Sprouts sees double-digit revenue growth for Q3

Sprouts sees double-digit revenue growth for Q3

New stores help drive gains with strong performance, CEO says

Sales climbed by double digits in the third quarter at Sprouts Farmers Market Inc., which also topped Wall Street’s earnings expectations.

Sprouts said Thursday that for the 13-week quarter ended Sept. 30, revenue came in at $1.33 billion, up 10.2% from nearly $1.21 billion a year earlier.

The Phoenix, Ariz.-based fresh, natural and organic grocer attributed the gain to a healthy performance at new stores and a 1.5% uptick in same-store sales. Two-year comparable-store sales are up 6.1%, the company noted.

Third-quarter gross profit rose 10% to $382 million, lifting the gross profit margin five points year over year to 28.8%. Sprouts said the gain stems mainly from higher merchandise margins, partially offset by increased occupancy costs.

“Robust new-store productivity, continued product innovation and strong operations drove a double-digit increase in net sales in the third quarter,” Sprouts CEO Amin Maredia said in a statement. “During this time, we introduced Sprouts’ unique model of health, value and service to two new states, where very strong sales demonstrated that our brand continues to resonate well in communities from coast to coast and is firmly positioned for long-term growth.”

Sprouts opened 12 new stores during the third quarter. Those locations included the supermarket chain’s first stores in Pennsylvania and Washington as well as three stores in California, two in Nevada and one apiece in Arizona, Oklahoma, Maryland, North Carolina and Texas.

At the bottom line in the third quarter, net earnings totaled $37.5 million, or 29 cents per diluted share, compared with $31.5 million, or 23 cents per diluted share, a year ago. Sprouts noted that the result includes a $3 million discrete income tax benefit from the federal Tax Cuts and Jobs Act. Excluding that benefit, adjusted net earnings were $35 million, or 27 cents per diluted share, reflecting a lower effective tax rate, higher sale, and fewer shares outstanding after stock buybacks, partially offset by higher planned wage investments, the company said.

Analysts, on average, projected Sprouts’ third-quarter adjusted earnings per share (EPS) at 26 cents, with estimates ranging from a low of 23 cents to a high of 27 cents, according to Thomson Reuters.

For the full 2018 fiscal year, Sprouts raised its EPS guidance and lifted the low end of its sales outlook. The retailer now pegs adjusted EPS (diluted) at $1.28 to $1.30, compared with its previous guidance of $1.24 to $1.28 and up from $1.01 in fiscal 2017.

Analysts’ consensus forecast is for 2018 EPS of $1.26, with projections running from a low of $1.25 to a high of $1.28, Thomson Reuters reported.

Sprouts projects sales to grow 11% to 11.5% for 2018, compared with its earlier forecast of 10.5% to 11.5%, and expects same-store sales to increase 1.7% to 2%, narrowing its previous estimate of 1.5% to 2.5%.

Overall capital expenditures are slated to total $160 million to $165 million for 2018, with 30 new stores. Sprouts said two more stores have been opened in the fourth quarter. As of Nov. 1, the retailer operated 315 stores in 19 states.

A week ago, Sprouts unveiled the first seven locations of 30 new stores planned for 2019. Locations in Carlsbad and Fontana, Calif.; Clearwater and Naples, Fla.; Las Vegas; Lynnwood, Wash.; and Sugar Land, Texas, are due to open during the first quarter.

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