SpartanNash Company

Good day and welcome to the Spartan Nash Company second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. 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, everyone, and welcome to the Spartan Nash Company's second 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 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 a replay 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, which can be found on Spartan Ash's website at www.spartannash.com backslash investors. And now, it is my pleasure to turn the call over to Tony.

Thank you, Kaylee, and good morning, everyone. As reflected in our strong second quarter earnings, our winning recipe continues to drive results and create value for our shareholders. Compared to prior year, this past quarter, we increased net sales by nearly 8% to $2.3 billion, and we achieved adjusted EBITDA of $61.8 million, an impressive 13.7% increase. Turning to our quarterly segment performance, we improved our gross profit rates in both food distribution and military. Additionally, our military sales were positively impacted by a case volume increase of 3.3%. We are also pleased that our military EBITDA margin again improved year over year in the second quarter. Moving to our retail business, we gained share and maintained momentum with a strong same-store sales of 6.5%. And we completed the acquisition of the Shop and Save food centers at three-store Michigan grocery chains. we welcome our 400 newest associates to the Spartan Nash family. Overall, we continue to make progress on our supply chain transformation goals. We exited the quarter with an impressive 9% improvement in throughput rate year over year, and we are reaffirming our current annualized cost savings range of $25 million to $35 million. Following the success of our supply chain transformation, we are energized about the launch of our merchandising transformation This adds another ingredient to our winning recipe. Over the past year, product cost increases have outpaced underlying commodity price changes in many categories. Our team has been actively tracking these trends and industry data. We have always had a robust process for negotiating price, but we are doubling down on these efforts due to the unprecedented inflation. To combat the impact of these rising costs, we proactively rolled out a new cost policy and a new enhanced category planning program. The program includes additional checks and balances to ensure cost increases are justified, which allows us to provide a more competitive offering to our customers and retail shoppers while strengthening our business. These actions will lead to top line growth and margin expansion. Even during these early stages, we are pleased to report that many leading vendors are partnering with us to find creative solutions. At the end of the day, When the consumer wins, we all win. Importantly, the merchandising transformation includes three key components, improving category management, upgrading merchandising capabilities, and automating promotions and pricing. We are in the initial stages of this initiative. We look forward to providing more information on the expected benefits during our upcoming investor day, which I will discuss momentarily. Over the past year, we have invested in our three core capabilities, people, operational excellence, and insights that drive solutions. As a reminder, these three core capabilities inform our five strategic priorities, which are creating a people-first culture, elevating execution to win the day, transforming the supply chain, acting on insights that drive growth, and launching consumer-centric innovative solutions. Due to the success of our winning recipe and the momentum in our results, we are increasing guidance for the second time this year. The raise was driven by our food distribution and military gross margin expansion, as well as the benefits we are capturing from our initiatives. Jason will go into further detail, but I wanted to call out our adjusted EBITDA range of $227 million to $240 million, which now includes the cost associated with the new merchandising transformation initiative. Now let's turn to our long-term financial targets. The ongoing success of our winning recipe gives us confidence in the growth targets we announced in May this year. To review, compared to fiscal 2021, by 2025, we expect to grow net sales by at least 12% to more than $10 billion. and we expect to increase adjusted EBITDA by at least 40% to more than $300 million. Now, how are we going to achieve these targets? Great question. Our team is diligently planning an investor day scheduled for Wednesday, November 2nd. The in-person event will include a formal presentation and Q&A, which will also be live streamed. Additionally, We will be hosting a mini trade show where investors and analysts can interact with our executive team on a one-on-one basis. We are very excited to share in-depth details at the event, which will include an update on our winning recipe and KPIs, the long-term benefits we expect to capture from our supply chain transformation, and more details on the merchandising transformation, including the exciting changes we are making and the initiative's projected benefits. This will be a great opportunity for investors and analysts to interact with this fine executive leadership team we have built over the past couple of years. I have a very deliberate staffing strategy in which I don't simply recruit players, but rather I recruit the right team. That team is leading the way in executing our winning recipe. I invite you to meet them so you can see firsthand why I'm so excited to be part of this all-star team. I'll now turn the call over to Jason to walk through the quarterly financials in greater details.