Sprouts Q2 Report Delineates Company Strategy

Phoenix, AZ—Sprouts Farmers Market, Inc., has reported results for the second quarter ended July 4, 2021.

Noting that Q2 last year was in the early days of the pandemic, highlights include:

  • Net sales of $1.5 billion; a 7% decrease from the same period in 2020 and a 7% increase from the same period in 2019
  • Comparable store sales growth of -10.0% and two-year comparable store sales growth of -0.6%
  • Net income of $61 million; compared to net income of $67 million and adjusted net income of $70 million in the same period in 2020; and compared to net income of $35 million from the same period in 2019
  • Diluted earnings per share of $0.52; compared to $0.57 diluted earnings per share and adjusted diluted earnings per share of $0.59 in the same period in 2020; and compared to $0.30 diluted earnings per share from the same period in 2019

Sprouts opened one new store this quarter, bringing the company to a total of 363 stores in 23 states. Seven new store-openings planned for Q4 this year will be delayed until 2022, due to difficulties obtaining necessary equipment because of supply chain delays. However, the store that did open, according to CEO Jack Sinclair, was in a new store format. In an Earnings Conference Call, Sinclair noted that the new format is smaller, more efficient, and cheaper to build, while highlighting innovative and fresh products. Innovation Centers, he added, will be rolling out to all stores, allowing Sprouts to showcase new-to-market, attribute-driven items.

Part of Sprouts’ strategy, Sinclair added, involves staying fresh—literally. The company has built two new distribution centers, in order to get fresh food to stores faster. “We’re leaning into why customers love Sprouts: produce,” Sinclair said. “Our produce pricing remains ultra-competitive, with prices significantly lower than the marketplace. We just went through a great cherry season, which showcased more than five different varieties of cherries from unique, family-owned farms… with distinctly different taste profiles than the common red cherries. Our organic produce is up to 35% of department sales, which we believe is one of the highest penetration rates in the industry. We’re now focused on getting some of our organic prices in line with our conventional prices, making it a clear differentiator for Sprouts.”

Sprouts is also implementing new strategies in-store. “Thankfully, the country is in a place where we can start an active sampling program, which is a new endeavor for Sprouts, and will prompt education, trial, and purchase,” Sinclair added.

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“I am pleased with our strong profit results in the second quarter, continuing to build on the positive step change in financial performance we made in 2020,” Sinclair stated in the press release. “As I look forward to the balance of the year, I am excited about growing our differentiated brand proposition. We continue to lead with our strategic priorities of investing in innovation and our new store format, accelerating our marketing initiatives to deepen our relationship with our target customer, and leveraging an advantaged fresh supply chain, setting the foundation for Sprouts’ long-term growth.”

Adjusted diluted earnings per share for the full-year 2021 are expected to be between $1.90 and $2.02.