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Sprouts Farmers Market reports increases across the board

Net sales, same-store sales and income all increased in Q3 compared with the same period in 2017.

New stores, product innovation and increased sales at existing stores pushed Sprouts Farmers Market’s net sales up 10 percent from 2017, the company reported Thursday.

Net income increased 19 percent, while comparable stores saw sales grew 1.5 percent from 2017. Two-year growth in comparable stores came in with 6.1 percent growth, the company announced.

In the five years since it became a public company, Sprouts has increased its store locations to 315 from 160, including new sites in 11 states where Sprouts had not previously operated, said Amin Maredia, chief executive officer of Sprouts Farmers Market. As a result, revenue has more than doubled.

“This is a testament to the strength of our business model of making healthy eating easy, understandable and, most importantly, affordable. All of this is supported by an extremely talented team that keeps us on trend and moving forward,” Maredia said during Thursday’s earnings call. http://investors.sprouts.com/file/Index?KeyFile=395592896

For the third quarter, which ended Sept. 30, Sprouts reported these results:

  • Net sales of $1.3 billion.
  • Gross profit of $382 million, a 10 percent increase.
  • Gross margin of 28.8 percent, up 5 basis points or 0.05 percent.
  • Net income of $38 million, or $35 million after excluding tax changes.

During the third quarter, Sprouts opened 12 new stores, including some in Pennsylvania and Washington, which are new markets for the company. Since the third quarter ended, two more stores have opened, bringing this year’s total additional stores to 30. Sprouts can now be found in 19 states across the country, Maredia said.

“The promotional environment has remained fairly consistent this year,” Maredia said. “While it remains competitive, we continue to maintain our proven pricing strategies across our different regions and within our various departments. At the same time, we continue to face an overall deflationary environment driven primarily by produce.”

Year-to-date results also were positive, the company reported:

  • Net sales rose 12 percent o $3.9 billion.
  • Comparable store sales have increased 2 percent.
  • Net income of $146 million; adjusted net income is $143 million, a 21 percent increase.

Bradley Lukow, chief financial officer, said he expects year-end sales to be up 11 percent to 11.5 percent compared with 2017, with comparable-store growth sales up 1.7 percent to 2 percent. The company is seeing strong growth in private label and nonperishable departments, he noted. Improvements to the stores’ deli are increasingly popular with customers, as well.

Maredia expanded on those growth areas, pointing out that more than half of the company’s private-label products are organic or non-GMO. Private label drives higher gross margins. Since it accounts for only 13 percent of sales right now, the CEO said he expects to see years of growth there.

More than half of Sprouts locations now feature a deli that offers more ready-to-eat meals made with fresh, healthy food, he said.

He also pointed out that Instacart delivery is now available at more than 200 stores, with the rest expected to be ready early next year.

“While the environment from five years ago has changed, our unique small-format farmers market model focused on health, value, selection and service is resonating more than ever with greater adoption in existing and new markets with our customers giving us confidence in the future growth of Sprouts,” Maredia said.

Five stores are testing a new design that is resonating well with millennials, he said. The design, which Maredia didn’t detail, will continue to be tested and likely will be a prototype for about one-third of the stores that will open next year. The company plans to open 30 stores per year for the next few years.

“We feel that we're positioned better than we've ever been in this marketplace, particularly when it comes to authentic health and as well as fresh, prepared and convenient,” he said.

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