Sprouts Raises Sales Outlook as Comparable Sales Improve
Second-quarter net sales reached $2.326 billion as the grocery chain opened seven stores.
Sprouts Farmers Market (SFM), the specialty grocery chain, posted a modest increase in quarterly earnings as comparable-store sales remained negative, while the company raised the lower end of its full-year sales forecast.
Comparable-store sales improved to negative 1.0% from negative 1.7% in the first quarter, but the result marked a sharp slowdown from growth of 5.9% in the third quarter of 2024. The latest reading landed at the midpoint of Sprouts' guidance range.
Second-quarter net sales rose 4.7% from a year earlier, accelerating from 4.1% growth in the first quarter. Diluted earnings increased to $1.37 a share from $1.35, reversing the first quarter's year-over-year decline and finishing one cent above the company's guidance range.
Higher sales did not carry through to operating profit. Net income fell 3.4% to $129.2 million, while operating income declined 2.9% to $174.2 million. Gross margin slipped to 38.7% from 38.8%, and EBIT margin narrowed to 7.5% from 8.1%.
Sprouts opened seven stores during the quarter, bringing its total to 490. The company also launched more than 1,300 unique items and nearly 85% of its stores received meat through Sprouts distribution centers.
For 2025, Sprouts now expects sales growth of 5.5% to 6.5%, raising the bottom of its previous 4.5% to 6.5% range. It forecasts comparable sales between negative 0.5% and positive 0.5%, a narrower range than before, and expects to open 42 net new stores.
The company trimmed the upper end of its profit outlook, forecasting EBIT of $675 million to $685 million and diluted earnings of $5.32 to $5.40 a share. Year-to-date operating cash flow fell 10% as capital spending increased 55%, while share repurchases declined to $210 million from $292 million.