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Sprouts Farmers' (SFM) Customer-Centric Efforts Bode Well

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As social distancing becomes the new normal, grocery and supermarket retailers are on their toes to serve the community. These companies are now supporting people through enhanced operational tools, including curbside pickup service across their stores. Renowned grocery retailer Sprouts Farmers Market, Inc. (SFM - Free Report) has been taking several initiatives focused on product innovation, customer experience, targeted marketing and technology. Moreover, the company is benefiting from coronavirus-induced demand spike as consumers are spending higher on groceries. With people largely staying at home to contain the spread of coronavirus, demand for grocery is here to stay for now.

In addition, the company has been focusing on expedited delivery services. It has launched delivery and curbside pickup via shop.sprouts.com, through which customers are able to order directly from Sprouts, either through its website or app. Also, its alliance with Instacart to offer same-day delivery to customers bodes well. The company has also rolled out grocery pickup service at all its stores. It has also tested self-checkout across few of its stores. In fact, it is trying all means to provide ready-to-eat, ready-to-heat and ready-to-cook items to customers. Impressively, the company’s e-commerce business soared 337% year over year during the third quarter of 2020. This followed an increase of more than 500% in the preceding quarter.

Apart from these, the company remains committed to affordable offering of natural and organic produce, along with a full grocery-shopping experience including packaged groceries, meat and seafood, deli, vitamins, dairy, baked goods, frozen foods, body care, beer, and more. Product innovation continues to drive sales in private label items. Notably, the company has significantly shifted its marketing spend toward digital, social, radio and TV from print to better engage with consumers.

What’s More?

Management also continues with the investment to improve operating efficiencies. In this regard, we note that the fresh item management technology has been successful. The company has been implementing the system in all its departments to lower operational complexity, optimize production, improve in-stock position, lower down shrink and drive incremental sales.

Also, its store-growth endeavors to drive revenues are noteworthy. During the third quarter of 2020, the company opened six new outlets, taking the total count to 356 stores in 23 states as of Sep 27, 2020. As of Oct 28, the company has opened 20 new stores. Markedly, management now focuses on smaller stores and expansion in select markets. This will help in creating a leveraged fresh supply chain as well as refine its brand and marketing approach. In fact, the company envisions at least 10% annual unit new store growth in markets with higher potential and supply chain support.


 

Wrapping up, Sprouts Farmers’ emphasis on e-commerce and technology coupled with expansion of private-label offerings and focus on innovation will continue to yield results. Impressively, the Phoenix, AZ-based company’s shares have advanced 8.2% and outperformed its industry’s 1.5% gain over the past year. The company’s VGM Score of A with an expected long-term earnings growth rate of 9.2%, ahead of the industry’s 6.6% further supports the positive view on the Zacks Rank #2 (Buy) stock.

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Sysco (SYY - Free Report) has an expected long-term earnings growth rate of 11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hain Celestial (HAIN - Free Report) has delivered a trailing four-quarter average earnings surprise of 24.6% and presently carries a Zacks Rank #2.

B&G Foods (BGS - Free Report) , also a Zacks Rank #2 stock, which has a trailing four-quarter average earnings surprise of 9.3%.

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