from more than 100 company-owned stores. Our customer-centric innovation is a key priority for driving growth. With this new omnichannel partnership, we will expand our customer base and capture more of the grocery retail market by rapidly scaling our digital offering. We also recently reached an agreement to acquire a three-star Michigan grocery chain, Shop and Save Food Centers. These stores will be converted into our popular family fair banner. Our focus right now is ensuring a smooth transition for our new team members and the customers they serve. We're also expanding shopper offerings through our robust loyalty program. I'm also pleased to announce that the Stockton California Distribution Center has been integrated into our network. Through our partnership with the Coastal Pacific Food Distributors, 500,000-square-foot multi-temperature facility is now fully servicing customers after a phased-in launch. Having a West Coast presence allows us to provide faster, fresher, and more cost-effective deliveries to our customers. The arrangement will also save roughly 1 million gallons of diesel fuel annually, while helping us reduce our fleet mileage by 10% or more than 7 million miles. This agreement further advances our progressive work in ESG by reducing our carbon footprint. We anticipate lowering our greenhouse gas emissions by an estimated 10,000 metric tons this year. And we are not done yet. If you have not seen the document, I highly encourage you to review our inaugural ESG report, which is available under the Corporate Responsibility section of our website at spartnash.com. Now let's talk about long-term targets. We have built a strong foundation based on our winning recipe. And our momentum gives us confidence in the growth targets we recently announced on May 12th. As a reminder, by 2025, we expect to grow net sales by at least 12% from fiscal 2021 to more than $10 billion. We expect to increase adjusted EBITDA by at least 40% from fiscal year 2021 to more than $300 million. And we expect to expand our adjusted EBITDA margin to 3% of net sales by an increase of 25% from fiscal year 2021. We are very pleased with the actions the current executive leadership team has taken, which is reflected in our performance. We believe our strategy provides a clear path for long-term growth and increased shareholder value. Before I turn the call over to Jason, I would like to extend one more heartfelt thank you to our Spartan Nash Associates, whose operational excellence and keen focus on winning has made these results possible. Your hard work and dedication is transforming our company. On behalf of the Spartan Nash executive leadership team, thank you for being our customers' unsung heroes. With that, I'll now turn the call over to Jason to walk you through the first quarter financial performance in great detail.