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Sprouts ups 2017 outlook, expects more improvement in 2018

Sprouts Farmers Market's third-quarter results have management looking forward to an even brighter year-end. Initiatives launching in 2018 also excite leaders.

Sprouts Farmers Market management expects to end the year better than previously stated and to continue executing on the growth strategies that are working into the new year.

“We’ll continue to accelerate strategic priorities that will enhance our business—from product assortment to the digital experience to customer service,” CEO Amin Maredia said via press release. “These, coupled with our technology investments to drive efficiencies, will provide the flexibility to make future investments where needed to ensure Sprouts is well-positioned for the future.”

Third-quarter 2017 earnings highlights include:

  • Net sales of $1.2 billion; a 16 percent increase from the same period in 2016.
  • Comparable store sales growth of 4.6 percent, and two-year comparable store sales growth of 5.9 percent.
  • Gross profit for the quarter increased 19 percent to $346 million, resulting in a gross profit margin of 28.7 percent, an increase of 60 basis points compared with third quarter 2016. 
  • Net income of $31 million; a 32 percent increase from third quarter last year.
  • Diluted earnings per share of 23 cents; a 44 percent increase over third quarter 2016.

Revised full-year guidance includes:

  • Net sales growth of 14.5 to 15 percent from its previous 13 to 14 percent.
  • Comparable store sales growth of 2.5 to 3 percent, up from 1.5 to 2 percent.
  • Diluted earnings per share of 98 to 99 cents, up from 88 to 92 cents.
  • Capital expenditures of about $170 million, up from $155 million to $165 million.

Store openings for 2017 remain the same at 32. The chain will make its first move into the mid-Atlantic when it opens a store in Ellicott City, Maryland, in the first quarter. Regional growth includes Pennsylvania and South Carolina. The 30 new stores planned next year also include locations in Albuquerque, New Mexico; Fayetteville, North Carolina; Green Valley, Arizona; Las Cruces, New Mexico; Mesa, Arizona; Sacramento, California; Tempe, Arizona; and Valrico, Florida.

In addition to its march across the nation, systems and infrastructure investments will allow the company to grow margin and make price investments, Sprouts leadership said during the third-quarter earnings call Nov. 2. In 2018, Sprouts will launch a new digital and social platform for customers, as well as tools to manage labor and fresh.

The company will continue to focus on its innovation and product pipeline, private label, meat and seafood and deli programs. Expanded delis exist in about 45 percent of stores now, with plans to grow to 65 percent of outlets over the next three years.

Increased delivery also remains part of the Sprouts' growth plans. It partners with Amazon in eight cities now, and Maredia said he hopes to continue to expand to more cities in the coming year. He said he could not comment about the Amazon partnership itself.

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