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Natural Foods Merchandiser

Strategic initiatives on track at Sprouts

Sprouts private label success
Expanded delis, growth in private label and weather challenges shaped the retailer's first quarter of 2016.

As competitors in natural food and supplement retail reported mixed quarterly financial results this week, Sprouts Farmers Market delivered fairly healthy growth in its first quarter ending April 3.

  • Revenue grew 16 percent for the quarter to $993.2 million but fell short of Wall Street analysts' expectations.
  • Net income was $46.2 million, up 20 from the same quarter last year.
  • Comparable same store sales grew 4.8 percent, at the lower end of Sprouts’ guidance for the quarter.
  • Diluted earnings per share came out to $0.30–up 20 percent from last year.
  • Gross profit was $306.5 million, with a gross profit margin of 30.9 percent. “This leverage was primarily due to deflation in certain categories, driving higher margins and more normalized promotions compared to the prior year,” said Chief Financial Officer Brad Lukow.
  • Added 11 new stores in Q1. Weather has pushed construction back in some parts of the country, but hasn’t altered the company’s plans to open 36 new stores in 2016.

CEO Amin Maredia provided several updates on the retailer’s primary initiatives outlined earlier this year. Notably, two dozen stores have expanded their deli offerings with prepared salads, customer-facing sandwich stations, foodservice cases, fresh juices and specialty coffees, and 30 more stores are slated to implement those offerings throughout the rest of the year.

Also, like competitor Whole Foods, Sprouts recently launched digital coupons through its mobile app—an effort to deepen its relationship with customers. It’s also expanded its partnership with Amazon Prime Now, offering home delivery through five stores in three markets.

Private label products continued to outpace overall company growth, accounting for nearly 10 percent of sales this quarter. Sprouts is on track to have more than 200 private label products by the end of the year, Maredia said.

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