Sprouts Reports 10% Sales Increase for Q1

Sprouts Reports 10% Sales Increase for Q1
According to interim CEO/CFO Brad Lukow, Sprouts Farmers Market is on track to achieve its 2019 financial targets

Sprouts Farmers Market has reported a 10 percent increase in net sales for Q1 from a year ago, for a total of $1.4 billion. Comparable-store sales growth was 1.4 percent, and two-year comps growth was 4.1 percent.

During the quarter, the Phoenix-based grocer opened eight new stores, one more than planned, as well as one in the second quarter, which is part of the nine new stores already announced. The company also revealed plans to open 13 more stores in the second half of the year.

“Sprouts’ efficient model continues to produce strong returns on invested capital, resulting in healthy cash generation,” said Brad Lukow, interim co-CEO and CFO of Sprouts. “This sound financial footing, coupled with strong new-store productivity, supports continued expansion of our trusted brand across existing markets and three additional states this year. We are on track to achieve our 2019 financial targets, and we are raising the bottom end of our EPS guidance.”   

Gross profit for the quarter increased 9 percent to $484 million, resulting in a gross profit margin of 34.3 percent, a decrease of 30 basis points compared with the same period in 2018. According to Sprouts, this deleverage was primarily driven by cost inflation that wasn't fully reflected in retail pricing due to the competitive landscape, as well as changes in product mix.

“Our focus on fresh and healthy products at great prices has positioned us well to meet the needs of today’s customers, and our ongoing investments in technology for efficiency, digital channels for brand and product awareness, and innovation for differentiation are paving the way to success for years to come,” said Jim Nielsen, Sprouts' interim co-CEO, president and COO. Nielsen is on medical leave and didn't join Lukow on the earnings call about the Q1 results. The company is currently in search of a permanent CEO, after Amin Maredia stepped down from the role at the end of last year.

Net income was $56 million, down from $67 million a year ago. Adjusted net income was $57 million, a 15 percent decrease from the same period in 2018. Sprouts noted that this decrease was driven by cycling a lower effective tax rate (9.8 percent, compared with 24.4 percent for the first quarter of 2019) in the first quarter of 2018, primarily because of the exercise of a significant number of expiring pre-IPO stock options, as well as the impact of the adoption of the new lease accounting standard in 2019. This was partly offset by higher sales and fewer shares outstanding due to a repurchase program. 

Specializing in fresh, natural and organic products, Sprouts employs more than 30,000 associates and operates 300-plus stores in 19 states. The company is No. 22 on Progressive Grocer’s 2018 Super 50 list of the top grocers in the United States.

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