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Sprouts Farmers Market Hits Its Stride

Grocer’s Q4 and FY22 results underscore its attention to successful formats and shopper interests
Lynn Petrak, Progressive Grocer
Sprouts Brand
For the first time, sales of Sprouts Brand products hit the $1 billion mark in FY22.

‘Tis the season for quarterly and yearly financial reports, and Sprouts Farmers Market is out with its results. Focus seems to be the name of the game for Sprouts, as it maintained growth during the fourth quarter and fiscal year while zeroing in on successful formats and shopper needs that best serve the business and its customers.

For the fourth quarter ending Jan. 1, net sales rose 6% on a year-over-year (YoY) basis to hit $1.6 billion, while sales comps grew 2.9%. For the fiscal year that also ended on the starting day of 2023, net sales climbed 5% compared to 2021 to $6.4 billion with a 2.2% lift in comps.

[Read more: "Sprouts on Pace for Several Store Openings"]

E-commerce sales went up 17% in the fourth quarter, representing 11.4% of total sales for that period. Sprouts attributed some of that growth to the November addition of DoorDash marketplace to its omnichannel business in select cities.  

Sprouts opened seven new stores during the last fiscal quarter and 16 new stores over the course of 2022, nine of which were the smaller-format locations that the company has focused on recently. “We are pleased with the performance of our most recent store openings, especially the small formats, and in 2023, we plan to open at least 30 new stores, all of which are our current prototypes,” said CFO Chip Molloy during the earnings webcast.  

As Sprouts has found growth and success with smaller-footprint locations, the retailer is also streamlining its operations. “Back in early 2020, we considered closing some underperforming locations as we switch to smaller and more productive prototypes but we decided not to close those stores as the pandemic struck,” explained Molloy, noting that their priority was to serve communities in need during a crisis. “We recently revisited that decision and we plan to close 11 stores in 2023. Those stores, on average, are 30% larger than our current prototype and generate negative cash flow.”

CEO Jack Sinclair reported that the leadership is pleased with its strong fourth-quarter results and solid trends for the year and remains focused on providing what shoppers want. “Last quarter, we conducted a comprehensive research study to understand what is most important to our customers and they consistently told us that they are looking to us to help them take new measures to be healthy,” he said, noting that the feedback led to the January launch of Sprouts’ “Find Your Healthy” program featuring healthy on-the-go food offerings and tips and recipes for healthy living.

During the high-inflationary fiscal year, Sprouts also fared well with its private label selection. “Sprouts Brands hit $1 billion in sales last year, a remarkable accomplishment. We plan to accelerate that growth even more in 2023 and you will see new Sprouts brand products,” Sinclair reported.

The latest financial report also included an outlook for FY23, as the grocer expects net sales growth between 4-6% and comp sales growth in the low single digits. The adjusted EBIT should land between $355-$370 million and capital expenditures are estimated at $210 million to $230 million. 

"While we recognize the near-term economic environment is difficult to predict, the stability of our recent sales is encouraging," said Molloy. "We are optimistic about our ongoing cash generation and our ability to invest in our business for growth."

Phoenix-based Sprouts Farmers Market employs approximately 31,000 associates and operates approximately 380 stores in 23 states nationwide. The company is No. 53 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America.

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