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Sprouts Plunges on Guidance Cut, Supermarket Stocks Follow
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Shares of Sprouts Farmers Market Inc. (SFM - Free Report) plunged 13.7%, closing at $19.68 yesterday as the organic grocery retailer revealed the unpleasant news of its lowered guidance for third-quarter and full-year 2016. The news comes just before its participation in the Goldman Sachs 23rd Annual Global Retailing Conference on Sep 8, 2016.
The news not only impacted Sprouts Farmers' stock price, but also went on to hurt the other stocks in the supermarket industry. These include bellwethers like Whole Foods Market Inc. , SUPERVALU Inc. and The Kroger Co. (KR - Free Report) , which slipped 5.3%, 3.9% and 4.1%, respectively.
Coming to the numbers, Sprouts drastically slashed its third-quarter comparable sales (comps) guidance to come in flat with last year from the previous forecast of 3–4% growth. Simultaneously, the company curtailed its earnings and comps view for full-year 2016. The company now anticipates earnings per share in the range of 83–86 cents against 92–94 cents projected earlier. Further, the company’s comps growth guidance for the year was substantially lowered to 1.5–2.5% from the earlier forecast of 3.5–4.5%.
The drastic guidance cut was due to a lingering deflationary environment, increased competition and industry dynamics that have led to more promotions throughout the industry. This in turn had a bearing on retail deflation and traffic growth, thus affecting the top and bottom lines of industry participants.
While Sprouts’ lowered outlook invokes a bearish view, the company has a history of coming out triumphant in such competitive and deflationary environments. This time too, the company remains optimistic about boosting traffic and sales amid challenges on the back of its stringent focus on strategically building long-term value.
Share Repurchase Announcement
Concurrent with its lowered view, Sprouts authorized a new $250 million share repurchase program that follows the completion of its previous $150 million buyback program in the second quarter of 2016. The authorization represents nearly 7.4% of the company’s total shares outstanding at current price.
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Sprouts Plunges on Guidance Cut, Supermarket Stocks Follow
Shares of Sprouts Farmers Market Inc. (SFM - Free Report) plunged 13.7%, closing at $19.68 yesterday as the organic grocery retailer revealed the unpleasant news of its lowered guidance for third-quarter and full-year 2016. The news comes just before its participation in the Goldman Sachs 23rd Annual Global Retailing Conference on Sep 8, 2016.
The news not only impacted Sprouts Farmers' stock price, but also went on to hurt the other stocks in the supermarket industry. These include bellwethers like Whole Foods Market Inc. , SUPERVALU Inc. and The Kroger Co. (KR - Free Report) , which slipped 5.3%, 3.9% and 4.1%, respectively.
SPROUTS FMR MKT Price
SPROUTS FMR MKT Price | SPROUTS FMR MKT Quote
What’s Behind Sprouts’ Guidance Cut
Coming to the numbers, Sprouts drastically slashed its third-quarter comparable sales (comps) guidance to come in flat with last year from the previous forecast of 3–4% growth. Simultaneously, the company curtailed its earnings and comps view for full-year 2016. The company now anticipates earnings per share in the range of 83–86 cents against 92–94 cents projected earlier. Further, the company’s comps growth guidance for the year was substantially lowered to 1.5–2.5% from the earlier forecast of 3.5–4.5%.
The drastic guidance cut was due to a lingering deflationary environment, increased competition and industry dynamics that have led to more promotions throughout the industry. This in turn had a bearing on retail deflation and traffic growth, thus affecting the top and bottom lines of industry participants.
While Sprouts’ lowered outlook invokes a bearish view, the company has a history of coming out triumphant in such competitive and deflationary environments. This time too, the company remains optimistic about boosting traffic and sales amid challenges on the back of its stringent focus on strategically building long-term value.
Share Repurchase Announcement
Concurrent with its lowered view, Sprouts authorized a new $250 million share repurchase program that follows the completion of its previous $150 million buyback program in the second quarter of 2016. The authorization represents nearly 7.4% of the company’s total shares outstanding at current price.
Sprouts currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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