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SFM Q3 Earnings Miss Estimates on Soft Comps, Margin Pressure
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Key Takeaways
SFM's Q3 EPS fell 0.8% to $1.21, while sales grew 4.7% to $2.30 billion, with both missing estimates.
Comparable sales fell 0.9% as weaker traffic and cyclospora disruptions pressured margins.
SFM lowered its 2026 outlook, projecting 4.3% sales growth, a 1.7% decline in comps and EPS of about $4.80.
Sprouts Farmers Market, Inc. (SFM - Free Report) reported third-quarter 2026 results, wherein both the top and bottom lines missed the Zacks Consensus Estimate. Earnings of $1.21 per share fell 0.8% year over year and lagged the consensus estimate of $1.22.
Net sales increased 4.7% year over year to $2,304.7 million but missed the Zacks Consensus Estimate of $2,329 million. Strong new-store performance supported sales growth, while comparable-store sales declined 0.9%. A challenging consumer environment, weaker traffic and a cyclospora-related disruption weighed on performance.
SFM's Sales Trends Reflect Traffic Challenges
Comparable-store sales declined 0.9% during the quarter, reflecting a 3.3% decrease in comparable transactions, partly offset by a 2.5% increase in the average basket size. Management noted that sales trends softened during August and September despite easing year-over-year comparisons. The cyclospora disruption hurt comparable sales by about 60 basis points.
E-commerce remained a bright spot, with sales increasing 12% and accounting for more than 16% of total sales. Sprouts Farmers also expanded its digital reach by adding Shipt as its fourth e-commerce platform. Meanwhile, Sprouts-branded products continued to outperform national brands within its stores, representing approximately 26% of total sales.
The company introduced more than 1,400 unique products during the quarter, strengthening its differentiated assortment. Management highlighted encouraging customer responses to affordable offerings, including family meals, organic sourdough and products addressing specific wellness needs.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Gross profit increased 3.5% year over year to $880.8 million from $851.1 million. However, gross margin contracted 50 basis points to 38.2%, primarily due to higher shrink associated with weaker sales due to cyclospora disruption, alongside elevated fuel costs. Benefits from self-distribution partially offset these pressures.
Selling, general and administrative expenses increased 4.6% year over year to $683.3 million. Management cited fixed-cost deleverage stemming from weaker comparable-store sales, partly offset by lower incentive compensation.
Operating income declined 2.9% to $152.8 million from $157.4 million in the year-ago quarter. Operating margin contracted approximately 60 basis points to 6.6%. Net income decreased 5.6% year over year to $113.4 million.
SFM Accelerates Its Store Expansion
Sprouts Farmers opened 15 new stores during the third quarter, marking its highest quarterly opening cadence. The company also closed one underperforming location following lease expiration, ending the quarter with 504 stores across 25 states.
Management highlighted strong productivity from recently opened stores, with its 2026 store vintage exceeding expectations. The development pipeline remained healthy, supported by more than 105 executed leases and above 160 approved new stores. The company continues to target 42 net new store openings in 2026.
Sprouts Farmers Strengthens Its Customer Strategy
Management acknowledged that existing affordability initiatives have not sufficiently improved customer traffic. The company plans deeper investments in pricing, particularly across healthy essentials, conventional produce and differentiated products that influence shopping decisions.
Sprouts Farmers intends to introduce additional price reductions during the holiday season, followed by a revamped national pricing strategy in January. Management also plans to leverage loyalty data, personalized marketing and expanded self-distribution to improve customer engagement, freshness and operating efficiency.
SFM Maintains Financial Flexibility
For the 39 weeks ended Sept. 27, 2026, operating cash flow totaled $555.1 million compared with $577.5 million in the prior-year period. Capital expenditures, net of landlord reimbursements, amounted to approximately $275 million.
Sprouts Farmers repurchased 1.1 million shares for $89 million during the quarter. Year-to-date repurchases totaled $299 million, leaving $537 million available under its existing authorization. Management now expects full-year share repurchases to exceed $300 million. The company ended the quarter with $228.7 million in cash and cash equivalents and no outstanding borrowings under its $600 million revolving credit facility.
Sprouts Farmers Lowers Its 2026 Outlook
For the fourth quarter of 2026, management expects comparable-store sales to decline between 2% and 4%, with earnings per share projected between 47 cents and 51 cents. The outlook incorporates approximately 90 basis points of gross margin pressure and 170 basis points of SG&A deleverage.
On a 52-week basis, management now projects full-year net sales growth of approximately 4.3% and a comparable-store sales decline of approximately 1.7%. Management had earlier guided net sales growth of 5.5% to 6.5% with comparable-store sales down 0.5% to up 0.5%.
EBIT is expected to reach approximately $605 million, while earnings per share are projected at approximately $4.80. SFM had previously forecasted earnings between $5.32 and $5.40 per share. Capital expenditures, net of landlord reimbursements, are expected to total approximately $310 million.
The additional 53rd week is expected to contribute approximately $190 million in sales, $20 million in EBIT and 16 cents in earnings per share.
Shares of this Zacks Rank #4 (Sell) company have plunged 43.2% over the past three months compared with the industry’s decline of 19.6%.
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS implies growth of 4.3% and 15.9%, respectively, from the year-ago figures. DG delivered a trailing four-quarter earnings surprise of 19.1%, on average.
Target Corporation (TGT - Free Report) , which operates as a general merchandise retailer, currently carries a Zacks Rank #2. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 5.1% and 37.8%, respectively, from the year-ago figures.
BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) , a leading operator of membership warehouse clubs, currently carries a Zacks Rank #2. BJ delivered a trailing four-quarter earnings surprise of 4.8%, on average.
The Zacks Consensus Estimate for BJ's Wholesale Club’s current fiscal-year sales and EPS calls for growth of 11.7% and 6.8%, respectively, from the year-ago figures.
View the Zacks #1 Rank List
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SFM Q3 Earnings Miss Estimates on Soft Comps, Margin Pressure
Key Takeaways
Sprouts Farmers Market, Inc. (SFM - Free Report) reported third-quarter 2026 results, wherein both the top and bottom lines missed the Zacks Consensus Estimate. Earnings of $1.21 per share fell 0.8% year over year and lagged the consensus estimate of $1.22.
Net sales increased 4.7% year over year to $2,304.7 million but missed the Zacks Consensus Estimate of $2,329 million. Strong new-store performance supported sales growth, while comparable-store sales declined 0.9%. A challenging consumer environment, weaker traffic and a cyclospora-related disruption weighed on performance.
SFM's Sales Trends Reflect Traffic Challenges
Comparable-store sales declined 0.9% during the quarter, reflecting a 3.3% decrease in comparable transactions, partly offset by a 2.5% increase in the average basket size. Management noted that sales trends softened during August and September despite easing year-over-year comparisons. The cyclospora disruption hurt comparable sales by about 60 basis points.
E-commerce remained a bright spot, with sales increasing 12% and accounting for more than 16% of total sales. Sprouts Farmers also expanded its digital reach by adding Shipt as its fourth e-commerce platform. Meanwhile, Sprouts-branded products continued to outperform national brands within its stores, representing approximately 26% of total sales.
The company introduced more than 1,400 unique products during the quarter, strengthening its differentiated assortment. Management highlighted encouraging customer responses to affordable offerings, including family meals, organic sourdough and products addressing specific wellness needs.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote
Sprouts Farmers Sees Margin Contraction
Gross profit increased 3.5% year over year to $880.8 million from $851.1 million. However, gross margin contracted 50 basis points to 38.2%, primarily due to higher shrink associated with weaker sales due to cyclospora disruption, alongside elevated fuel costs. Benefits from self-distribution partially offset these pressures.
Selling, general and administrative expenses increased 4.6% year over year to $683.3 million. Management cited fixed-cost deleverage stemming from weaker comparable-store sales, partly offset by lower incentive compensation.
Operating income declined 2.9% to $152.8 million from $157.4 million in the year-ago quarter. Operating margin contracted approximately 60 basis points to 6.6%. Net income decreased 5.6% year over year to $113.4 million.
SFM Accelerates Its Store Expansion
Sprouts Farmers opened 15 new stores during the third quarter, marking its highest quarterly opening cadence. The company also closed one underperforming location following lease expiration, ending the quarter with 504 stores across 25 states.
Management highlighted strong productivity from recently opened stores, with its 2026 store vintage exceeding expectations. The development pipeline remained healthy, supported by more than 105 executed leases and above 160 approved new stores. The company continues to target 42 net new store openings in 2026.
Sprouts Farmers Strengthens Its Customer Strategy
Management acknowledged that existing affordability initiatives have not sufficiently improved customer traffic. The company plans deeper investments in pricing, particularly across healthy essentials, conventional produce and differentiated products that influence shopping decisions.
Sprouts Farmers intends to introduce additional price reductions during the holiday season, followed by a revamped national pricing strategy in January. Management also plans to leverage loyalty data, personalized marketing and expanded self-distribution to improve customer engagement, freshness and operating efficiency.
SFM Maintains Financial Flexibility
For the 39 weeks ended Sept. 27, 2026, operating cash flow totaled $555.1 million compared with $577.5 million in the prior-year period. Capital expenditures, net of landlord reimbursements, amounted to approximately $275 million.
Sprouts Farmers repurchased 1.1 million shares for $89 million during the quarter. Year-to-date repurchases totaled $299 million, leaving $537 million available under its existing authorization. Management now expects full-year share repurchases to exceed $300 million. The company ended the quarter with $228.7 million in cash and cash equivalents and no outstanding borrowings under its $600 million revolving credit facility.
Sprouts Farmers Lowers Its 2026 Outlook
For the fourth quarter of 2026, management expects comparable-store sales to decline between 2% and 4%, with earnings per share projected between 47 cents and 51 cents. The outlook incorporates approximately 90 basis points of gross margin pressure and 170 basis points of SG&A deleverage.
On a 52-week basis, management now projects full-year net sales growth of approximately 4.3% and a comparable-store sales decline of approximately 1.7%. Management had earlier guided net sales growth of 5.5% to 6.5% with comparable-store sales down 0.5% to up 0.5%.
EBIT is expected to reach approximately $605 million, while earnings per share are projected at approximately $4.80. SFM had previously forecasted earnings between $5.32 and $5.40 per share. Capital expenditures, net of landlord reimbursements, are expected to total approximately $310 million.
The additional 53rd week is expected to contribute approximately $190 million in sales, $20 million in EBIT and 16 cents in earnings per share.
Shares of this Zacks Rank #4 (Sell) company have plunged 43.2% over the past three months compared with the industry’s decline of 19.6%.
Stocks Looking Red Hot
Dollar General Corporation (DG - Free Report) , a discount retailer, currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS implies growth of 4.3% and 15.9%, respectively, from the year-ago figures. DG delivered a trailing four-quarter earnings surprise of 19.1%, on average.
Target Corporation (TGT - Free Report) , which operates as a general merchandise retailer, currently carries a Zacks Rank #2. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 5.1% and 37.8%, respectively, from the year-ago figures.
BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) , a leading operator of membership warehouse clubs, currently carries a Zacks Rank #2. BJ delivered a trailing four-quarter earnings surprise of 4.8%, on average.
The Zacks Consensus Estimate for BJ's Wholesale Club’s current fiscal-year sales and EPS calls for growth of 11.7% and 6.8%, respectively, from the year-ago figures.