Sprouts Farmers Market Reports Pandemic Revenue Gains

Sprouts Farmers Market Inc. has reported a 16% year-over-year gain in net sales for its first quarter of 2020, along with 10.6% boost in comparable-stores sales.

Much of that growth comes from increased consumer demand during the COVID-19 pandemic, the food retailer said. “Demand increased dramatically during the latter part of the quarter,” Sprouts noted for the quarter ended March 29, during which total net sales hit $1.6 billion. “As a result, net sales were positively impacted by an estimated $146 million and comparable-store sales by an estimated 9.6%.” For the entire quarter, Sprouts reported net income of $92 million, up about 64% percent year over year.

“I am inspired by our hard-working and profoundly dedicated 32,000 team members who have served under the most difficult of circumstances to ensure our customers have healthy food to feed their families,” said Sprouts CEO Jack Sinclair. “During the first quarter, the COVID-19 crisis led to a significant increase in sales as consumers bought more food to consume at home. As we navigate these ever-changing circumstances, we remain steadfast and decisive, prioritizing team member and customer safety and remaining in stock on fresh, healthy food for our communities, all the while not losing sight of our transformational strategy that will set us up for long-term success.”  

During the first quarter, the grocer, like so many others, increased pay for its workers and absorbed associated charges as Sprouts and other food retailers continued operations deemed essential by authorities. That helps to explain the 16% year-over-year increase in sales, general and administrative expenses for the chain, to $426 million.

That expense category “included a pre-tax special item charge of $1.2 million for professional fees related to our ongoing strategic initiatives,” Sprouts said. “Leverage from increased sales related to the COVID-19 pandemic was largely offset by increased bonuses paid to team members as they serve the communities during this crisis [and] incremental e-commerce fees as more customers adopt digital solutions, as well as continued pressure from higher health care, labor and occupancy costs.”

Such costs will continue into the second quarter of 2020 and affect margins, the food retailer added.  

“The COVID-19 crisis has created a lack of visibility for the remainder of 2020, with many unknowns,” said Denise Paulonis, Sprouts' CFO. “While April sales trended higher than average, we are making significant investments in pay, benefits and safety measures, as the health of our team members and customers is our No. 1 priority. We remain uncertain as to when consumer behavior will return to normal or what may emerge as the ‘new normal.’ This environment is making it difficult to predict specific outcomes.”

Phoenix-based Sprouts employs more than 30,000 associates and operates 340 stores in 23 states. The company is No. 22 on Progressive Grocer’s 2019 Super 50 list of the top grocers in the United States.