SpartanNash Deepens Ties With Amazon, Issues Stock Warrant

SpartanNash Company SPTN recently issued a stock warrant to Amazon AMZN, which has been garnering positive investor sentiments. Shares of the company were up as much as 26.3% on Oct 9, when its disclosure of  issuing a warrant to the e-commerce giant came into the limelight. Per the filing, Amazon will be able to purchase up to 5.4 million shares of the company.

The warrant forms part of the company’s commercial agreement with Amazon. It has been specifically issued to one of Amazon’s subsidiaries — NV Investment Holdings LLC. The shares offered to Amazon represent nearly 15% of SpartanNash’s total outstanding stock. The warrant is vested with the purchase of more than 1 million shares immediately upon issuance, while the remaining will be available for buying within the next seven years. Other large institutional shareholders of SpartanNash include BlackRock and Dimensional Fund Advisors LP.

Strengthening Ties With Amazon is Likely to Aid Growth

SpartanNash’s link with Amazon dates back to 2016, when the company began supplying groceries to the e-commerce biggie. Per sources, the company has been delivering groceries to Amazon’s distribution centers to support Amazon Prime Now grocery delivery program as well as AmazonFresh perishables delivery services.

The new agreement is likely to help SpartanNash play a vital role in Amazon’s growing grocery portfolio. This is likely to boost the company’s top line in the forthcoming periods.

We note that consumers augmented spending on essentials such as groceries, amid the coronavirus pandemic is driving significant growth for SpartanNash. The trend was well exemplified in the company’s second-quarter fiscal 2020 results. Consolidated net sales of $2,184.1 million grew 9.4% on the back of pandemic-led elevated demand in the Retail and Food Distribution segments as well as persistent growth with existing Food Distribution customers. In fact, the company’s efforts to address this unexpected demand in a dynamic operating landscape were impressive. As a result, management raised bottom-line projections for fiscal 2020.

SpartanNash is likely to keep gaining from higher consumer food-at-home consumption with respect to the pandemic. Moreover, with deepened ties with Amazon, the company is likely to solidify its presence in the grocery space. In fact, the pact with Amazon is likely to fortify SpartanNash’s e-commerce business, which registered growth of more than 300% during the second quarter.

All said, we expect SpartanNash’s prudent measures to expand its business to continue yielding. Notably, the company currently operates 12 grocery and seven military distribution centers. It provides supplies to grocers, including 155 of its own retail stores as well as U.S. military commissaries.

Impressively, shares of this Zacks Rank #2 (Buy) company have surged 51% in the past six months and outperformed the industry’s 32.8% rally.

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