Sprouts Farmers Market is experiencing the "most challenging deflationary environment we've faced since 2009," according to CEO Amin Maredia, but the company still finished the fiscal year strong.
Net sales grew 14 percent on a 13-week basis in the fourth quarter to $986 million, while comparable store sales grew 0.7 percent. Diluted earnings per share were 12 cents, a decrease from 18 cents in the fourth quarter of 2015.
For the full year, Sprouts saw net sales of $4 billion, a 15 percent increase from 2015, with comparable store sales growth of 2.7 percent.
Maredia focused his fourth-quarter remarks on progress with strategic initiatives in product innovation, customer experience, infrastructure investments and investments in team members. The retailer’s private label line continues to account for more than 10 percent of sales and now comprises more than 2,100 items. In 2016, Sprouts also expanded the delis in 76 of its stores; 50 more will get expanded delis in 2017. It also continued efforts to digitally engage with customers via email, a mobile app and social media, and is "poised to accelerate personalization in 2017," according to Maredia.
Also on the docket for 2017 is expanding the Sprouts presence in the southeast by entering two new states, Florida and North Carolina, and opening 32 new stores total. For the next several years, Sprouts plans to open 30 stores each year. Maredia said the retailer expects continued high growth of its private label and will continue to work with Amazon Prime Now to bring delivery to new markets.
Chief Financial Officer Brad Lukow presented a "cautious outlook" for 2017, noting that Sprouts expects deflation in many of its fresh categories to continue through at least the first half of the year. Expected sales growth for 2017 is 12 percent to 13 percent, with comp sales growth of flat to 1 percent and EPS growth of 4 percent to 8 percent, he said.
"As it relates to margins, we will continue to make price investments as necessary to drive traffic and to maintain our competitive position," Lukow said.
Sprouts also announced a $250 million buyback of its own shares.