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Sprouts Farmers (SFM) Up on Q3 Earnings Beat, Raised View

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Sprouts Farmers Market, Inc. (SFM - Free Report) kept its robust earnings surprise streak alive in the third quarter of 2022, wherein the top and bottom lines increased year over year and beat their respective Zacks Consensus Estimate. Encouragingly, management raised its guidance for 2022.

Shares of Sprouts Farmers jumped 7.1% in the after-market trading session on Nov 8 following robust results.

The renowned grocery retailer delivered quarterly earnings of 61 cents a share, which cruised past the Zacks Consensus Estimate of 52 cents, marking the 13th straight beat. Impressively, the bottom line increased from 56 cents reported in the year-ago period.

Net sales of this Phoenix, AZ-based company were $1,591 million, up 5% from the prior-year quarter. The growth was driven by sales from the new stores and a jump in comparable store sales.

The top line beat the Zacks Consensus Estimate of $1,579 million. Comparable store sales increased 2.4% during the quarter under review, backed by a rise in basket due to retail inflation, somewhat negated by a narrow decline in basket items.

We note that e-commerce sales grew 19% and formed 11.1% of the company’s total quarterly sales. Deli remained a top performer. The grocery, dairy, frozen and bakery categories continued to depict strength.


The gross profit rose 8.2% to $583.7 million. The gross margin expanded around 90 basis points to 36.7%, primarily driven by lower promotional activity.

Sprouts Farmers reported an operating income of $90.3 million, up 5.2% from the year-ago period. The operating margin remained nearly flat year over year at 5.7%.

SG&A expenses increased by $37 million year over year to $461 million due to new stores, elevated marketing spend and increased wages. The company witnessed a rise in e-commerce fees and credit card fees.

Store Update

During the quarter, SFM opened one new store, taking the total count to 379 stores in 23 states as of Oct 2, 2022. The company plans to open 16 new stores in the current financial year.

Moreover, it plans to open at least 30 new stores in the next year.

Other Financial Aspects

Sprouts Farmers ended the quarter with cash and cash equivalents of $316 million, long-term debt and finance lease liabilities of roughly $259 million and stockholders’ equity of $1,040.8 million. The company had $700 million in its revolving credit facility as of the quarter end.

Sprouts Farmers repurchased 1.6 million shares for a total investment of $44 million in the third quarter.

The company generated cash from operations of $307 million and spent $71 million on capital expenditures, net of landlord reimbursement, year to date through Oct 2, 2022. Management anticipates capital expenditures (net of landlord reimbursements) in the $120-$135 million band for 2022.


A robust to-date performance encouraged management to raise its guidance for 2022.

Sprouts Farmers now envisions net sales growth of 4.5-5% and a comparable store sales increase of roughly 2% for 2022. Earlier, these metrics were envisioned in the range of 4-5% and 1-2%, respectively.

It projects adjusted earnings in the band of $2.32-$2.36 per share for 2022, up from the earlier guided range of $2.18-$2.26 per share.

For the fourth quarter, the company expects comparable store sales growth of nearly 2% and earnings in the band of 35-39 cents a share.

This Zacks Rank #3 (Hold) stock has risen 11.7% in the past six months compared with the industry’s growth of 6.2%.

3 Hot Stocks

Here we have highlighted three better-ranked stocks.

SpartanNash Company (SPTN - Free Report) distributes and retails grocery products. SPTN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SpartanNash’s current financial-year earnings suggests growth of 36.5% from the year-ago reported figure. SpartanNash has a trailing four-quarter earnings surprise of nearly 3%, on average.

Burlington Stores (BURL - Free Report) , which operates as a retailer of branded apparel products, carries a Zacks Rank #2. BURL has a trailing four-quarter earnings surprise of 5.6%, on average.

The Zacks Consensus Estimate for Burlington’s current financial-year sales and EPS suggests a decline of 8.2% and 52.2%, respectively, from the year-ago period.

Ross Stores (ROST - Free Report) operates off-price retail apparel and home fashion stores. The stock currently carries a Zacks Rank #2. ROST has an expected EPS growth rate of 10.5% for three to five years.

The Zacks Consensus Estimate for Ross Stores’ current financial-year revenues and EPS suggests a decrease of 4.1% and 17.9%, respectively, from the year-ago reported figure. Ross Stores has a trailing four-quarter earnings surprise of 14.1%, on average.

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