We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Sprouts Farmers (SFM) Down 7.4% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Sprouts Farmers (SFM - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sprouts Farmers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sprouts Farmers Q2 Earnings Beat Estimates, Comps Up
Sprouts Farmers Market, Inc. reported second-quarter 2020 results, wherein both earnings and revenues not only improved year over year but also surpassed the Zacks Consensus Estimate for the fourth straight quarter. Further, the company sustained its positive comparable store sales trend. Management highlighted that strategic changes undertaken and coronavirus-induced demand spike contributed to the company’s performance. With people largely staying at home, thanks to rising number of coronavirus cases, demand for grocery is here to stay for now.
The renowned grocery retailer reported adjusted quarterly earnings of 59 cents a share that surpassed the Zacks Consensus Estimate of 40 cents, and improved considerably from 30 cents in the year-ago period. Notably, higher net sales and reduced net interest expense drove the bottom line.
Net sales were $1,642.8 million, up 16% from the prior-year quarter on account of comparable store sales growth of 9.1% and sturdy performance in new stores opened. Further, net sales outpaced the Zacks Consensus Estimate of $1,608 million. For the quarter, e-commerce accounted for 12% of sales, and soared more than 500% compared with the last year.
Notably, consumers continued to spend more on groceries. Moreover, as social distancing becomes the “new normal” they have been opting more for e-commerce services. Sprouts Farmers indicated that comparable store sales are estimated to have increased approximately 9% for the month of July, and e-commerce sales are anticipated to represent roughly 11% of net sales.
Margins
Gross profit jumped 32% to $613 million during the quarter, while gross margin expanded 450 basis points to 37.3%. This can be attributed to strategic changes in promotional activities, outsized shrink improvement from operational efficiencies and positive leverage from additional sales.
Adjusted operating income came at $96.2 million, up from $51.3 million reported in the year-ago period. Further, adjusted operating margin increased 230 basis points to 5.9%. We also note that adjusted EBITDA surged 56% to $127.4 million, while adjusted EBITDA margin grew 200 basis points to 7.8%.
SG&A expenses rose 28% to $488.9 million, while as a percentage of net sales the same increased 270 basis points to 29.8%. The deleverage in SG&A expenses was due to increased bonuses and rise in store operating expenses on account of the pandemic and incremental e-commerce costs. These were partly offset by decline in marketing expense as the company spend more on digital than print. Management informed that additional costs related to COVID-19 were about $47 million during the quarter under review.
Store Update
During the quarter, Sprouts Farmers opened six new outlets, taking the total count to 350 stores in 23 states as of Jun 28, 2020. The company remains on track with its plan to open about 20 new stores this year.
Other Financial Aspects
Sprouts Farmers ended the quarter with cash and cash equivalents of $328.1 million, long-term debt and finance lease liabilities of $461.9 million and stockholders’ equity of $743.3 million.
The company generated cash flow from operations of $393.3 million during 26-week period ended on Jun 28, 2020 and incurred capital expenditures (net of landlord reimbursements) of $48 million. The company ended the quarter with $451 million in loans and $34 million of letters of credit outstanding under its revolving credit facility. Subsequent to the end of the quarter, the company paid down $76 million of its revolving credit facility.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 29.9% due to these changes.
VGM Scores
Currently, Sprouts Farmers has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sprouts Farmers has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Sprouts Farmers (SFM) Down 7.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Sprouts Farmers (SFM - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sprouts Farmers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sprouts Farmers Q2 Earnings Beat Estimates, Comps Up
Sprouts Farmers Market, Inc. reported second-quarter 2020 results, wherein both earnings and revenues not only improved year over year but also surpassed the Zacks Consensus Estimate for the fourth straight quarter. Further, the company sustained its positive comparable store sales trend. Management highlighted that strategic changes undertaken and coronavirus-induced demand spike contributed to the company’s performance. With people largely staying at home, thanks to rising number of coronavirus cases, demand for grocery is here to stay for now.
The renowned grocery retailer reported adjusted quarterly earnings of 59 cents a share that surpassed the Zacks Consensus Estimate of 40 cents, and improved considerably from 30 cents in the year-ago period. Notably, higher net sales and reduced net interest expense drove the bottom line.
Net sales were $1,642.8 million, up 16% from the prior-year quarter on account of comparable store sales growth of 9.1% and sturdy performance in new stores opened. Further, net sales outpaced the Zacks Consensus Estimate of $1,608 million. For the quarter, e-commerce accounted for 12% of sales, and soared more than 500% compared with the last year.
Notably, consumers continued to spend more on groceries. Moreover, as social distancing becomes the “new normal” they have been opting more for e-commerce services. Sprouts Farmers indicated that comparable store sales are estimated to have increased approximately 9% for the month of July, and e-commerce sales are anticipated to represent roughly 11% of net sales.
Margins
Gross profit jumped 32% to $613 million during the quarter, while gross margin expanded 450 basis points to 37.3%. This can be attributed to strategic changes in promotional activities, outsized shrink improvement from operational efficiencies and positive leverage from additional sales.
Adjusted operating income came at $96.2 million, up from $51.3 million reported in the year-ago period. Further, adjusted operating margin increased 230 basis points to 5.9%. We also note that adjusted EBITDA surged 56% to $127.4 million, while adjusted EBITDA margin grew 200 basis points to 7.8%.
SG&A expenses rose 28% to $488.9 million, while as a percentage of net sales the same increased 270 basis points to 29.8%. The deleverage in SG&A expenses was due to increased bonuses and rise in store operating expenses on account of the pandemic and incremental e-commerce costs. These were partly offset by decline in marketing expense as the company spend more on digital than print. Management informed that additional costs related to COVID-19 were about $47 million during the quarter under review.
Store Update
During the quarter, Sprouts Farmers opened six new outlets, taking the total count to 350 stores in 23 states as of Jun 28, 2020. The company remains on track with its plan to open about 20 new stores this year.
Other Financial Aspects
Sprouts Farmers ended the quarter with cash and cash equivalents of $328.1 million, long-term debt and finance lease liabilities of $461.9 million and stockholders’ equity of $743.3 million.
The company generated cash flow from operations of $393.3 million during 26-week period ended on Jun 28, 2020 and incurred capital expenditures (net of landlord reimbursements) of $48 million. The company ended the quarter with $451 million in loans and $34 million of letters of credit outstanding under its revolving credit facility. Subsequent to the end of the quarter, the company paid down $76 million of its revolving credit facility.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 29.9% due to these changes.
VGM Scores
Currently, Sprouts Farmers has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sprouts Farmers has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.