SpartanNash Co (SPTN) 2010 Q4 法說會逐字稿

Greetings and welcome to the Spartan Stores, Incorporated fiscal 2010 fourth quarter earnings conference call. (Operator Instructions).

Ladies and gentlemen, I must remind you that the comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates, and projections that involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such a difference include, among others, competitive pressures among food retail and distribution companies, the uncertainties inherent in implementing strategic plans, and general economic and market conditions. Additional information about risk factors and the uncertainties associated with our forward-looking statements can be found in the Company's earnings announcement, Annual Report on Form 10-K, and the Company's other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements.

It is now my pleasure to introduce your host. Mr. Dennis Eidson, President and CEO for Spartan Stores, Incorporated. Thank you, sir. You may begin.

Good morning, everyone. Thank you for joining our fiscal 2010 fourth quarter and year-end earning conference call.

With me this morning are members of our team, including EVP and CFO Dave Staples, Executive Vice President of Merchandising and Marketing Alan Hartline, Executive Vice President of Retail Operations Ted Adornato, Executive Vice President of Wholesale Operations Derek Jones, and our EVP and General Counsel Alex DeYonker. As is customary, I'm going to provide you with a brief overview of our business progress and year-end financial results, and then Dave is going to give you more details about the quarterly financial results and the outlook for the coming year. I'll rejoin the call at the end to provide some concluding remarks.

We're pleased to have achieved historically high levels of operating profits and EBITDA, despite the challenging economic and competitive climate that has affected both Michigan and certainly the entire grocery industry. For the year, we reported adjusted EBITDA of $103.3 million and adjusted operating earnings of $63.5 million. This performance is second only to the record levels of EBITDA and operating earnings that we reported last year. In addition, we generated cash from operations of $92 million, which is a 13% increase above last year. I believe this performance is particularly noteworthy because we generated these results in the context of Michigan's extremely difficult economic environment, as evidenced by its high unemployment rate, the price deflation, and the heightened level of market competition that we experienced during the year.

During the fourth quarter, sales and earnings were affected by the same factors that influenced the full year. Our distribution segment experienced an overall moderation in price deflation as the quarter progressed, and deflations affect on our retail segment was slightly lower than the 2% plus that we experienced in the third quarter. Following a difficult year-over-year comparison in the third quarter, retail fuel margins in the quarter were comparable to last year's fourth quarter.

As I just mentioned, conditions in our operating environment have remained challenging, but we're encouraged by the more recent economic developments. These include GDP growth, a rebound in the domestic auto production, stabilizing to slightly declining unemployment rates, a nine consecutive months of manufacturing growth, and positive consumer confidence trends. We're also encouraged by the moderation and the deflationary pressures of certain product categories. And from a competitive environment perspective, we'll cycle the majority of the prior year's openings during the first half of fiscal 2011, while experiencing a much lower rate of openings during the the current fiscal year. In fact, we're expecting only two significant competitive openings during the upcoming year.

On the consumer front, we've not yet seen a meaningful turn in consumer purchasing behavior, as they remain somewhat cautious, buying only for their immediate needs and staying focused on value. We do believe, however, that some initial positive indicators of change are occurring, as sales trends appear to be showing improvement at our retail banners. We continue to focus aggressively on our retail value drivers and on providing a value-added experience to our distribution customers, who also have a strong desire to bring more value to their consumers and to be competitive in the marketplace. Our private brand products are an integral part of our value offering, and the program continues to perform well, as its sales penetration improved again during the fourth quarter. Based on items scanned, our private label sales penetration reached 24.6% during the fourth quarter, compared to 23.3% in the same period of fiscal 2009.

Looking back at the past year, we're pleased to have made steady progress executing against our business plan, and I believe that we're well positioned to achieve better financial and operating results, as the economy continues to strengthen. Our goals for the coming year were to selectively -- or, for the current year -- were to selectively invest capital in the areas that represent our best development opportunities, strengthen our consumer value proposition, and improve operating efficiency and structural cost. And I'm happy to report that we made good progress in each of these areas. During the year, we invested capital in store remodels and relocation projects, began construction on a new store and a relocation store,and we opened five more fuel centers. We also closed or sold four stores during the year.

From a consumer perspective, we launched a loyalty card program that we're pleased about, because it's providing us with additional insight into consumer buying patterns. We believe that the program is at the stage where we can leverage that information to develop much better and more effective marketing and merchandising programs. In addition, we also implemented our first continuous customer satisfaction monitoring system. The system provides customers with the ability to rate each of our stores on multiple dimensions of shopping satisfaction. Although our raw scores are not yet at the levels that we would like, we are pleased to report that the trends are improving.

We also took another significant step toward improving our structural costs, as operating efficiency through our warehouse consolidation and the associated administrative cost reduction initiatives. We have been working diligently on the consolidation effort since announcing the plans, and have now transitioned all of our customer shipments to our Grand Rapids distribution center. As previously disclosed, this initiative will substantially improve our already efficient distribution operation.

And with that overview, I'm going to turn the call over to Dave. Dave?

Thank you, Dennis, and good morning, everyone. I'll now provide you with some additional details about our fourth quarter financial results, and provide some broad guidance for fiscal 2011.

Consolidated net sales for the 12-week fourth quarter were $558.8 million, compared to $581.3 million in the year-ago quarter. The decline related to lower retail and distribution sales, caused by the prevailing economic and competitive market conditions, price deflation, and stores that were closed or sold since the beginning of the fiscal year. Distribution and fuel sales represented approximately 44% and 5% respectively of consolidated sales, compared with 43% and 2.9% respectively in last year's fourth quarter. The consolidated gross margin rate for the fourth quarter decreased 70 basis points, to 22.6% from 23.3% in last year's quarter. The change was due mainly to the higher mix of fuel and distribution sales, and a lower LIFO inventory valuation credit, compared with the the prior year period.

Fourth quarter operating expenses were 21% of net sales, compared with 20.4% of sales in the same period last year. The rate increase was due to the restructuring charge disclosed in our press announcement. Excluding the charge, operating expenses as a percentage of sales declined to 20.1% of sales. Excluding the restructuring charge, adjusted fourth quarter operating earnings were $13.7 million, compared with $17.3 million last year, which was a fourth quarter record. As reported, operating earnings for the quarter were $8.9 million. The year-over-year change in adjusted operating earnings was due to lower comparable store sales volume, a $1.1 million decline in the LIFO inventory valuation credit, and a $900,000 one time pay-out related to the modification of certain employee benefit plans in our retail segment.

Adjusted EBITDA, which excludes the restructuring charge, was 4% of sales, compared with 4.2% in the same period last year. Adjusted earnings from continuing operations, which exclude the restructuring charge, were $6.5 million, or $0.29 per diluted share, compared with $8.2 million, or $0.37 per diluted share, in last year's fourth quarter. As reported, earnings from continuing operations for the quarter were $3.3 million, or $0.15 per diluted share. Fourth quarter net earnings, excluding the restructuring charge, were $6.4 million or $0.28 per diluted share, compared with $8.4 million, or $0.38 per diluted share, in the year-ago quarter. Net earnings included a loss from discontinued operations of $0.01 per diluted share this year, compared to earnings from discontinued operations of $0.01 per diluted share last year. As reported, including the restructuring charge, net earnings were $3.2 million, or $0.14 per diluted share.

Turning to our business segments, fourth quarter distribution sales were $244.3 million, compared with $249.2 in the same period last year. The change in sales was due primarily to the current economic conditions. Excluding the distribution segment's portion of the restructuring charge, operating earnings were $12.2 million, compared with $14.6 million in last year's fourth quarter. The decline was due primarily to a $100,000 LIFO inventory valuation expense in this year's fourth quarter, compared to a $2.1 million LIFO credit last year. As reported, distribution operating earnings were $8 million.

Fourth quarter retail sales were $314.4 million, compared with $332 million in the same period last year. The change in sales is due primarily to a 6.9% decline in comparable store sales, which excludes fuel, a loss of $6.2 million in sales related to four stores that were closed or sold since the first quarter, and the cycling of a successful store grand reopening in last year's fourth quarter. These items were partially offset by sales contributions from the additional fuel centers that were opened this year and higher average retail fuel prices. Cautious consumer spending, retail price deflation, and competitive market activity contributed to the comparable store sales decline. We estimate the price deflation impacted comparable store sales by approximately 1.8%. In addition, we believe that competitive store openings contributed approximately 2% to our results.

Fourth quarter retail operating earnings included a $600,000 pre-tax restructuring charge related to certain discontinued real estate projects. Excluding this charge, adjusted retail operating earnings were $1.5 million, compared with $2.7 million last year. As reported, including the charge, retail operating earnings were $900,000. The change in operating earnings was due primarily to lower comparable store sales volumes and a $900,000 pre-tax charge, related to a one-time payout to modify the employee benefit program previously mentioned. These items were partially offset by a $1.1 million reduction in LIFO inventory expense, compared to last year.

During fiscal 2010, our capital investments totaled approximately $50 million, and depreciation and amortization were $34.6 million. Our balance sheet, capital position and cash flow remain strong. For fiscal 2010, we generated cash from operating activities of $91.7 million, a 13.3% increase compared to last year. The improvement was due to better working capital management and the timing of certain payments. As of March 27, 2010, total long term debt, including current maturities and capital lease obligations, declined $18.5 million to $185.3 million from the balance at the end of the third quarter. You may recall that this exceeded our debt reduction guidance of $10 million that we discussed during our last call.

Our balance sheet ratios strengthened during the fourth quarter, with the long term debt to capital ratio improving to 0.4 to 1 from 0.43 to 1 in the third quarter. Our debt to EBITDA ratio, based on a trailing four quarters EBITDA, remained at a healthy 1.8 to 1. We also have approximately $131 million of availability under our existing credit facility. From a capital investment perspective, we continued construction of a new D&W Fresh Market and a new Family Fare store. The Family Fare store represents the relocation of an existing Felpausch facility. We remain on schedule to open the D&W Fresh Market during the first quarter, and the Family Fare relocation project is expected to open early in our third quarter.

I will now cover our outlook and provide some broad guidance for fiscal 2011. We expect retail comparable store sales trends to improve on a sequential quarter basis, beginning in the first quarter, and for the improvement to accelerate during the course of the year. The trend improvement will be the result of our expectation that price deflation will moderate, the economy will continue to recover, and the cycling of competitive store opens, which will occur predominantly during the first two quarters of fiscal 2011. I want to point out that our fiscal 2010 first quarter was not affected by the same magnitude of challenges that developed during the course of the fiscal year. We also held grand reopenings of four remodeled stores during the period -- during the prior year's first quarter. This will make our year-over-year comparison in the upcoming first quarter more difficult. And as a result, we expect fiscal 2011's first quarter comparable store sales, excluding fuel, to improve only slightly from the fourth quarter results.

In our distribution segment, we expect our first quarter year-over-year sales to decline by about the same rate that we reported in the fourth quarter. From a net earnings standpoint, we expect the first quarter results to be slightly better than the year-over-year decline in adjusted net earnings, which excludes the restructuring charge reported in the fourth quarter. For the full year, we expect net earnings to meet or exceed the prior year, as the deflationary and economic conditions improve, and we benefit from our efficiency improvement initiatives. As previously discussed, we've made substantial investments in our stores, distribution network, and management systems during the past three years. As a result, we intend to reduce the level of capital investment in fiscal 2011, to approximately $30 million to $35 million. We expect depreciation and amortization for the fiscal year to be approximately $36.5 million to $38 million, with total interest expense of approximately $16.5 million to $17 million.

I will now turn the call back to Dennis for his closing remarks. Dennis?

Thanks, Dave.

Again this quarter, I want to begin my concluding remarks by thanking our associates for their extraordinary effort as we work collectively through this very challenging period. They've made remarkable contributions toward our continued success, and are certainly well deserving of our praise. Looking ahead, we're encouraged by the signals that the economy has stabilized and appears to be on a growth path. I believe that these signs bode well for the Michigan economy in particular, because of our heavy manufacturing base, which has historically rebounded faster than the general economy during an economic recovery.

Although our near-term outlook remains cautious, we believe that business conditions will gradually improve during the fiscal year. Our optimism stems from expectations that the unemployment rate has stabilized and will show some year over year improvement, the rate of product price deflation will diminish, our cycling of the prior year's competitive store openings, and our expectation of a more normalized competitive environment during the year.

Our goals for the fiscal year are to further strength our consumer value proposition in both business segments, continue working on operationally efficiency improvements, invest in new store construction where fill-in or store relocation opportunities exist, and expand our fuel center operations. In addition, we will opportunistically seek growth opportunities in our existing markets, or adjacent states, through new customer development or acquisitions. Two specific areas where we believe development opportunities exist are in our private brand portfolio and our value profile. In fiscal 2011, we will be concentrating efforts on expanding our private brands in the fresh food categories. We have a significant opportunity to improve our brands penetration rate in the fresh food area and plan to launch up to 75 new items this year. I believe that our private brand portfolio provides us with a distinctive and sustainable competitive advantage in the marketplace, for both our retail and distribution business segments, and we have more development potential in this area.

Another area of focus will be in more aggressively working to raise our value profile. In March, we began the process by implementing a new value-based merchandising and marketing campaign. It included a new and distinct ad circular that emphasizes deeper values on key items, more value offerings inside the store, and in-store signage that will draw much more attention to these values. On the distribution side, we expect to solidify our position as a low cost and highly efficient distributor with the completion of our warehouse consolidation project. Our value-added support services have never been more relevant than today, and I believe these service attributes will help us win customers in adjacent geographic areas.

The past year has clearly been one of the most challenging periods that our industry has faced in many years, yet we have maintained a relatively high level of profitability. I believe that this performance demonstrates both the effectiveness of our consumer-centric business strategy, and our ability to execute in a very tough environment. I also believe that the worst business conditions have now passed, or at the very least, stabilized. We have worked diligently during this period to position the Company to prosper as the economy does recover. We have made great progress improving our operating efficiency, our consumer value proposition, our systems and facilities, and our consumer data collection and analysis capabilities, and we fully expect these efforts to yield positive results into the future.

We'll now open the call for your questions.

(Operator Instructions). Our first question today comes from the line of Karen Short with BMO Capital Markets. Please proceed with your question.

Hello, there. Good quarter.

Good morning.

How are you?

Good.

A couple of questions. Just wondering, I'm sorry if it's loud. I'm in a conference room here. Your language on your guidance for fiscal 2011 -- I think in the third quarter you'd said fiscal 2011 would exceed 2010, but you seem to now be saying that it will maybe equal or be slightly higher. First, I guess am I interpreting that correctly? And is that maybe just more of a function of the fact that you beat your internal expectations on the fourth quarter?

I think, as we look forward, we are saying that it will equal or exceed performance, and I think some of that is exactly like you said, we did have a stronger than anticipated fourth quarter.

Okay. And I guess, I mean it seemed to be fairly broad based. Maybe talk a little bit about what was the driver of the comp being a little bit better?

You know, I think it was not one thing. I mean, we continued to experience the deflation, although it was a little bit better than it was in Q3. The competitive openings were still in existence. I think it was more one of those, you know, rising tides lift all ships, kind of thing. It just felt a little bit better all around than we had anticipated, Karen.

Can you give some color on the composition of the same store sales traffic versus basket?

The composition would be -- the negative number is more canted for traffic than it is basket size. I will say that early in the new fiscal year we are seeing an improvement in that traffic number that seems to be pretty meaningful. You know, the traffic thing is a tough one.

You know, the end of the month continues to be extremely difficult for us. What used to be just in certain geographies,really kind of is across our total portfolio, on both the distribution side and retai, and almost feels like it's a longer period than it used to be. So I think that's part of the driver of traffic. And I will also say as fuel has reached price points that are significantly ahead of a year ago, we may have begun seeing customers consolidating trips. And indeed, in the most recent customer research we just concluded, 40% of our customers said that they were trying to reduce trips.

Okay. And then, looking at inflation, I guess, first of all, what your outlook for inflation in 2011. And then, do you think comments on your ability to pass on higher prices, because I guess some of your competitors have indicated that it's very -- it's tough to pass on.

I think our outlook on the inflation, we certainly -- we aren't experts at this. We're probably reading the same things that you are. I think we suspect that the second half of the year, it's going to be better than the first half. And so our plan, business model, implies that we'll gradually see modest inflation begin to creep back in over the course of the year, and that obviously contributes to the sequential improvement that we're talking about in the forward looking.

As it relates to the ability to pass on inflation, you know, that is -- that's a lumpy thing, and even though we're relatively tight geographically, even in our tight marketplace, it varies from region to region. But I would say to you, it does not feel like an irrational environment for passing it on. We have seen, most recently, a pretty robust inflation on -- in the meat department and in produce, particularly in, you know, the beef category is way up. You know, those categories tend to be highly promotional and a significant amount of the volume in red meat, for example, is done on promotion. It's less about everyday pricing, and are the promotional prices moving. Frankly, we're seeing that they are. It's not that we don't have our challenge. I would say it is a manageable situation.

Okay. Great.

And then lastly, one of your competitors, I think, commented that they were carefully looking at the financials from the independents that they were serving. I guess I was just wondering if you could comment a little bit on the health of your independents, and then talk about what your more recent rates of attrition are, with your independent customers.

Yes, Karen. This is Dave.

We feel that our customer base in Michigan, and maybe it's more conservative than other places, has always -- they've weathered these kind of ups and downs over their history, and I think they probably, maybe more so than in other places, I can't really comment on that, prepare themselves for the ups and downs. So knock on wood, I guess, we've been very presently surprised, probably, with how our base has weathered the storm, you know, from a financial perspective, anyway, as it relates to our receivable collections and the rate. Actually had one of our lowest receivable delinquent write-offs in our history this year. Our base seems to be holding up well. Obvioulsy, we don't have insight into every customer we own -- we service. But from an overall perspective, we've been relatively pleased with how they've performed through this environment.

Go on --

I guess that was really it.

And then, do you have any expectations for LIFO for next year?

Yes, I mean, we will have a higher charge. It probably will be in about that $2.4 million range variance year-over-year.

Okay. Thanks very much for taking my questions.

Thank you. Our next question comes from the line Ajay Jain with Hapoalim Securities. Please proceed with your question.

Hi, good morning. Thanks for taking my question.

I just wanted to follow up on the question on wholesale inflation. Dennis, it sounded like you characterized that as a manageable situation for you retailing operations. I just want to confirm, in terms of your first quarter outlook, you don't anticipate any inflationary headwind that might have implications or negative implications, from a gross margin perspective?

You're talking about it retail, Ajay?

Yes. From a retail perspective.

Again, I would characterize it as manageable, Ajay, and you know, the red meat example I gave you is a good example of that, where we've been able to see that price point move up in the marketplace. So I'm not saying it's not without its challenges, I just think it's a manageable situation, we don't see that as an inhibitor to accomplishing our business plan.

Okay. And the same question for your wholesale operations, I'm assuming that you can actually get some meaningful leverage from inflation with respect to distribution. So if you look at the iflationary impact across your integrated platform, would you say that higher food costs are a net positive, or not necessarily?

I would say modest inflation is a net positive for us. And as you know, on the distribution side it is a pass- through and we do benefit from that.

And is it fair to say, you're benefiting from that currently?

You know, the turn to inflation, we were actually, on the wholesale side, you know, slightly deflationary in the fourth quarter. So it's not like we're seeing rampant inflation. There's a mix of things. We have certain commodities, like meat and produce, that are going up, we've got other commodities that are coming down. So the overall mix isn't exactly ginning up an aggressive inflationary platform for us to be launching from.

Okay. Great. That's very helpful.

And then, I have a question for Dave. On the lower tax rate that you had in Q4, what was the basis for that, and what are you expecting as far as your normalized tax rate for this year.

Yes, I think as you look at the rate in any quarter, the Michigan MBT ,Michigan business tax, it's a complicated formula, with this new program they put in it. It has a layer of credits, and performance can affect how those credits are accuated. And so, you know, as we get through the quarter -- we were, I guess benefited by the way those credits worked out and it impacted our overall rate. We've also, as always, do certain tax planning strategies that I think have worked out favorably for us, as we've gotten to learn this law better. I think as we look forward, you're looking at a rate maybe in the ballpark of this year maybe a little bit up, but I'd maybe take it up just a little bit.

Okay.

Just one more housekeeping issue. In terms of restructuring costs, it looks like they came ina little higher than what you communicated before. So just looking ahead, will there be any kind of spillover effect on the restructuring charges into this year, and do you have any comment on how material that might be?

As you looked at our -- and we provided some level of guidance for that. You know, we expect and we expected previously, that we would have a credit in the first quarter. And that credit, we just mentioned being around a half million dollars in our most recent guidance. I think that that guidance was actually a little lower than that, way back in January. That credit really is a mixture of things. It's a LIFO benefit that we expect to get by bringing, realizing the significant inventory reductions that we're looking for out of this warehouse consolidation, as well as then the clean up. You know, you can't take your warehouse closing charge until you actually close the warehouse, and that happened in the first quarter, and other such costs that go along with, you know, the closure and turning over of the warehouse to the landlord. We still, net-net, expect that to be a positive.

Okay. I'm sorry, just switching gears, I'm assuming by now you have some visibility into what Wal-Mart is doing in your markets with their new pricing strategy. Do you have any sense for whether those roll-backs are having any impact on your customer traffic, or I guess, even more fundamentally, do you think the majority of those roll-backs are even in place yet?

Well, I can't really answer the second part. I'm not sure. I'm probably reading some of the same things you are, whether they are or aren't in place.

What I would say to you is that we're feeling better about our overall business trends, and that includes markets where Wal-Mart is the primary competitor. And I would maybe editorialize that our view of what we've seen, since they announced the roll-backs, has been relatively no change on the everyday pricing. And it almost feels like the roll-backs are of shorter duration, you know, we have -- we've seen roll backs come out, and they've come and gone in three days. They come and go in one week. It's a little bit of a different definition of a roll-back than what we've been historically accustomed to, that they've taken the prices down for six, eight, 12 weeks. So we're not seeing a lot of impact, I would say, at the moment.

Okay. And just, finally, I just wanted to confirm the deflation figure, Dennis, that I think you mentioned in your prepared comments for the fourth quarter.

For the fourth quarter, we called out deflation in the retail segment was negative 1.8% impact.

Great. Thank you very much.

Thank you.

Thank you. Our next question comes from line of Bakley Smith with Jeffries and Company. Please proceed with your question.

Hello, guys. It's Bakley here.

I just want to ask about, and I know you don't provide this in the press release, but if you could talk a little bit about your retail gross margins, excluding fuels, because I know that that obviously moved around quite a bit this quarter. I wanted to try and get a feel for what's going on beneath that.

Well, Bakley, as you say, we don't disclose those separately. I think our margins were in line, for the most part, with what we expected. It's an interesting year, as always, when you have deflation, and that does a lot of unique things to a retailer. But I think, you know, nothing extraordinarily out of line with what we would have anticipated in the existing environment.

And looking out a little bit, assuming that we move through this and what have you, what are you -- you've now had VG's for, I believe, going on 16 months or so. Are you, you know, do you have an appetite at this stage to try and do something else, either on the retail or distribution side? And you know, what are you -- I guess, I'm assuming that prices have come down somewhat, and therefore do you have a strategy in place, or are you interested in trying to do something else?

Yes. I think we -- as we kind of talked about in the comments earlier, we are prepared to opportunidtically take advantage of acquisition targets, if they make good sense. We've been pretty conservative in how we've attacked that. Clearly it is still in the strategy, to grow through acquisition. It could be either segment, but we'll be prudent with that kind of activity as we move forward.

And last one, is just on the loyalty program. I assume most of what you've got is, as you say, just qualitative, just because it's been in place for a pretty short time. How are people responding to it, are they responding to what's on offer, and do you feel like you're getting some (inaudible) share from your customers?

We just did some research on how they're feeling about the program, and I would say that we are more optimistic today than we were yesterday, or three months ago, or six months ago. And we are beginning to see some benefits of some of the initiatives we have in place around the loyalty marketing. As you'll recall, Bakley, it's just in the Glen's banner, and intentionally we did that, to try to work out all of the kinks and be able to tweak it, and be sure that we're getting all of the value out of that program before we roll it out. But we're extremely encouraged.

Okay. Great. Thanks very much.

Thank you. Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Please proceed with your question.

Good morning everyone.

Good morning, Chuck.

Good morning.

When you're talking about the private label penetration increasing, Dennis, how does that look across your quality levels? Is it more towards, I think it's the ValuTime brand?

Alan, do you know the answer?

Yes. It's prominently the Spartan brand. We've also, in terms of new item innovation, the most number of SKUs we've launched is under our Top Care brand on HPC. And we saw some significant lifts there as well.

Will Top Care get the bulk of the new brand -- or new item introductions next year?

Yes, actually it's going to be on the fresh perimeter. We're really focusing on the fresh perimeter in totality. But we see tremendous upside in fresh. We've really focused on center store and have had a lot of success there. But we see the real opportunity is, as Dennis articulated in the script, with new items under the Fresh Selections platform. So we're excited about that. And that's in the works as we speak.

Great.

Now, Dennis, when you look at, you know, individual stores or group stores, sort of demographically, high, low, middle. How are you seeing consumers behave in those formats?

I would say it's probably consistent with what others are reporting. The Fresh Market brand clearly is performing better for us than the balance of portfolio. It appears as if that up cale consumer that, you know, has some more confidence in the economy and, obviously, hasn't experiencing the unemployment rates have, if not bounced back to normal, clearly are much closer to normal. So we are definitely seeing that.

Now with Whole Foods reporting strong numbers yesterday, to follow your answer, your best stores, your demographically best positioned stores would be seeing that sort of behavior and then at the opposite end of the spectrum, the movement is much less.

Yes.

And looking at the CapEx ,Dennis, for this year, what -- you guys canceled the store, or pulled out of the project in downtown Grand Rapids, I'm sure that was due to the economy. But what else is driving the pull back in CapEx for this year?

Well, a couple of things. The downtown store was not in the plan for this year and didn't affect the CapEx spend rate. You know, Chuck, we have spent a fair amount of capital against our retail portfolio in the past several years, and we're feeling pretty good about the shape we're in. Sometimes that is driven by, you know, the opportunity to move forward on a project. But because we feel the portfolio is in place and just the way the schedule ran, we've got that little bit of a dip next year. But I think on the go forward, you know, we'll continue to be opportunistic with fill-in opportunities and remodels, where they make sense.

Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Megan O'Hara with BMO Capital Markets. Please proceed with your question.

Yes, hello. I just had a couple of follow-up questions.

Can you just confirm the number of stores you opened and closed in the fourth quarter, and how many fuel stations you currently operate?

From an open and close perspective, in the quarter there would be none. From a fuel center perspective, 26 now is the number we operate.

Okay. Thanks.

What are your plans for new store openings and closures in FY2011?

In 20111, we'll have one new store, one relocated store, and in the range of three fuel centers. You know, I misspoke on the fuel centers. I was thinking about the number with next year. It's 24.

24. Okay.

And do you have any more specific details in terms of the timing of the competitive openings in FY 2011, and any color looking out to FY 2012?

As we look at 2011, one of the openings will come in the first quarter, actually has come in the first quarter, it opened last week. The other one I believe is early third quarter, late second quarter, somewhere in there. I'd probably plan on the third. From our store openings -- our new store opens this quarter, actually the end of this week, and we -- our relocation store will be early in the third quarter.

Okay. And did the 4Q same store sales number include any benefit from weather?

No not in the Michigan environment.

Okay. Thanks, that's all for me.

(Operator Instructions).

Thank you, ladies and gentlemen, but we have no further questions at this time. I'd like to turn the floor back to management for closing remarks.

Thank you, and if there are no more questions, we'll conclude the call.

And on behalf of Dave, and Alan, and everybody here on the Spartan team, I want to thank everybody for joining the call today, and we'll look forward to discussing our first quarter results with you during the next call. Thank you.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.