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Sprouts Farmers (SFM) Q1 Earnings Beat, Comps Up 4% Y/Y
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Sprouts Farmers Market, Inc. (SFM - Free Report) came up with first-quarter 2024 results, wherein the top and bottom lines not only increased year over year but also beat their respective Zacks Consensus Estimate. The company's results were favorably impacted by decent comparable sales, positive traffic trends, accelerating unit growth and increasing customer engagement.
Q1 in Details
The renowned grocery retailer delivered quarterly earnings of $1.12 cents a share, which beat the Zacks Consensus Estimate of $1.00. Impressively, the bottom line increased 14.3% from 98 cents reported in the year-ago period.
Net sales of this Phoenix, AZ-based company came in at $1,883.8 million, which came ahead of the Zacks Consensus Estimate of $1,840 million. The metric increased 9% on a year-over-year basis. The growth was driven by sales from the new stores and a jump in comparable store sales.
Comparable store sales increased 4% during the quarter under review, better than our estimate of a 2.7% jump. We note that e-commerce sales grew 25% and represented 14% of total sales in the quarter.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
The gross profit rose 11.1% year over year to $722.3 million in the quarter, while the gross margin expanded 80 basis points to 38.3% from the prior-year quarter. We had expected a gross margin expansion of 40 basis points.
Sprouts Farmers reported an adjusted operating income of $148.3 million, up from $137 million reported in the year-ago period. The adjusted operating margin remained flat at 7.9%. We had anticipated a 30-basis point contraction in the operating margin.
SG&A expenses increased 11% year over year to $539.8 million. As a percentage of net sales, the metric deleveraged 60 basis points to 28.7%. We had anticipated a 6.4% increase in SG&A expenses.
Store Update
During the quarter, Sprouts Farmers opened seven new stores, thereby taking the total count to 414 stores in 23 states as of Mar 31, 2024. Sprouts Farmers Market is strategically expanding its store footprint, particularly focusing on smaller prototype formats, aiming to enhance accessibility to its differentiated assortment. It plans to open 35 new stores in 2024.
Other Financial Aspects
Sprouts Farmers ended the first quarter with cash and cash equivalents of $312.3 million, long-term debt and finance lease liabilities of roughly $133.4 million and stockholders’ equity of $1,211 million. The company repurchased 958 thousand shares for a total investment of $60 million in the quarter.
Sprouts Farmers generated cash from operations of $219.7 million and spent $46 million on capital expenditures, net of landlord reimbursement, year to date through Mar 31, 2024. Management anticipates capital expenditures (net of landlord reimbursements) in the range of $225-$245 million for 2024.
Outlook
For the second quarter of 2024, Sprouts Farmers expects comparable store sales growth between 3% and 4% and adjusted earnings in the band of 75-79 cents a share compared with 71 cents reported in the year-ago period.
Sprouts Farmers expects net sales growth of 7-8% and comparable store sales growth of 2.5% to 3.5% in 2024.
Sprouts Farmers guided adjusted earnings before interest and taxes between $415 million and $425 million for 2024. While the company anticipates an improvement in the gross margin, it foresees pressure on SG&A due to ongoing wage increases and strategic investments. Despite this, it expects full-year adjusted earnings in the range of $3.05-$3.13 per share, reflecting an increase from the $2.84 reported in 2023.
This Zacks Rank #2 (Buy) stock has risen 54.3% in the past six months compared with the industry’s growth of 22.4%.
The Zacks Consensus Estimate for Grocery Outlet's current financial-year sales and earnings suggests growth of around 9.6% and 10.3%, respectively, from the year-ago reported numbers.
Vital Farms (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 155.4%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of around 19.5% and 30.5%, respectively, from the year-ago reported numbers.
Target (TGT - Free Report) , a general merchandise retailer, currently carries a Zacks Rank #2. TGT has a trailing four-quarter earnings surprise of 27.1%, on average.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of around 5% from the year-ago reported numbers.
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Sprouts Farmers (SFM) Q1 Earnings Beat, Comps Up 4% Y/Y
Sprouts Farmers Market, Inc. (SFM - Free Report) came up with first-quarter 2024 results, wherein the top and bottom lines not only increased year over year but also beat their respective Zacks Consensus Estimate. The company's results were favorably impacted by decent comparable sales, positive traffic trends, accelerating unit growth and increasing customer engagement.
Q1 in Details
The renowned grocery retailer delivered quarterly earnings of $1.12 cents a share, which beat the Zacks Consensus Estimate of $1.00. Impressively, the bottom line increased 14.3% from 98 cents reported in the year-ago period.
Net sales of this Phoenix, AZ-based company came in at $1,883.8 million, which came ahead of the Zacks Consensus Estimate of $1,840 million. The metric increased 9% on a year-over-year basis. The growth was driven by sales from the new stores and a jump in comparable store sales.
Comparable store sales increased 4% during the quarter under review, better than our estimate of a 2.7% jump. We note that e-commerce sales grew 25% and represented 14% of total sales in the quarter.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote
Margins
The gross profit rose 11.1% year over year to $722.3 million in the quarter, while the gross margin expanded 80 basis points to 38.3% from the prior-year quarter. We had expected a gross margin expansion of 40 basis points.
Sprouts Farmers reported an adjusted operating income of $148.3 million, up from $137 million reported in the year-ago period. The adjusted operating margin remained flat at 7.9%. We had anticipated a 30-basis point contraction in the operating margin.
SG&A expenses increased 11% year over year to $539.8 million. As a percentage of net sales, the metric deleveraged 60 basis points to 28.7%. We had anticipated a 6.4% increase in SG&A expenses.
Store Update
During the quarter, Sprouts Farmers opened seven new stores, thereby taking the total count to 414 stores in 23 states as of Mar 31, 2024. Sprouts Farmers Market is strategically expanding its store footprint, particularly focusing on smaller prototype formats, aiming to enhance accessibility to its differentiated assortment. It plans to open 35 new stores in 2024.
Other Financial Aspects
Sprouts Farmers ended the first quarter with cash and cash equivalents of $312.3 million, long-term debt and finance lease liabilities of roughly $133.4 million and stockholders’ equity of $1,211 million. The company repurchased 958 thousand shares for a total investment of $60 million in the quarter.
Sprouts Farmers generated cash from operations of $219.7 million and spent $46 million on capital expenditures, net of landlord reimbursement, year to date through Mar 31, 2024.
Management anticipates capital expenditures (net of landlord reimbursements) in the range of $225-$245 million for 2024.
Outlook
For the second quarter of 2024, Sprouts Farmers expects comparable store sales growth between 3% and 4% and adjusted earnings in the band of 75-79 cents a share compared with 71 cents reported in the year-ago period.
Sprouts Farmers expects net sales growth of 7-8% and comparable store sales growth of 2.5% to 3.5% in 2024.
Sprouts Farmers guided adjusted earnings before interest and taxes between $415 million and $425 million for 2024. While the company anticipates an improvement in the gross margin, it foresees pressure on SG&A due to ongoing wage increases and strategic investments. Despite this, it expects full-year adjusted earnings in the range of $3.05-$3.13 per share, reflecting an increase from the $2.84 reported in 2023.
This Zacks Rank #2 (Buy) stock has risen 54.3% in the past six months compared with the industry’s growth of 22.4%.
3 Other Stocks Looking Red Hot
Grocery Outlet (GO - Free Report) , an extreme value retailer of quality, name-brand consumables and fresh products, currently carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 17%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Grocery Outlet's current financial-year sales and earnings suggests growth of around 9.6% and 10.3%, respectively, from the year-ago reported numbers.
Vital Farms (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 155.4%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of around 19.5% and 30.5%, respectively, from the year-ago reported numbers.
Target (TGT - Free Report) , a general merchandise retailer, currently carries a Zacks Rank #2. TGT has a trailing four-quarter earnings surprise of 27.1%, on average.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of around 5% from the year-ago reported numbers.