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Sprouts Farmers Loses 12% Since Q1 Earnings: Here's Why
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Shares of Sprouts Farmers Market, Inc. (SFM - Free Report) have plunged roughly 11.7% since its earnings release and 14.6% in three months, underperforming the industry’s gain of 3.9%. This is primarily because of lower-than-expected first-quarter 2018 net sales as well as trimmed sales and comps guidance for the full year.
Three Factors That Hurt the Stock
Soft Comps
This Zacks Rank #3 (Hold) company generated net sales of $1,287 million, lagging the Zacks Consensus Estimate of $1,289 million. Notably, this breaks the company’s history of sales beat in the past six quarters. Although the comparable store sales figure rose 2.7%, it lagged the company’s projections.
Trimmed Guidance
Following the results, the company trimmed full year guidance for sales and comps. The company now expects net sales in the range of 10.5% to 11.5% versus the previous 11.5% to 12.5%. Further, comps are expected in the band of 1.5% to 2.5% versus the earlier 2.5% to 3.5%. However, the company reiterated the earnings per share range at $1.22 to $1.28.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
The company recently dissolved the Amazon Prime home delivery partnership. The company had 18 months accord with the e-commerce giant for 15 of its stores . Per management, this discontinuation will impact comps over the next several quarters.
Fundamentals to Look At
In an effort to expand its customer base, the company is adopting several initiatives. The company launched new Sprouts.com website and mobile app in February to provide customers with a hassle-free shopping experience. The company has also partnered with Instacart to offer same-day delivery to customers.
Further, management announced plans to launch more than 200 items in 2018. The company is making efforts to come up with ready-to-eat, ready-to-heat and ready-to-cook items to improve customer satisfaction.
The company is leaving no stone unturned to drive revenues. We note that the company opened nine stores in the first quarter. Management is also optimistic about the pipeline, which included 47 approved sites and 40 signed leases. The company is also trying to tap opportunities in the State of South Carolina.
We believe these efforts are likely to cushion sales and margins.
B&G Foods, Inc. (BGS - Free Report) , with a Zacks Rank #2 (Buy), delivered an average positive earnings surprise of 6.7% in the trailing four quarters.
Conagra Brands, Inc. (CAG - Free Report) has a long-term earnings growth rate of 8% and carries a Zacks Rank #2.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Sprouts Farmers Loses 12% Since Q1 Earnings: Here's Why
Shares of Sprouts Farmers Market, Inc. (SFM - Free Report) have plunged roughly 11.7% since its earnings release and 14.6% in three months, underperforming the industry’s gain of 3.9%. This is primarily because of lower-than-expected first-quarter 2018 net sales as well as trimmed sales and comps guidance for the full year.
Three Factors That Hurt the Stock
Soft Comps
This Zacks Rank #3 (Hold) company generated net sales of $1,287 million, lagging the Zacks Consensus Estimate of $1,289 million. Notably, this breaks the company’s history of sales beat in the past six quarters. Although the comparable store sales figure rose 2.7%, it lagged the company’s projections.
Trimmed Guidance
Following the results, the company trimmed full year guidance for sales and comps. The company now expects net sales in the range of 10.5% to 11.5% versus the previous 11.5% to 12.5%. Further, comps are expected in the band of 1.5% to 2.5% versus the earlier 2.5% to 3.5%. However, the company reiterated the earnings per share range at $1.22 to $1.28.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise | Sprouts Farmers Market, Inc. Quote
Discontinuation of Amazon Prime
The company recently dissolved the Amazon Prime home delivery partnership. The company had 18 months accord with the e-commerce giant for 15 of its stores . Per management, this discontinuation will impact comps over the next several quarters.
Fundamentals to Look At
In an effort to expand its customer base, the company is adopting several initiatives. The company launched new Sprouts.com website and mobile app in February to provide customers with a hassle-free shopping experience. The company has also partnered with Instacart to offer same-day delivery to customers.
Further, management announced plans to launch more than 200 items in 2018. The company is making efforts to come up with ready-to-eat, ready-to-heat and ready-to-cook items to improve customer satisfaction.
The company is leaving no stone unturned to drive revenues. We note that the company opened nine stores in the first quarter. Management is also optimistic about the pipeline, which included 47 approved sites and 40 signed leases. The company is also trying to tap opportunities in the State of South Carolina.
We believe these efforts are likely to cushion sales and margins.
Looking for More? Check These 3 Trending Stocks
Medifast, Inc. (MED - Free Report) has a long-term earnings growth rate of 15% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
B&G Foods, Inc. (BGS - Free Report) , with a Zacks Rank #2 (Buy), delivered an average positive earnings surprise of 6.7% in the trailing four quarters.
Conagra Brands, Inc. (CAG - Free Report) has a long-term earnings growth rate of 8% and carries a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>