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Sprouts sees double-digit revenue growth for Q3

New stores help drive gains with strong performance, CEO says

Russell Redman

November 1, 2018

3 Min Read
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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.

Related:Sprouts launches online pickup and delivery for the holidays

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.

Related:Sprouts unveils first new stores for 2019

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.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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