Sprouts Farmers Market Moves Forward with New Stores and Strategy

Sprouts Farmers Market continues to move forward on its strategic plan, even though second-quarter sales were disappointing, company executives said after the results were released Thursday afternoon.

“We have made great strides in delivering on many of our priorities,” CEO Jack Sinclair said during Thursday’s call for results. The company’s differentiated model and the excellent in-store teams give it great confidence in the future, he added.

Related: Sprouts Farmers Market’s new mall to serve 33 Florida stores by year-end

The company created innovation centers with dedicated merchandising displays in stores, increased its range of seasonal and local products, opened two new distribution centers for fresh products and, in July, opened its first new format store, Sinclair said.

All new stores and many existing stores will add innovation centers in the second half of 2021, he said. Each month, the Innovation Centers will feature “new to market and attribute-focused items” such as vegan and plant-based meals and snacks.

Related: Sprouts Farmers Market to open 20 new stores in 2021

“And finally, the country is in a place where we can start an active sampling program, which is a new venture for Sprouts, and will inspire education, testing and purchasing,” said Sinclair.

Of course, cabbages would not be cabbage without fresh produce. Organic products now account for 35% of fresh produce sales, “which we believe is one of the highest penetration rates in the industry,” he said. Although the prices of Sprouts organics are competitive, Sinclair said the company is trying to align the prices of organics more with those of conventional products.

Bringing fresher products to stores was another goal for Sinclair and his team. With two new distribution centers opened in Colorado and Florida, more than 85% of Sprouts stores are within 250 miles of a distribution center, he said.

Stores served by Colorado DC, which opened before the Florida location, are seeing product sales increase and also offer more local options, he said. The purchase of local produce by Sprouts will continue to increase during the growing season: “up to 20% of the department, a 300% increase over our assortment in previous years,” said Sinclair.

Q2 sales not as high as expected

“Sales were slower than expected in the second quarter. While April saw strong results, both up and down, we were disappointed with May and June,” Sinclair said, noting consumers are turning back. at the restaurant and travel again.

He also acknowledged that the company’s marketing campaigns had not generated the expected volume of customer traffic. They use a testing and learning approach to increase awareness and traffic; only a slight increase is needed, he said, because the basket size is so large.

CFO Denise Paulonis said e-commerce accounted for 10.1% of sales for the quarter, an increase of over 350% from the second quarter of FY20. Thanks to the shopping site d ‘Instacart and Sprouts, the company collects meaningful data from about two-thirds of e-commerce customers, she said.

Sprouts reported these second quarter results:

• Net sales of $ 1.5 billion, a decrease of 7% compared to the same period in 2020 and an increase of 7% compared to the same period in 2019.

• Comparable store sales growth of -10.0% and comparable store sales growth over two years of -0.6%.

• Net income of $ 61 million compared to net income of $ 67 million and adjusted net income of $ 70 million for the same period in 2020; compared to net income of $ 35 million for the same period in 2019.

• Diluted earnings per share of $ 0.52 compared to diluted earnings per share of $ 0.57 and diluted adjusted earnings per share of $ 0.59 during the same period in 2020; compared to $ 0.30 in diluted earnings per share for the same period in 2019.

• Gross margin decreased 10.2% to $ 550 million.

• Gross profit margin was 36.1%, a decrease of 115 basis points compared to the same period in 2020 and an increase of 330 basis points compared to Q2 2019.

• Year-to-date sales are up 9.5% and profit is up 56% compared to the same period of fiscal 2019. First half net sales amount to $ 3.1 billion.

For fiscal 2021, Sprouts released new guidance. He expects net sales to decline slightly, single-digit, from 2020. Comparable store sales are expected to fall between 5% and 7%, inclusive, while Adjusted diluted EPS will be in the range of 1.00%. $ 90 and $ 2.02, included.

Sprouts opened a new store in Reno, Nevada, during the quarter, giving the chain 363 stores in 23 states as of July 4. Two more have opened since the start of this third quarter and a California store has been remodeled, Sinclair said.

The new format stores have a smaller footprint but more shopping area and cost 20% less to build, the company said.

Seven new store openings are slated for Q4 2021, but could be delayed due to supply chain delays affecting the construction industry.

This article originally appeared on New Hope Network, a sister website of Supermarket News.