Sprouts is on track to open at least 30 new smaller-format stores this year.
According to Sprouts Farmers Market Inc. CEO Jack Sinclair, the company’s long-term growth strategy is gaining traction and driving positive performance, as seen in the specialty grocer’s first-quarter earnings ended April 2.
Sprouts’ quarterly results included comparable-store sales growth of 3.1%, total sales growth of 6% and adjusted diluted-earnings-per-share growth of 24%. Net sales totaled $1.7 billion, a 6% increase from the same period in 2022.
The grocer was especially pleased with its e-commerce sales, which grew double digits and represented 12.2% of total sales for the quarter.Sprouts recently improved its site design and digital experience to improve conversion and sales.
“We are encouraged by our most recent performance, a direct result of the strategic changes we have made over the past few years to differentiate ourselves as a specialty health and food retailer,” said Sinclair. “We believe these changes are gaining traction now that we are on the other side of the pandemic.”
Sprouts is driving growth through customer engagement. For example, the team is focused on ramping up its sampling program, particularly with its Sprouts brand offerings, increasing speed at checkout and proactively helping customers navigate the store. The grocer is also expanding and improving its omnichannel experience. This area is of particular importance to the company as its e-commerce growth continues to outpace overall growth. Additionally, Sprouts’ new Southern California distribution center is on target to open later this month.
CFO Chip Molloy further pointed out that the company is encouraged by its efforts to create more brand awareness. “Our Sprouts brand, now at 20% of total sales, performed well as customers continue to seek uniqueness and quality,” he said.
“Our customers recognize that the Sprouts brand provides quality offerings that taste great and are good for you,” added Sinclair. “Amid the high inflationary environment, we brought in more value-forward offerings like multipack grocery items and value-sized meat and daily offerings, while continuing to offer great pricing in our produce department and on important items such as our Sprouts brand cage-free eggs at $3.99 and our healthy sandwiches at $4.99.”
To further improve product quality and freshness, Sprouts will complete the addition of ripening rooms in its Arizona, Texas and Southern California distribution centers in the first half of this year.
“Our traffic trends are improving, and our newer stores on average are exceeding our internal expectations,” noted Sinclair.
Back in March, Sprouts revealed a plan to focus on new smaller-concept stores. The company is on track to open at least 30 new stores this year using this more cost-efficient format.
Additionally, Sprouts reported diluted earnings per share of 73 cents in its first quarter and adjusted diluted earnings per share of 98 cents, a 24% increase from the same period in 2022.
Looking forward to its second quarter, Sprouts expects comparable-store sales growth of approximately 3% and adjusted diluted earnings per share of 61 cents to 65 cents.
For full-year 2023, the grocer expects 5%-6% net sales growth. Comparable-store sales growth is anticipated to be 2%-3%, and adjusted EBIT is forecasted at $370 million- $385 million. Adjusted diluted earnings per share is predicted to be $2.58-$2.68.
“Better eating and healthy eating is not a trend,” observed Sinclair. “It’s a fast-growing movement of customers seeking a healthier lifestyle, even during challenging economic conditions. Given our leadership and being a destination for health, wellness and innovation, Sprouts is well positioned to grow. Our commitment to our strategic changes is beginning to show results, attracting more customers and visits, and doing so profitably.”