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Sprouts Farmers Market delivery and brick-and-mortar outlets to grow

Sprouts Farmers Market logo
Sprouts remains committed to affordable, healthier-for-you products provided conveniently as it grows and shifts to meet consumer demand. The retailer reported positive quarterly results and a brighter 2017 outlook during its second-quarter earnings call.

Online and delivery efforts will continue to expand but will not dramatically change Sprouts Farmers Market and its leadership’s outlook on the chain as a growing natural grocery retailer.

In the near future, the Amazon Prime Now partnership will expand to 20 stores by the end of the year. CEO Amin Maredia said that while the program might have been slow to start, delivery service will ramp up quickly and continue into 2018. Over time, the service could become available in 30 percent to 40 percent of Sprouts Farmers Market stores.

Maredia told investors on the Sprouts second-quarter earnings call that the partnership is "very productive; I will leave it at that.”

Yet as the grocery landscape changes and delivery grows, don’t expect big transformation from Sprouts. Maredia said the image of Sprouts as a specialty retailer has shifted as it gains grocery market share and becomes known as a convenient, healthy grocery store that offers a fuller shop. Improved deli and meat departments have been keys to making Sprouts a one-stop shop for customers and increasing sales.

As such efforts increase and brand equity grows, the “opportunity to open more stores has become more and more evident,” Maredia said.

The move to e-commerce might make management smarter about store placement, but it won’t reduce the 1,200-plus stores that leaders believe the chain can reach.

Meanwhile, second-quarter highlights include:

  • Net sales of $1.2 billion, a 15 percent increase compared with the same period in 2016.
  • Comparable store sales growth of 1.4 percent and two-year comparable store sales growth of 5.5 percent.
  • Gross profit for the quarter increased 12 percent to $342 million, resulting in a gross profit margin of 28.9 percent, a decrease of 70 basis points compared to the same period in 2016
  • Net income of $41 million, a 10 percent compared with the second quarter in 2016.
  • Diluted earnings per share of 29 cents, a 16 percent year-over-year increase.

Additionally, the company revised its full-year 2017 outlook.

New guidance includes:

  • Net sales growth is now at 13 percent to 14 percent, up from 12.5 percent to 13.5 percent.
  • Unit growth remained the same at 32 stores.
  • Comparable store sales estimated up 1.5 percent to 2 percent compared with earlier 0.5 percent to 1.5 percent.
  • Diluted earnings per share rose to 88 cents to 92 cents from 87 cents to 91 cents.
  • Capital expenditures remained the same in the range of $155 million to $165 million.
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