What happened

SpartanNash (SPTN -3.64%) investors underperformed a declining market this week. Shares were down 15% through early afternoon trading on Friday compared to a 2.8% slump in the S&P 500, according to data provided by S&P Global Market Intelligence. The food supplier's shares are now down 9% so far in 2023 compared to a 3% increase in the wider market.

This week's decline was sparked by management's fourth-quarter earnings report, which also contained an updated outlook for the 2023 year ahead.

So what

SpartanNash announced a solid 10% sales increase for the period that ran through late December. Management said the results exceeded their expectations. However, Wall Street zeroed in on a few warning signs in the report .

SpartanNash reported lower volume in both its wholesale and retail segments, for example, meaning its growth this quarter came entirely from higher prices. And profitability declined anyway, with gross profit margin dipping to 14.8% of sales from 15.4% of sales a year ago. These trends describe increasing pressures on the consumer staples business through late 2022 as consumers became more price-sensitive in their grocery shopping.

Now what

The good news is that SpartanNash believes the higher prices will allow for significant sales growth in 2023 and beyond. Management is calling for as much as $10.2 billion of annual sales this year compared to $9.6 billion in 2022. Executives raised their long-term targets as well, targeting at least $10.5 billion of annual revenue by 2025. Management says these updates indicate that the company "has now pivoted to growth."

Wall Street isn't so sure. Given the weak sales volume and profitability trends, SpartanNash is still missing some important ingredients of a high-performing growth stock. It's encouraging to see steady revenue growth in a tough selling environment. But investors are hoping that these wins will soon start arriving in the context of expanding margins, too.