Back to top

Bear of the Day

Sprouts Farmers Market (SFM - Free Report) first became a Zacks #5 Rank Strong Sell on August 23 when it was trading above $23.

Last Wednesday September 7, shares plunged nearly 14% to close below $20 as the organic grocery retailer delivered a profit warning and lowered guidance for the third-quarter and full-year 2016.

The news not only impacted SFM stock, but rippled throughout the supermarket industry, sending Whole Foods Market (WFM - Free Report) , SuperValu (SVU - Free Report) and Kroger (KR - Free Report) shares all down between 4% and 5%.

Behind the Guidance Cut

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.

The company also slashed 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 grocery business.

Deflation at the Grocery Store?

It's odd for consumers to hear about "deflation" causing problems for food retailers when it seems the shopping cart bill is always getting harder to keep under control. But the day after Sprouts warned, we heard the same message from SuperValu and Kroger, including cuts in their guidance.

Sprouts may be a quality up-and-coming contender to Whole Foods in the natural/healthy grocery space.

But until the Zacks Rank turns around for it, and the industry, best to shop for other stocks.

So Where Are the Profitable Trades?

Be sure to short or avoid this Bear Stock of the Day. Now would you like to see Zacks' recommendations that have the best profit potential? Starting today, for the next month, you can follow all our private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for all Zacks trades >>


In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

WHOLE FOODS MKT (WFM) - free report >>

SUPERVALU INC (SVU) - free report >>

SPROUTS FMR MKT (SFM) - free report >>

KROGER CO (KR) - free report >>