Commission File Number: 000-31127

Registrant's telephone number, including area code: (616) 878-2000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).

The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant based on the last sales price of such stock on The NASDAQ Stock Market on September 12, 2003 (which was the last trading day of the registrant's second quarter in the fiscal year ended March 27, 2004) was $55,394,462.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, no par value, outstanding as of May 21, 2004: 20,353,422 shares.

Forward-Looking Statements

          The matters discussed in this Annual Report on Form 10-K include "forward-looking statements" about the plans, strategies, objectives, goals or expectations of Spartan Stores, Inc. (together with its subsidiaries, "Spartan Stores"). These forward-looking statements are identifiable by words or phrases indicating that Spartan Stores or its management "expects," "anticipates," "projects," "plans," "believes," "estimates," "intends," is "forecasting," "optimistic" or "confident" or has "goals," "objectives" or "strategies" that a particular occurrence "will," "may," "could," "should" or "will likely" result or that a particular event "will," "may," "could," "should" or "will likely" occur in the future, that the "trend" is toward a particular result or occurrence, or similarly stated expectations. Accounting estimates, such as those described under the heading "Critical Accounting Policies" in Item 7 of this Annual Report on Form 10-K, are inherently forward-looking. You sh ould not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

          In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this Annual Report and our other periodic reports filed with the Securities and Exchange Commission, there are many important factors that could cause actual results to differ materially. Our ability to strengthen our retail-store performance; improve sales growth; increase gross margin; reduce operating costs; sell assets classified as held for sale on favorable terms; continue to meet the terms of our debt covenants; and implement the other programs, plans, strategies, objectives, goals or expectations described in this Annual Report will be affected by changes in economic conditions generally or in the markets and geographic areas that we serve, adverse effects of the changing food and distribution industries and other factors including, among others, those discussed below.

          Anticipated future sales are subject to competitive pressures from many sources. Our Retail and Grocery Distribution businesses compete with many warehouse discount stores, supermarkets, pharmacies and product manufacturers. Future sales will be dependent on the number of retail stores that we own and operate, competitive pressures in the retail industry generally and our geographic markets specifically, and our ability to implement effective new marketing and merchandising programs. Competitive pressures in these and other business segments may result in unexpected reductions in sales volumes, product prices or service fees. We recently consolidated our retail supermarket banners, which resulted in changing the names of our six Ashcraft's Markets stores, our three Great Day Food Centers, our eight Prevo's Family Markets and our one Madison Family Market to either Family Fare Supermarkets or Glen's Markets. We can make no assuran ces that these changes will be received favorably by our customers or that they will not negatively impact future sales.

          Our operating and administrative expenses may be adversely affected by unexpected costs associated with, among other factors: difficulties in the operation of our current business segments; future business acquisitions; adverse effects on existing business relationships with independent retail grocery store customers; difficulties in the retention or hiring of employees; labor shortages, stoppages or disputes; business and asset divestitures; increased transportation or fuel costs; current or future lawsuits and administrative proceedings; and losses of, or financial difficulties of, customers or suppliers. Our operating and administrative expenses could also be adversely affected by changes in our sales mix. Our ongoing cost reduction initiatives and changes in our marketing and merchandising programs may not be as successful as we anticipate. Acts of terrorism or war have in the past and may in the future result in considerable economic and political uncertainties that could have adverse effects on consumer buying behavior, fuel costs, shipping and transportation, product imports and other factors affecting our company and the grocery industry generally.

          Our future interest expense and income also may differ from current expectations, depending upon, among other factors: the amount of additional borrowings; changes in our borrowing arrangements and agreements; changes in the interest rate environment; and the amount of fees received on delinquent accounts. The availability of our senior secured revolving credit facility depends on compliance with the terms of the credit facility.

          As discussed in this Form 10-K, during fiscal 2004, we have sold substantially all of the assets of L&L/Jiroch Distributing Company ("L&L/Jiroch"), J.F. Walker Company, Inc. ("J.F. Walker"), United Wholesale Grocery Company ("United") and have sold or closed our remaining Food Town stores. These sales and closings have allowed us to better focus our efforts and capital on key strategic markets where we have the strongest growth and value creation opportunities. However, we cannot assure you that these transactions will be beneficial to our company or that actual exit costs will not exceed our allowances. The agreements relating to many of these transactions require us to indemnify these asset buyers for breaches of our representations and warranties contained in the agreements and certain other matters.

          This section is intended to provide meaningful cautionary statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information that we obtain after the date of this Annual Report.

PART I

Overview

          Spartan Stores is a leading regional grocery distributor and grocery retailer, operating principally in Michigan and Ohio. We operate two primary business segments: Grocery Distribution and Retail. We are the eighth largest wholesale distributor to grocery stores in the United States and the largest wholesale distributor to grocery stores in Michigan. Our distribution and retail operations hold a combined #1 or #2 market share in many of the key Michigan markets we serve. For the fiscal year ended March 27, 2004 ("fiscal 2004"), we generated net sales from continuing operations of $2.1 billion as compared to net sales of $2.0 billion for the fiscal year ended March 29, 2003.

          Established in 1917 as a cooperative grocery distributor, Spartan Stores converted to a for-profit business corporation in 1973. In January 1999, we began to acquire retail supermarkets in our focused geographic regions. In August 2000, our common stock became listed on the NASDAQ Stock Market under the symbol "SPTN."

          We appointed Craig C. Sturken as President and Chief Executive Officer ("CEO") effective March 3, 2003. Mr. Sturken was appointed as Chairman of the Board of Directors in August 2003. Mr. Sturken has more than forty years of retail experience, including ten years as Chief Executive Officer of the Great Atlantic & Pacific Tea Company's Atlantic and Midwest regions. In addition, we hired Dennis Eidson as Executive Vice President Marketing and Merchandising in March 2003 and Ted Adornato as Executive Vice President Retail Operations in December 2003. Both Mr. Eidson and Mr. Adornato have over 20 years of experience in the food industry.

          We have also improved the leadership and retail experience of our Board of Directors with the appointments of Ms. M. Shân Atkins, Dr. Frank Gambino and Mr. Timothy O'Donovan in August 2003. Ms. Atkins formerly served as Executive Vice President, Strategic Initiatives for Sears Roebuck & Co. Dr. Frank Gambino is Associate Professor of Marketing and Director of the Food Marketing Program at Western Michigan University. Mr. O'Donovan is President and CEO of Wolverine World Wide, Inc., a publicly-traded company.

          We believe that our experience and expertise as a grocery distributor and the addition of key executive team members for our retail operations provides us with the tools for successful operation of our integrated business. Under Mr. Sturken's leadership, Spartan Stores has refocused its fundamental business strategies in both its distribution and retail operations and we are beginning to see the positive effects of these changes.

Grocery Distribution Segment

          Spartan Stores is the eighth largest wholesale distributor to grocery stores in the United States and the largest wholesale distributor to grocery stores in Michigan. Our Grocery Distribution segment provides approximately 400 stores with a selection of approximately 40,000 products, including dry groceries, produce, dairy products, meat, frozen food, seafood, floral products, general merchandise, pharmacy, and health and beauty care items. In addition, we offer our grocery distribution customers approximately 1,800 private label grocery and general merchandise items. Total distribution revenues from continuing operations of our Grocery Distribution segment, including shipments to our corporate owned stores, were $1.6 billion for fiscal 2004.

          Customers. Our Grocery Distribution segment supplies our corporate owned stores and a diverse group of independent grocery store operators that range from single stores to supermarket chains with as many as 21 stores. Pricing to our customers is generally based upon a "cost plus" model for grocery, frozen, dairy, pharmacy and health and beauty care items and a "variable mark-up" model for meat, deli, bakery, produce, seafood, floral and general merchandise products.

          Our Grocery Distribution customer base is very diverse, with no single customer exceeding 7% of consolidated net sales. Our five largest Grocery Distribution customers (excluding corporate owned stores) accounted for approximately 18.7% of our fiscal 2004 consolidated net sales.

          Distribution Functions. Our Grocery Distribution business utilizes approximately 2.0 million square feet of warehouse, distribution and office space. We supply our corporate owned stores and our independent grocery distribution customers from our distribution centers located in Grand Rapids and Plymouth, Michigan. We believe that our distribution facilities are strategically located to efficiently serve our customers. We are continually evaluating our inventory movement and assigning stock-keeping units (SKUs) to appropriate facilities within our distribution centers to reduce the time required to pick products. During fiscal 2003 and fiscal 2004, we implemented engineered labor standards across all direct labor functions within our distribution centers to improve productivity. Through-put (defined as cases shipped per hour) increased in comparison to fiscal 2003 by 2.7% in our grocery warehouses and 0.5% in our perishables warehouse. This is the second con secutive year of improved productivity. As we make continuous progress towards our expected productivity levels, we would expect these increases to moderate in future years.

          To supply our Grocery Distribution customers, we operate a fleet of approximately 100 tractors, 200 conventional trailers and 175 refrigerated trailers, substantially all of which are leased. In fiscal 2004, we upgraded the on-board transportation management systems on our Grand Rapids fleet of tractors, or approximately 64 of our tractors. These computers have allowed us to reduce idle time by 20% and have helped us control costs. We expect to upgrade the on-board computers on the remainder of the fleet during fiscal 2005. This should allow us to further reduce costs and vehicle idle time.

          Additional Services. We also offer and provide many of our independent grocery distribution customers with value-added services, including:

Retail Segment

          Our Retail segment operates 54 retail supermarkets and 21 deep-discount food and drug stores predominantly in midsize metropolitan, tourist and rural areas of Michigan and Ohio. Beginning in fiscal 2004 we consolidated the number of banner names for our retail supermarkets from six to two. Currently, our retail supermarkets are operated under the banners Family Fare Supermarkets and Glen's Markets. We believe that the consolidation of our banner names will provide a stronger, more unified retail store brand identity, enhanced customer loyalty, a streamlined operating structure and the ability to deliver more concise, cohesive and effective advertising, which will improve our financial performance. Our 21 deep-discount food and drug stores operate under the banner The Pharm.

          We believe our retail supermarkets maintain a #1 or #2 market share position in many of the Michigan markets they serve. We believe that our strong market share positions result from our distinct "neighborhood market" focus and the favorable name recognition of our banners. Our neighborhood market strategy distinguishes our stores from supercenters and limited assortment stores by emphasizing convenient locations, demographically targeted merchandise selections, strong perishables offerings, customer service, value pricing and community involvement.

          Our 54 retail supermarkets typically offer dry groceries, produce, dairy products, meat, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care products, delicatessen items and bakery goods. Twenty-five of our grocery stores also offer pharmacy facilities. In addition to nationally advertised products, the stores carry our private label items: the "Spartan" and "Pharm" brands, and our value brand label, "HomeHarvest." These private label items provide above-average retail margins and we believe they help generate increased customer loyalty. See "Merchandising and Marketing-Corporate Brands." Our retail supermarkets range in size from approximately 20,000 to 64,000 total square feet and average approximately 38,000 total square feet per store.

          Our 21 deep-discount food and drug stores, which operate under the banner The Pharm, offer a unique combination of a full-service pharmacy, general merchandise products and basic food offerings. These stores operate under a deep discount format that emphasizes everyday low prices that are typically at or below supercenter offerings and are less than those of a traditional supermarket or drug store. The Pharm stores range in size from approximately 17,000 to 44,000 total square feet and average approximately 29,000 total square feet per store.

          We have acquired our stores as a result of six acquisitions from January 1999 to March 2001. Since the acquisitions, we have added 3 stores, closed 34 stores and sold 24 Food Town stores as a result of our continual evaluation of store performance. The following chart details the changes in the number of our retail stores over the last five years:

          During fiscal 2004, we reset and/or performed limited remodels on 37 of our stores, including all 21 Pharm stores. During fiscal 2005, we expect to reset and/or remodel an additional 13 stores. Capital expenditures, including remodeling, are expected to approximate $10.0 to $15.0 million per year as we continually maintain and update our store base. We will evaluate proposed retail projects based on demographics and competition within each market, and prioritize projects based on their expected returns on investment. We require projects to meet a targeted internal rate of return to be approved; however, we may undertake projects that do not meet this standard to the extent they represent required maintenance or necessary infrastructure improvements. We believe that focusing on such measures provides us with an appropriate level of discipline in our capital expenditures process.

Operating Segment Financial Data

          More detailed information about our operating segments may be found in Note 11 to the consolidated financial statements included in Item 8, which is herein incorporated by reference. All of our sales and virtually all of our assets are in the United States of America.

Discontinued Operations

          Our former convenience distribution operations, insurance operations, certain of our retail, grocery distribution and real estate operations have been recorded as discontinued operations in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, for all years presented all information in this Annual Report on Form 10-K have been adjusted and the discontinued operations information is excluded, unless otherwise noted.

          Discontinued Retail Operations. In March 2003, we announced our decision to close 13 Food Town stores and our plans to either sell or close our remaining 26 Food Town stores. During fiscal 2004, we completed the sale of 24 Food Town stores for net proceeds of $42.1 million. Stores not sold have been closed. Additionally, we had closed six Food Town, two Family Fare Supermarkets, one Glen's Markets and four The Pharm stores earlier in fiscal 2003. The operations of these stores are included in discontinued operations.

          Discontinued Convenience Distribution Operations. On June 9, 2003 we consumated the sale of substantially all the assets of L&L/Jiroch and J.F. Walker to The H.T. Hackney Co. for approximately $40.8 million in cash and the assumption of certain liabilities.

          During the fourth quarter of fiscal 2004, Spartan Stores completed the sale of the operating assets of United Wholesale Grocery Company ("United") for net proceeds of $16.9 million. The asset sale includes a continuing supply agreement between Spartan Stores and the new owner; however, this supply agreement does not constitute a significant continuing involvement and the operations and discontinued cash flows of United have been eliminated from the ongoing operations of Spartan Stores, as defined by Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

          Discontinued Grocery Distribution Operations. We consolidated our Toledo, Ohio distribution operations into our Michigan facilities during the fourth quarter of fiscal 2003. As a result of the decision to exit the Food Town stores, the operating results related to these facilities have been classified as discontinued operations in the consolidated financial statements because the operations and cash flows of these facilities have been substantially eliminated from ongoing operations.

          Discontinued Real Estate Operations. Discontinued real estate operations include properties either held for sale or sold during fiscal 2004, fiscal 2003 and fiscal 2002.

          Discontinued Insurance Operations. Discontinued operations also include our discontinued insurance operations, which were sold in fiscal 2002 and 2001. Insurance reserves of $4.1 million for open claim liabilities related to policies that we will remain obligated under until all claims are closed are included in the Consolidated Balance Sheet at March 27, 2004.

Marketing and Merchandising

          General. In fiscal 2004, we combined the marketing and merchandising departments of our Grocery Distribution and Retail segments to more effectively leverage the use of category management principles. We believe that this combination will produce greater focus, efficiencies and value while improving relationships with vendors and improving the offerings to our customers and consumers. Our Grocery Distribution segment has implemented marketing practices to more aggressively pursue incremental sales gains to existing and prospective customers. Our Retail segment's marketing and merchandising strategies have changed from supplier to consumer driven programs in keeping with the implementation of improved category management practices.

          We believe these changes have been fundamental to improving the financial performance of our retail operations, enhancing our competitive market position, driving incremental sales growth and capturing more of the natural synergies that exist between our retail stores, independent customer stores and distribution operations.

          With the efficiencies created from consolidation of these functions and by partnering with our vendors to develop more robust category management, we have been able to more effectively develop and roll-out our merchandising programs, which has aided our ability to increase our sales and earnings. We have and will look to expand these offerings and partner with our independent customers over time to continue to realize incremental benefits.

          Corporate Brands. We currently market and distribute approximately 1,800 highly recognized private label brand items under three exclusive store brands: the "Spartan" and "Pharm" brands, and our value brand, "HomeHarvest."

          During fiscal 2004, we began the process of reenergizing our "Spartan" brand and redesigned the label. The redesigned label is currently being used on approximately 50% of our private label products, with continued conversion expected during fiscal 2005. The new label has been well received by consumers and for the last two quarters of the current fiscal year, sales of private label products increased by approximately 8% in units and 18% in dollars at our corporate owned stores. We believe positive sales trends will continue as the new label continues to be implemented.

          We entered into new strategic relationships with private label brand partners that will provide us with greater category management expertise, product variety and improved costs. We believe these changes will further enhance the value of this already widely accepted and recognized private label brand.

Competition

          Our Retail and Grocery Distribution segments operate in highly competitive markets, which typically result in low profit margins for the industry as a whole. Our Retail and Grocery Distribution segments compete with, among others, regional and national grocery distributors, independently owned retail grocery stores, large chain stores that have integrated wholesale and retail operations, mass merchandisers, limited assortment stores and wholesale membership clubs, some of whom have greater resources than we do. The principal competitive factors in the retail grocery business include the location and image of the store; the price, quality and variety of the products; and the quality and consistency of service.

          We believe we have developed and implemented strategies and processes that allow us to be competitive in our Retail segment. We monitor planned store openings by our competitors and have established proactive strategies to respond to new competition. We have developed comprehensive plans to address competitor openings. Strategies to combat competition vary based on many factors, such as the competitor's format, strengths, weaknesses, pricing and sales focus. During fiscal 2003, eight competitor supercenters opened in significant markets that either we operate corporate owned stores, or in which our independent customers operate stores. During fiscal 2004, six additional competitor supercenters opened in similar markets and additional supercenter openings are expected to occur during fiscal 2005.

          The primary competitive factors in the distribution business include price, product quality, variety and service. We believe we have developed an internal set of matrices that allow us to measure our performance against these factors, compare our performance against our competitors and make improvements, as appropriate. We believe our overall service level, defined as actual units shipped divided by actual units ordered, is among industry leading performance.

Seasonality

          Throughout the fiscal year our Retail and Grocery Distribution segment's sales and operating performance vary with seasonality. Our first and fourth quarters are typically our slowest sales quarters and therefore operating results are generally lower during these two quarters. Additionally, these two quarters can be affected based on the timing of the Easter holiday, which is a strong sales week. All quarters are 12 weeks, except for our third quarter, which is 16 weeks and includes the Thanksgiving and Christmas holidays. Most of our northern Michigan stores are dependent on tourism and therefore, most affected by seasons and weather patterns, including, but not limited to, the amount and timing of snowfall during the winter months and the range of temperature during the summer months.

Suppliers

          We purchase products from a large number of national, regional and local suppliers of name brand and private label merchandise. We have not encountered any material difficulty in procuring or maintaining an adequate level of products to serve our customers. No single supplier accounts for more than 9% of our purchases. We have developed strategic relationships with key suppliers that did not exist in prior years. We believe this will prove valuable in the development of enhanced promotional programs and consumer value perceptions.

Intellectual Property

          We own valuable intellectual property, including trademarks and other proprietary information, some of which, including "Spartan," "Family Fare," "Glen's," "The Pharm," "HomeHarvest" and other related marks, are of material importance to our business.

Technology

          We invest in technology as a means of maximizing the efficiency of our operations and improving service to our customers. Our focus during the last year has been to refine and maximize the utilization of our existing systems and to deploy and update systems in support of the business. During the last year we have done this with a focus on business process and data integrity in the use of all our systems.

          Supply Chain. During fiscal 2004, we completed the upgrade of our warehouse management systems. In addition, we completed the upgrade of our on-board transportation management system for our Grand Rapids fleet of tractors, as discussed in "Grocery Distribution Segment - Distribution Functions." We also made significant improvements in our systems for tracking detail item and costing information for complex items flowing through our supply chain systems.

          Retail Systems. During fiscal 2004, we installed "self-checkout" systems in eight of our retail supermarkets, with four additional installations planned for fiscal 2005. We will continue to expand our deployment of "self-checkout" systems in our larger stores. In addition, we completed the following during the current fiscal year:

          Financial Systems. We streamlined processes and enhanced controls for many aspects of our financial systems.

          Human Resource Systems. We upgraded our human resource and payroll systems software.

          Information Technology. We significantly improved our business continuity capabilities and continued to refine the security of our internal network and systems. In addition, we have begun to install and service our independent retail store customers with "self-checkout" systems.

Subsidiaries

          Our Grocery Distribution segment consists primarily of our wholly owned subsidiary, Spartan Stores Distribution, LLC. We operate our Retail segment primarily through two wholly owned subsidiaries, Family Fare, LLC and Seaway Food Town, Inc. and their respective subsidiaries. United Wholesale Grocery Company, L&L/Jiroch and J.F. Walker comprised our discontinued Convenience Distribution segment and substantially all assets of these three companies were sold during fiscal 2004.

Associates

          We currently employ approximately 6,900 associates, approximately 4,000 of which are full-time and 2,900 of which are part-time.

          Unions represent approximately 22% of our associates, with contracts for approximately 840 distribution center and transportation associates expiring between April 2005 and October 2006 and contracts for approximately 630 retail associates expiring between June 2004 and March 2005. Approximately 12% of our associates and approximately 56% of our union associates are represented by contracts that expire by April 2005.

          We consider our relations with our union and non-union associates to be good and have not had any material work stoppages in the last five years.

Regulation

          We are subject to federal, state and local laws and regulations covering the purchase, handling, sale and transportation of our products. Several of our products are subject to federal Food and Drug Administration regulation. We believe that we are in compliance with all Food and Drug Administration and other federal, state and local laws and regulations governing our businesses.

Forward-Looking Statements

          The matters discussed in this Item 1 include forward-looking statements. See "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K.

Available Information

          The address of our web site is www.spartanstores.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports (and amendments to those reports) filed or furnished pursuant to Section 13(a) of the Securities Exchange Act available on our web site as soon as reasonably practicable after we electronically file or furnish such materials with the Securities and Exchange Commission. Interested persons can view such materials without charge by clicking on "Investor Information" and then "SEC Filings" on our web site. Spartan Stores is not an "accelerated filer" within the meaning of Rule 12b-2 under the Securities Exchange Act.

Grocery Distribution Segment Real Estate

          The following table lists the location, approximate size and ownership of the facilities used in our Grocery Distribution segment.

Retail Segment Real Estate

          The following table lists the retail banner, number of stores, geographic region, approximate total square footage under the banner, average store size (in square feet) and ownership of our retail supermarkets:

          In addition to the stores listed above, we own a 65% interest in a joint venture that operates a grocery store of approximately 45,700 square feet located in southeastern Michigan.

          The following table lists the retail banner, number of stores, geographic region, approximate total square footage under the banner, average store size (in square feet) and ownership of our deep-discount food and drug stores:

          Various lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against Spartan Stores and its subsidiaries. While the ultimate effect of such lawsuits and claims cannot be predicted with certainty, management believes that their outcome will not result in a material adverse effect on the consolidated financial position, operating results or liquidity of Spartan Stores.

          No matters were submitted to a vote of Spartan Stores' shareholders during the fourth quarter of fiscal 2004 through the solicitation of proxies or otherwise.

PART II

          Spartan Stores common stock is traded on the National Market System of the NASDAQ Stock Market under the trading symbol "SPTN."

          Stock sale prices are based on transactions reported on the NASDAQ Stock Market. Information on quarterly high and low sales prices for Spartan Stores' common stock appears in Note 12 to the consolidated financial statements and is incorporated herein by reference. At May 21, 2004 there were approximately 765 shareholders of record of Spartan Stores common stock.

          During fiscal 2003 and 2004, we did not pay any dividends. The payment of future dividends will be determined by our board of directors. We anticipate that we will use any net earnings from our operations to repay debt and to acquire additional retail operations, and that we will not pay any dividends for the foreseeable future.

          Our credit facilities contain restrictions that do not allow us to pay future dividends or make a variety of other restricted payments. See the "Liquidity and Capital Resources" section of Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Item 7 below for a more detailed discussion of these restrictions, as well as Note 5 to the consolidated financial statements.

          The information required by Item 201(d) of Securities and Exchange Commission Regulation S-K is incorporated herein by reference from the section entitled "Equity Compensation Plans" in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held August 11, 2004.

          The following table provides selected historical consolidated financial information of Spartan Stores. The historical information was derived from our audited consolidated financial statements as of and for each of the five fiscal years ended March 25, 2000 through March 27, 2004. Fiscal 2001 was a 53-week year. Certain reclassifications have been made to the fiscal 2000 through fiscal 2003 selected financial data to conform to the fiscal 2004 presentation. As noted elsewhere in this Form 10-K, for all years presented, all information in this Form 10-K has been adjusted and the discontinued operations information is excluded, unless otherwise noted. See Note 3 for additional information on discontinued operations occuring in the periods presented below.

(In thousands, except per share data)

Executive Overview

          Spartan Stores is a leading regional grocery distributor and grocery retailer, operating principally in Michigan and Ohio.

          We currently operate two reportable business segments: Retail and Grocery Distribution. Our Retail segment operates 54 retail supermarkets in Michigan under the banners Family Fare Supermarkets and Glen's Markets and 21 deep-discount food and drug stores in Ohio and Michigan under the banner The Pharm. Beginning in fiscal 2004 we consolidated the number of banner names that we operate our retail supermarkets under from six to two. We believe that the consolidation of our banner names will provide a stronger, more unified retail store brand identity, enhanced customer loyalty, a streamlined operating structure and the ability to deliver more concise, cohesive and effective advertising, which will improve our financial performance. Our retail supermarkets have a "neighborhood market" focus to distinguish them from supercenters and limited assortment stores. Our deep-discount food and drug stores offer a unique combination of full-service pharmacy, gene ral merchandise products and basic food offerings. Our Grocery Distribution segment provides a full line of grocery, general merchandise, frozen and perishable items to approximately 400 stores, including 330 independently owned grocery stores and 75 corporate owned stores.

          For fiscal 2004, we established four key management priorities we believed were central to our ability to refocus our organization on profitable growth. We have made significant progress towards achieving these short-term goals, which has provided stability to our business and allowed us to focus on future profitable growth. A summary of our goals and results follows:

          In addition to these accomplishments, we also completed the refinancing of our bank facilities during the third quarter. Completion of this refinancing has been a major focus of the management team and its completion provides us with improved financial flexibility.

          Our strategic focus during fiscal 2005 will be on the customer. The customer will be at the forefront of all of our decisions. In conjunction with this focus, we have developed five "Phase I" priorities of our long-term strategic plan to attain our goals, they are:

          While we expect to return to net profitability during fiscal 2005, we will be faced with competitive store openings in several of the key markets we serve. While we believe that we have developed strategies to combat these competitors, the effectiveness of our strategies will affect our actual financial performance.

          The matters discussed in this Item 7 include forward-looking statements. See "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K.

Results of Operations

          The following table sets forth items from our Consolidated Statements of Operations as a percentage of net sales and the year-to-year percentage change in dollar amounts:

* Percentage change is not meaningful

          Results of Continuing Operations for the Fiscal Year Ended March 27, 2004 Compared to the Fiscal Year Ended March 29, 2003

          Net Sales. Net sales increased $79.3 million, or 4.0%, from $1,975.7 million in fiscal 2003 to $2,055.0 million in fiscal 2004.

          Net sales in our Grocery Distribution segment, after intercompany eliminations, increased $37.2 million, or 3.4%, from $1,095.2 million to $1,132.4 million. The increase resulted primarily from new customer sales of $38.9 million.

          Net sales in our Retail segment increased $42.1 million, or 4.8%, from $880.5 million to $922.6 million. Comparable-store sales increased by 3.2%. The sales increases were driven by improved merchandising and promotional programs driven by our focused category management efforts coupled with better operational excellence, sales from three stores open the entire fiscal year of $16.7 million, a shift in the Easter holiday from the fourth quarter of fiscal 2002 to the first quarter of fiscal 2004, the closure of our Food Town stores which transferred some business to select The Pharm locations and the closure of competing stores in three of our northern Michigan markets in the third quarter of fiscal 2004.

          We appointed Craig C. Sturken as President and Chief Executive Officer effective March 3, 2003. Mr. Sturken was appointed Chairman of the Board of Directors in August 2003. Mr. Sturken has more than forty years of retail experience, including ten years as Chief Executive Officer of the Great Atlantic & Pacific Tea Company's Atlantic and Midwest regions. In addition, we hired Dennis Eidson as Executive Vice President Marketing and Merchandising in March 2003 and Ted Adornato as Executive Vice President Retail Operations in December 2003. Both Mr. Eidson and Mr. Adornato have over 20 years of experience in the food industry. The new management brings strong leadership and experience in merchandising, marketing and retail store operations that we believe has improved our category management efforts, sales trends and operating results.

          We reported increased year-over-year sales in both of our segments for all four quarters during fiscal 2004. This growth is despite increasing competition from supercenters and other retailers. During the past year, approximately four supercenters have opened in our markets and we expect the opening of two additional supercenters during the second half of fiscal 2005. We believe that our improved marketing and merchandising practices and the continued weakening of conventional food competitors will allow us to sustain our growth, but at rates closer to industry averages. We are forecasting fiscal 2005 consolidated net sales to improve between 1.0% and 3.0%, with comparable-store sales of 0.0% to 1.5%.

          Gross Margin. Gross margin represents sales less cost of goods sold, which include purchase costs and promotional allowances. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs such as setting up warehouse infrastructure. Vendor allowances are recognized as a reduction in cost of goods sold when the product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.

          Gross margin increased by $11.8 million, or 3.2%, from $366.8 million to $378.6 million. As a percent of net sales, gross margin decreased from 18.6% to 18.4%. Gross margin was negatively impacted by a $3.7 million (0.2% of net sales) inventory adjustment due to the implementation of a stock ledger inventory and margin management system that significantly enhances our ability to calculate