Sprouts Reports Strong Third Quarter

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Phoenix, AZ — Sprouts Farmers Market reported $38 million in net income, a 19% increase from the same period in 2017, in its third quarter 2018 earnings report.

Other financials saw increases, too. The company reported net sales of $1.3 billion, a 10%  increase, driven by comparable store sales growth of 1.5% and two-year comparable store sales growth of 6.1%.

During the call, CEO Amin Maredia said strong new-store productivity also contributed to the growth.

Since going public more than five years ago, Maredia said the company has nearly doubled its store count from 160 to 315 and has entered 11 new states. The company opened 12 new stores during the third quarter, including places such as Pennsylvania and Washington, bringing it to 30 for the year. Sprouts recently announced plans to open an additional 30 new stores in 2019.

Maredia also discussed some of Sprouts’ strategic priorities for 2018, which were focused on technology and design both in and outside its stores.

“Sprouts has always embraced a small format, which creates meaningful engagement between our team members and customers,” he said on the call. “Every year, we build on these customer relationships to further enhance the connection and shopping experience at Sprouts. This year, a few of our new stores are incorporating a fresh innovative design to reflect the latest customer trends.”

Sprouts will try to expand its ready-to-eat, cooked meal offerings in its Market Corner Deli, Maredia said. Other changes to the deli include a new design that will allow “clear sight” across deli offerings and improve customer service.

Private label products are another area of focus.

The company is currently at 13% penetration in the private label market. Maredia said Sprouts sees room to grow and will try to do so with new product introductions and increased customer engagement.

“Private label products continue to help drive our top-line and with higher gross margins will provide added flexibility when it comes to further investments as necessary in the business,” Maredia said.

The company looks to continue its partnership with InstaCart, the home-delivery service that Sprouts joined forces with earlier this year. Today it offers the service in more than 200 stores and looks to expand to more markets in 2019.

“The home delivery remains a small percentage of grocery shopping in the U.S. today,” he said. “Our early involvement and experience in this space combined with strong brand trust, loyalty and execution continues to allow us to think about new and exciting ways to serve the customer outside the store.”

On the technology front, “fresh item management,” a company-wide initiative, will continue and is expected to save the company money, Maredia said. The initiative works to improve “shrink stock” postions. Shrink stock is when through various errors, including human, fewer items are actually in stock than are shown in inventory.

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