SpartanNash Company (SPTN) Q4 2022 Earnings Call Transcript

SpartanNash Company (NASDAQ:SPTN) Q4 2022 Earnings Call dated Feb. 23, 2023.

Corporate Participants:

Kayleigh Campbell — Head of Investor Relations

Tony Sarsam — Chief Executive Officer

Jason Monaco — Executive Vice President and Chief Financial Officer

Analysts:

Spencer Hanus — Wolfe Research — Analyst

Andrew Wolf — CL King — Analyst

Benjamin Wood — BMO Capital Markets — Analyst

Charles Cerankosky — Northcoast Research — Analyst

Jessica Taylor — Deutsche Bank Securities — Analyst

Presentation:

Operator

Good morning. [Operator Instructions] I would now like to turn the call over to Kayleigh Campbell, Head of Investor Relations.

Kayleigh Campbell — Head of Investor Relations

Good morning, and welcome to the SpartanNash Company fourth quarter and fiscal year 2022 earnings conference call. On the call today from the company are President and Chief Executive Officer, Tony Sarsam; 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 AM Eastern Time. For a copy of the earnings release as well as the company’s supplemental earnings presentation, please visit SpartanNash’s website at www.spartannash.com/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. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. If you will refer to SpartanNash’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 those forward-looking statements. Please remember that all forward-looking statements made today reflects our current expectations only and SpartanNash 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 certain non-GAAP financial measures to the most comparable GAAP measures, which can be found on the SpartanNash’s website at www.spartannash.com/investors.

And now it is my pleasure to turn the call over to Tony.

Tony Sarsam — Chief Executive Officer

Thank you, Kayleigh, and good morning everyone. 2022 was a transformational year at SpartanNash. Our corporate identity which we call our winning recipe served to align our associates as they executed on our strategic plan. Our success in 2022 was made possible by our talented and hardworking associates who play to win. Speaking of our terrific associates before we dive into our 2022 Results, I want to take a moment to recognize a group of associates who are Special Olympics athletes. This month, we had a company-wide fundraiser in our stores to support Special Olympics. We’ve enjoyed a 39-year relationship with Specialty and we are proud to support our 16 associates who are actively training to compete in the upcoming summer games. We encourage anyone listening today to join us in supporting this great organization.

All right. Turning to our performance. In a dynamic operating environment, our teams drove solid fourth quarter and fiscal 2022 Results. Our full year top line results were squarely in line with our most recent guidance as to having raised our expectations throughout the year and adjusted EBITDA came in around the top end of our guidance. This is an increase of nearly 14% compared to last year. I want to call out three of the many highlights from a pivotal year. First, secured cost savings in connection with our supply chain transformation. Part of this transformation involved optimizing our fleet mileage through the addition of a West Coast distribution solution. Of course taking miles out of the system also advanced our sustainability progress.

Additionally, our fill rates continued to improve, while throughput increased by 7% for the full year. And by the end of the year, we secured more than $25 million in run rate cost savings. Our success in supply chain helped enable us to gain share in our wholesale segment. We expect our supply chain transformation to make even greater strides in 2023, which include custom operational plans for each distribution center. There are more savings and efficiencies to come as we strive to reduce footsteps and fingerprints in our process. I want to extend my sincere thanks to all supply chain associates for their progress in improving operational metrics in 2022. Thank you, teams.

The second highlight in the year is that we created additional consumer offerings through digital partnerships with DoorDash, Uber Technologies and Shipped [Phonetic]. We also leveraged insights from our marketing innovation work to further our progress in own brands to unlock opportunities within our retail segments. Our comparable store sales remained strong, increasing 9.1% for the quarter. This is an increase of 110 basis points sequentially from Q3. We also continued to deliver a unit share growth year-over-year fueled in part by our strong own brand performance. We’re building on this momentum with investments in store renovations. We plan to renovate about a quarter of our stores by the end of 2025.

As a third highlight, we launched and made meaningful progress on our merchandising transformation. We are focused on creating enhanced offering and value for our customers and store guests in several ways. To start, we’re making significant strides making sales, profitability and customer loyalty driver across our wholesale and retail segments. Secondly, we’re leveraging insights to enhance our category management capabilities and we are improving our customer offerings. We also remain focused on our cost policy capabilities, which protects customers and justifies vendor cost increases based on underlying commodities markets and we are revamping our end-to-end fresh food offerings with an initial focus in produce. Finally, we are investing in wholesales deals and new retail promotions to offer more value for our customers and store guests. Our focus innovation is an important ingredient in our winning recipe. We expect our merchandising transformation will have a meaningful impact to our business for years to come.

I want to pivot now to discuss our inorganic growth. The M&A the framework we shared on our Investor Day is now deployed. We finished the year strong by adding Great Lakes Foods to our distribution network. We’re proud to welcome our newest associate in Menomonie Mich, whom I had the pleasure of visiting recently. This acquisition brings 100 new customers to our portfolio and allows us to further optimize our supply chain network throughout the Midwest. We are excited about the opportunities this expansion provides. As we look ahead, our team is energized by the progress we’ve made and we are united in our commitment to our winning recipe. It goes without saying that all businesses are evolving in this dynamic operating environment and we must stay focused on delivering value to our customers and store guests alike to remain competitive.

This morning, we provided our 2023 guidance and raised our 2025 long-term sales target to $10.5 billion. We remain committed to achieving adjusted EBITDA of more than $300 million, which is an increase of at least 40% since 2021, we are confident in our ability to achieve this aggressive target as we continue firing on all cylinders to advance our mission of delivering the ingredients for a better life.

All right. I’ll now turn the call over to Jason to walk you through the financials in greater detail.

Jason Monaco — Executive Vice President and Chief Financial Officer

Thanks, Tony and welcome to everyone joining us on today’s call. Let’s jump into the detailed results. Net sales for the fourth quarter increased more than 10% to $2.3 billion versus 2021’s fourth quarter sales of $2.1 billion. The growth versus prior year was driven by both the wholesale and retail segments, each of which were favorably impacted by inflation. Gross profit for the fourth quarter was $341 million or 14.8% of net sales compared to $323 million or 15.4% of net sales in the prior year’s fourth quarter. The gross profit dollar increase was driven by higher sales, while the rate decline was driven by cycling the higher inflation related price gains in the prior year and an increase in LIFO expense of $5.7 million or 21 basis points.

As a percent of sales, our reported operating expenses increased 58 basis points from prior year, primarily due to cycling the transition impact of the paid time off policy change in the prior year from a grant based time off policy to an accrual based policy. The transition resulted in a $21.4 million reduction in our balance sheet accrual and a corresponding one-time gain in the prior year. Also contributing to the increase in expenses as a rate of sales were higher corporate administrative costs in the current year, which included upfront investments in the merchandising transformation initiative. The increases in expenses were partially offset by a reduction in the supply chain expenses, driven by our supply chain transformation initiatives as well as lower healthcare insurance costs.

Our reported fourth quarter net earnings were $0.7 million, representing a 97% decrease compared to net earnings of $22.2 million in the prior year’s fourth quarter. Net earnings reflected a steep increase in interest rates, which represented a $5.1 million increase in expense, a drag of $0.11 on both reported and adjusted EPS. Overall, we delivered $47.2 million in adjusted EBITDA for the quarter, representing a nearly 10% increase compared to $43 million in the prior year’s fourth quarter.

Turning to our segments. In the fourth quarter, net sales in wholesale increased $151 million to $1.63 billion, an increase of 10.2% when compared to the prior year’s fourth quarter. This increase was due primarily to the inflationary impact on pricing, which increased net sales by 11.8% compared to the prior year. Although sales volumes were down modestly by 1.6% for the segment compared to prior year, we were up in our military channel over 6% due to continued strong demand.

The wholesale segment adjusted operating earnings totaled $13.6 million in the quarter versus 2021’s fourth quarter adjusted operating earnings of $7 million. We reported fourth quarter operating earnings of $0.3 million compared to operating earnings of $10.1 million in the prior year’s fourth quarter. The decrease in reported operating earnings was due to cycling a $10.1 million transition tax related to the PTO policy change in the prior year, a lower gross profit rate primarily driven by a $6.3 million increase in LIFO expense and increases in corporate administrative costs. The increase in expenses were partially offset by reduced supply chain expenses.

Retail sales came in at $678 million for the quarter compared to $613 million in the fourth quarter of 2021, an increase of 10.5%. Our comparable store sales momentum remained strong increasing to 9.1% for the fourth quarter. Our comparable store sales increased by 11.2% due to inflation, partially offset by a 2.1% decline in unit volumes. Our fourth quarter retail adjusted operating earnings were $8.5 million compared to $13.6 million in 2021’s fourth quarter.

Reported operating earnings in the retail segment were $8.5 million compared to $23.3 million in the prior year’s fourth quarter. The decrease was due to cycling an $11.3 million transition effect related to the PTO policy change in the prior year, a lower gross profit rate and increased corporate administrative costs. Our reported fiscal 2022 net earnings were $34.5 million, a decrease of over 50% compared to $73.8 million in the prior fiscal year. Overall, for the full year, our adjusted EBITDA was $243 million compared to $214 million in the prior year.

Turning to the balance sheet. Our leverage ratio remained strong increasing slightly to 2 times compared to 1.8 times at the prior year end. This includes higher long-term debt and finance lease liabilities of $98 million for the year. The increase was due primarily to funding acquisitions during fiscal 2022 totaling $41.5 million as well as changes to working capital. For the full year, we generated $110 million of cash from operating activities compared to $161 million in the prior year. The decrease was due primarily to changes in working capital just mentioned. In fiscal 2022, we paid $29.7 million in cash dividends equal to $0.84 per common share.

We also bought back more than 1 million shares of the company’s stock for a total of $32.5 million. In total, we returned more than $62 million to shareholders during the fiscal year. To ensure a strong ongoing liquidity, this past November, we entered into an amendment to our credit agreement. The principal changes of the amendment included an extension of the maturity date of our loans from December 18, 2023 to November 17, 2027. It also reset certain advanced rates for the borrowing base.

As covered in today’s press release, we are providing our initial guidance for fiscal 2023, which incorporates both the elements of our long-term strategy and current expectations for the 2023 supply chain and grocery environment. Overall, we expect the strong results from this past year to continue into 2023 with net sales expected to increase from fiscal 2022 within a range of $9.9 billion to $10.2 billion. In wholesale, we expect sales to grow between 4% and 7% inclusive of net sales from Great Lakes Foods. We are projecting that trends in our independent customer base will be similar to that of our corporate retail segment. We also expect to see growth within other areas of our portfolio. In retail, we believe sales will continue to increase resulting in an expected comparable sales growth range of 2% to 5%.

Our guidance includes an anticipated increase in our profitability over the prior year with fiscal 2023 adjusted EBITDA to be in the range of $248 million to $263 million compared to 2022’s adjusted EBITDA of $243 million. Interest expense is expected to continue to increase significantly in fiscal 2023 and our expectations for the higher rate environment are fully incorporated into our results. We currently anticipate interest expense to range from $37 million to $42 million this year. Our fiscal 2023 guidance reflects total planned capital expenditures in the range of $130 million to$145 million for the fiscal year, which includes investments in both our core operations as well as our growth initiatives.

We also wanted to give you some color on our expectations when looking at the cadence of our adjusted EBITDA throughout the year. In addition to our continued commitment to investing in our business to support future growth, we will be lapping a few notable impacts from Q1 of last year. During the first quarter of 2023, we will cycle significant inflation related price change benefits, also known as forward by of nearly $10 million. In addition, we will also be cycling $4 million in retail wage investments that were implemented at the end of first quarter last year. We expect that our supply chain and merchandising transformation initiatives will offset some, but not all of these headwinds in the first quarter of 2023.

We anticipate we will begin realizing benefits from our merchandising transformation in late Q1. These benefits along with continued cost-savings from our supply chain transformation give us confidence that we will reach our adjusted EBITDA range this year and remain solidly on the path to achieving our long-term targets. Looking ahead, we remain focused on our mission to deliver the ingredients for a better life. Despite uncertainties in the broader market, we’ve built a strong foundation and continue to execute on our winning recipe. The actions we’re taking through our supply chain transformation, merchandising transformation and other key initiatives are positioning us to effectively manage through this volatility. We look forward to building on our momentum in 2023 and beyond to further drive results and grow sustainable shareholder value.

And now I’d like to turn the call back over to Tony.

Tony Sarsam — Chief Executive Officer

Thank you, Jason. In addition to reporting earnings today, we’re also wrapping up a successful virtual customer expo. We look forward to seeing our customers and vendors during our upcoming in-person expo this summer in Grand Rapids. And this year, we are inviting our sell-side analysts to the event. Here we can provide your teams with more detail. Before we open the call to questions, I want to take a moment to recognize an impactful cultural shift. As a people first company, we prioritize our associates safety. Our recent actions remote safety include more accountability and executive level review of all lot [Indecipherable] and additional safety training.

We want each associate to return home safely to their loved ones everyday. I’m proud to report that the investments we have made in this critical initiatives have decreased our lost time incidents by 72% since 2020. Associate safety will continue to be a main area of focus and we have plans to roll out more initiatives in 2023. I’d like to take one more opportunity to thank our associates to continuing to execute with operational excellence. As part of our people first culture, we believe the meaningful recognition for their hard work. Over the past few years, we have implemented programs to recognize our associates and achievements. Again, thank you to all of our associates and congratulations for an outstanding year.

With that, I’d like to turn the call back over to the operator and open up for your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the Spencer Hanus from Wolfe Research. Your line is open.

Spencer Hanus — Wolfe Research — Analyst

Good morning. Thanks for taking the question. Really helpful disclosure on the unit performance during the quarter. Can you talk about how that trended versus 3Q results? And then as we look to 2023, how are you thinking about the contribution from both units and then also inflation?

Jason Monaco — Executive Vice President and Chief Financial Officer

Hey, Spencer, good morning. This is Jason. Thanks for joining and for the question. Thinking about unit volumes themselves and the trends, the last couple of quarters we’ve seen similar trends in unit volumes in the business. When I think about the go forward and you maybe pick this up a little bit in the cadence commentary in the earlier remarks, we’re coming off of a record Q1 last year. That Q1 included some of the kind of continued COVID bump from last year as well as significant price change and inventory related benefits or oftentimes what we call forward buy.

So we’re projecting that our Q1 will be down kind of high-single-digits from an EBITDA standpoint and that’s really reflective of the broader environment coming off of a record year and frankly some of the uncertainty in the market. At the same time, we feel really good about our long-term plans. We feel good about where we’re headed this year and this year is a great stepping stone as we talked about in our Investor Day towards that $300 million EBITDA growth.

Spencer Hanus — Wolfe Research — Analyst

Okay. So do you expect units to be down next year and then most of the growth to be driven by inflation or just how are you thinking about sort of those things next year?

Jason Monaco — Executive Vice President and Chief Financial Officer

Yeah. In 2023, our guidance reflects continued inflation, albeit moderating through the year and continued weakness in unit volume. Importantly, our unit volume has outperformed the market and we’ve grown share in that space throughout the year. We’ve had some nice share performance and we expect that similar trend of slightly down volumes and stronger revenues to continue to play out. However, at the same time, when you think about the consumer and consumer sentiment, we see this as an uncertain time and we want to plan accordingly.

Spencer Hanus — Wolfe Research — Analyst

Got it. And then just one more on the long-term guide. You raised the top line by about 5%, but you reiterated the EBITDA targets. So just curious sort of what led to that decision around EBITDA and reiteration there. Thanks.

Jason Monaco — Executive Vice President and Chief Financial Officer

Sure. Great question. So on the top line, we want to be respectful that inflation has frankly played a role in the revenue profile and that we’re still committed to driving organic growth in the business. We took the range of revenue up as a result of that and as a result of our successes thus far and our expectations for growth going forward. When you think about the margin profile or the EBITDAR piece, what we’ve seen is really strong margin per unit increases, but not necessarily margin percent increases because the nature of this business doesn’t necessarily show or doesn’t necessarily drive margin percent in a highly inflationary environment. So we continue to drive dollar growth, which we think creates long-term shareholder value and performance for our investors.

Operator

Our next question comes from Andrew Wolf of CL King. Your line is open.

Andrew Wolf — CL King — Analyst

Hi, good morning. Congratulations on ending such a year so solidly. So I wanted to ask about the acquisition of the Great Lakes Foods. I might have missed this, but trying to get a sense of the sales contribution, sort of if I did a pro rata based on the 100 customers they have versus the wholesale ex militaries, somewhat over 2,000 customers. And I thought the sales were about the same would be something over $200 million. Is that roughly close to the contribution or did you actually have an 8-K filing or something that I maybe missed?

Tony Sarsam — Chief Executive Officer

Yeah, it — we’ve been — hi, this is Tony. So we picked up that business in the Upper Peninsula and sort of Eastern Wisconsin. Great business for us, great folks overall, roughly 100 customers and roughly kind of a $90 million to $100 million. So they’re to be smaller customers on average versus kind of the broader portfolio.

Andrew Wolf — CL King — Analyst

Got it. Okay. Great. Thank you, very helpful. Similar on the — if I took out military from the case count, just on the traditional non-military business, mainly independent supermarkets, it seems that would obviously be down somewhat more close to what the market — sort of the grocery market at large is down sort of low to mid — more mid single-digits in cases.

Tony Sarsam — Chief Executive Officer

Yeah. Ex military channel unit volumes are down kind of mid single-digits in that space. Our military business, I’d be remiss if I didn’t highlight, continues to perform very well. We delivered single-digit — mid-single-digit growth unit volume growth in that business that’s coming off of mid-single-digit growth in the prior quarter and low-single-digit in the second quarter. We’ve seen a really nice momentum change there as we’ve turned the business around, but also really focused on getting the right solutions for patrons working together with DeCA and ensuring that those solutions are in place to drive performance. So we’re really pleased with the trajectory there and really energized to continue to serve our veterans, active duty military and all their patrons.

Andrew Wolf — CL King — Analyst

Got it. If I could I ask maybe one or two more on labor inflation was trending up for you last quarter at least and I’m sure it’s still up. Do you have a sense of — do you have a — like how are you feeling about normalization in wage rates in particular? Is there some normalization on the horizon or is it sort of too soon to call that?

Tony Sarsam — Chief Executive Officer

Yeah. I think it’s — I don’t think it’s too soon to call some normal. This is Tony again. So we’re seeing better applicant flow right now based on the wage actions in ’21 and ’22. Our turnover rate is still not where we’d like it to be, but stabilizing. It’s getting better. We actually hit our glide path of our turnover goals for most of the second half of last year. So we see good positive trends there. And I think there’s going to be spot adjustments we’ll have to make where there is some more difficult — still more difficult hotspots like drivers, for example. But I see it moderating this year and coming back maybe closer to what we would have seen in the three, four year ago timeframe.

Andrew Wolf — CL King — Analyst

Thank you very much. I’ll get back in the queue.

Tony Sarsam — Chief Executive Officer

Thank you.

Operator

Our next question comes from Kelly Bania of BMO Capital Markets. Your line is open.

Benjamin Wood — BMO Capital Markets — Analyst

Hi, good morning. This is Ben Wood on for Kelly. Thank you for taking our questions. First, can you just walk us through any consumer behavior you’re seeing in your stores or hearing from customers and any incremental trading down or increase in private label penetration or share shifts that may have happened over the quarter? And then kind of related on the supplier side of that is any new learnings from the merchandise initiative? Do price increases appear to be abating? Any insight there would be helpful.

Tony Sarsam — Chief Executive Officer

Great. This is Tony. I’ll take a crack at that. So a couple of things. So for the quarter, we had — overall basket size is up about 8.5%. It was in dollars, a little better than it was the previous couple of quarters. We saw our traffic continue to be better than year ago, about 1.5% for the quarter and items that were also wee bit better than they were in Q2 and Q3. So the overall trips are, up units are down, of course, as Jason mentioned a moment ago. And overall, people are looking for that mix value that I talked about on our last earnings call where you see a lot of folks are looking for getting a great deal or getting great cost on like items and then once in a while splurging on something unique.

So I’ll give you a couple of examples. So we’re seeing — still seeing a movement in the meat, for example, to more grind and chicken, which is sort of expected. So our pounds are strong, but the overall the cost per pound, people are looking for ways to get to reasonable deals on protein. And so we saw more growth on hamburger and chicken during the quarter again. We’re also seeing really strong growth on our own brands. Our own brands had a great quarter overall, grew by 18.5%. Penetration of our own brands is up. It was up for the year and up for the quarter. That growth rate is about roughly 2.5 times the growth rate of the national brands. So we see people who are finding own brands as a solid replacement, good quality product at a lower-price and we saw that in every quarter of last year and it was particularly strong in the fourth quarter.

And I think you had a question about the suppliers also, I’ll address that quickly. So we saw obviously an extraordinary amount of pricing all throughout 2022 that wasn’t any different as matter of it was the strongest in the fourth quarter. We are — I would say we’re seeing a reduction in the price requests as we finished up the year, but it was still significantly higher than what we would have seen maybe two, three years ago. So while the pricing request and the absolute pricing isn’t at its peak level, it’s still higher than we prefer.

The reason why as we talked in the last call about this merchandising transformation and really holding our suppliers accountable for, they obviously have a right to take pricing. We want to make sure that the — that we’re protective of our customers and our shoppers at the same time and we’re not seeing extraordinary pricing that maybe outlined or justified versus the cost inputs that they’re seeing. And we’re looking for partnerships that can allow us to win with those suppliers and win for our customers and we’re getting really, really good response overall. So I think we’re finding folks who want to win and want to look for opportunities to provide more deals and sort of stabilize really extraordinary inflation that our shoppers and customers have seen in the last year or so.

Jason Monaco — Executive Vice President and Chief Financial Officer

Yeah. And collectively — this is Jason. Collectively, I think it’s — we can’t reinforce enough the momentum that we’re building in our own brand portfolio and Tony alluded to this before earlier in the comments. In the quarter, our sales and our own brand and our retail operations were more than double the growth that we saw across all of our retail business and that included not just dollars, but unit growth. So we feel like we’re bringing a terrific offering, bringing it to consumers and meeting them where they are with respect to their pocket books, providing the right value and ensuring that we build as much stickiness as possible, so they continue shopping our stores.

Benjamin Wood — BMO Capital Markets — Analyst

Great. Thank you. And then just one question longer-term, you guys called out in your Analyst Day in your long-term targets kind of looking at a $250 million to 100 — $125 million to $150 million in supply chain and merchandising transformation initiative benefits. And then it sounds like you did $25 million this year. Are there any explicit targets you have for the year ahead or how do we think about the breakdown of that remaining supply chain and merchandise transformation initiative benefits in the long-term guide?

Jason Monaco — Executive Vice President and Chief Financial Officer

Yeah, Ben, we’re — we continue to progress both the supply chain and merchandising transformation work. They’re both tracking consistent with our plan that we shared at the Investor Day and we expect the merchandising transformation begin driving performance here by the end of the first-quarter and we expect continued momentum and additional savings in the — in supply chain. Both of those are in this year’s guidance and reflective of the long-term plan. And you mentioned the supply chain performance thus far. We exited the year with $25 million plus of performance on that and we expect that to be a strong base to next year’s or to this year’s plan.

Benjamin Wood — BMO Capital Markets — Analyst

Great. Thank you.

Operator

[Operator Instructions] And our next question comes from Chuck Cerankosky of Northcoast Research. Your line is open.

Charles Cerankosky — Northcoast Research — Analyst

Good morning, everyone. Can you comment please on the store remodeling objectives? I think you said 25% of the store base by 2025. What are sort of the priorities there? Are there any geographic areas or banners that especially need like renovation and how much of this is going to be significant remodeling versus just to paint the stores sort of thing and what level of relocations might be involved in that, please?

Tony Sarsam — Chief Executive Officer

Okay. Great question, Chuck. This as Tony. A couple of points. So as far as the relocation, right at the moment, we don’t have any relocations that are planned in that mix. So — and the remodels will be — it won’t be — there will be — won’t be just paint the store type of stuff. We would — we do some of that, but those are sort of low and sort of maintenance type of remodel or just kind of housekeeping. So these would be more substantial than just the simple refresh, but they will run the gamut. We know some of them will be in the high hundreds of thousands of dollars. Some will be multimillion dollar remodels as well.

So it depends on the needs of the store and as we assess what the value of that remodel can be. So it will run that gamut. So we have a — we did a handful of B&Ws here in the Grand Rapids area this past year and the performance has been really strong. So we had — the four remodels you did hear are growing at about twice the rate of the balance of our stores in the summer markets. So about 17% plus growth in those stores. We are seeing a good return in terms of the customers embrace of what we’ve done with the remodel, which is a little bit of a hint about where we’re going to be focused probably a little bit more on the upmarket stores early on.

So those are higher volume stores and greater opportunity for return from those stores, but we also see that we have a need to make sure that all of our stores stay current and relevant with the shopper base, so by 2025 we do a quarter of the storage, we will keep marching out to that. I want to make sure we have a predictable cadence of remodels that allow us to present the shopper what they want, they needed those as those needs change. So you’ll see more of them even after 2025.

Jason Monaco — Executive Vice President and Chief Financial Officer

Yeah. And Chuck, I’d add to that in addition to the major remodels, we’re doing and we talked about this at the Investor Day, we’re going through banner consolidations and included in those banner consolidations are not simply a change of the name on the front of the store or just some pain on the walls, but we’re reintroducing loyalty programs, doing the 360 marketing program at those stores and reinvigorating the surrounding markets around those locales. So I think for us, it’s not just reconstruct the store for the sake of doing it or just simply putting a new badge on it, but ensuring that we’ve got the right brand promise to our shoppers and our consumers and we bring that brand and that brand promise to those consumers through loyalty and other means. And you’ll also see those as part of the capital plan and even in 2023.

Charles Cerankosky — Northcoast Research — Analyst

Thank you.

Tony Sarsam — Chief Executive Officer

Thanks, Chuck.

Operator

Our next question comes from Krisztina Katai from Deutsche Bank. Your line is open.

Jessica Taylor — Deutsche Bank Securities — Analyst

Good morning. This is Jessica Taylor on for Krisztina. Thanks for taking our question. Just wanted to ask about your fill rates and whether they’re at a level that you would have seen prepandemic or a place where you’re happy with them and to follow along with that. Are you seeing like the promotional environment remains rational? Are you seeing that there is a pickup in promotion? Are you able to pick up promotion based on better fill rates? Thank you.

Tony Sarsam — Chief Executive Officer

Yeah. Great question. So a couple of things. So the fill rates are nowhere near what they were prepandemic. They are much better than they were last year, but to give you some perspective as we — we finished up 2021, for example, and into the early 2022, we were seeing fill rates in the high 50s, 55%, 56%, 57%. We’re now seeing fill rates there in the low 70s and they are — and by the way, those fill rates from a year ago were the lowest fill rates we had in the pandemic area, lower than they were when people have got the original shocks right after the shutdown. So they can — they spent between the spring of 2020 and the early part of 2022, the fill rates from food suppliers continued to go down.

They picked up in the back half of the year. Q4 was a pretty big improvement over the previous Q4. And so we’re now — as I mentioned earlier, we’re sort of in the low to mid 70% fill rates, but those fill rates would have been in the mid 90s prepandemic like the week before the pandemic. And so we are seeing more reliability. We seeing some food suppliers are still really struggling and dragging the number down, but the overall we are seeing improvement there. My — what we believe and the work we’re doing right now in combination of the merger transformation and then as folks see the realities of the limits to which they continue to take pricing that the next adventure for the food — the broader community is going to be how do we get back on track and how to get back and for the CPG companies how do we get back and growing share.

So our belief is that we’re seeing some early signs of that now and we’re seeing that they are opening up and running longer, doing the changeover required to make sure they can meet supply needs that we have and our shoppers expect. And I think we’ll see this year very significant improvement on fill rates as that CPG community decides to go chase share again. And it will come with — I believe it will come with more promotions too and those are some of the discussions we’re having with folks right now.

Jessica Taylor — Deutsche Bank Securities — Analyst

Thank you.

Jason Monaco — Executive Vice President and Chief Financial Officer

Maybe pivoting to promotional landscape, just to kind of close out that piece, overall, on the kind of on a year, we saw promotional product count pickup early in the fourth quarter, but then it eased by the end of the quarter. So I’m not sure there’s a whole lot to read into that yet. More kind of — if you kind of take a look at the whole year, the number of products that were promoted was more limited and not surprisingly given the comments Tony described with respect to the supply chain, so more — kind of more focused promotional products. And when we think about the environment itself and how we participated and played, SpartanNash has aligned from the standpoint of frequency and depth with our primary competitors and we continue to do so.

Jessica Taylor — Deutsche Bank Securities — Analyst

Thank you.

Operator

There are no other questions at this time. I will now turn the call back over to Tony Sarsam for closing remarks.

Tony Sarsam — Chief Executive Officer

All right. Well, thank you and thank you all for your participation in today’s call. We look forward to updating you on our continued progress throughout the year. And with that, from our family to yours, we’d like to wish you all a very pleasant good morning.

Operator

[Operator Closing Remarks]