Phoenix, AZ — Sprouts Farmers Market will expand its relationship with Amazon Prime Now to more than 20 locations by the end of the year, ceo Amin Meredia announced during the Q2 earnings call where he reported strong quarterly sales of $1.2 billion, a 15% increase.
Clearly the pending acquisition of Whole Foods Market for $137.billion is not deterring Amazon from growing its food delivery business with other partners. New Amazon Prime Now service promising delivery in up to one or two hours was just launched in the Atlanta metro area in July and Meredia said a faster rampup will continue into 2018.
“It’s been a slow start in a fast ramp,” Meredia said. “We wanted to make sure we work through all the operational kinks and efficiency kinks and particularly the customer service element of it which is super important to both Sprouts and Amazon. And as we’ve done that, we’ll accelerate that.”
Meredia said the number of stores that will ultimately partner with Amazon could hit up to 50%
“Today we certainly don’t think we would need more than 30%, 40% of the network,” he said. “In the future to the extent that home delivery or click and collect continues to be more and more desired by customers, you might just add more stores simply for efficiency reasons, because at that point, you would have the ability – it would actually add network efficiency. So, in short, it’s probably 30%, 40% of the stores over time and you’ll see us accelerate in 2018.”
Stores that are partnering with Amazon are “very productive,” Meredia added.
“Amazon has been a fantastic partner,” said Bradley Lukow, Sprouts cfo. “We’ve learned a lot together about the business and it’s a great way for Sprouts to engage with our customers and bringing them fresh, healthy products to their doorsteps.”
Sprouts reported a strong quarter with sales of $1.2 billion, a 15% increase over the same period in 2016. New stores performed well and overall comparable store sales grew by 1.4% with gross profit increasing by 12% to $342 million.
The Sprouts results are a contrast to those of Whole Foods Market, which while posting record sales for its latest quarter, saw same store sales continue to decline.
Sprouts said non-perishables sales are growing as well as private label sales, enhanced meat and seafood and momentum in the deli department. Deli is now in 120 stores.
Net sales growth for 2017 was forecast in the range of 13% to 14%, attributed to improved trends in the business. Full-year comp sales growth range could be 1.5% to 2%.
Sprouts opened 13 new stores in Q2, including two more in Florida and has opened five additional stores in the third quarter to-date for a total of 279 stores today. Six more stores are scheduled to open this year with 56 approved sites and 42 signed leases for the coming years.
Meredia also credited better site selection and grassroots marketing efforts in social media for the strong quarter. An expanded training program is helping to reduce staff turnover with retention up by 20% in the management ranks, he said.
Two separate teams are working on how to market to the in-store and online channels because customer behavior is different in each. The database has grown to 850,000 of the 3.5 million-odd Sprouts customers, offering more personalized coupons, offers and education.
Mobile coupon activity is up and a new mobile platform is rolling out next year to further enhance mobile and web engagement.
“Sprouts’ accelerating comp sales and strong top-line growth during this competitive grocery environment demonstrates the power of our brand,” Meredia said.