Phoenix, AZ -- Sprouts Farmers Market continues to live up to its name. The discount natural and organic grocer reported strong third quarter earnings, including same store sales growth of 4.6%.
"Sprouts is pleased to report strong top-line growth and demonstrate our ability to leverage those sales into exceptional earnings growth for the quarter. Sprouts' hallmark of fresh, healthy, affordable products continues to resonate with our customers and positions us as a leader in the industry," said CEO Amin Maredia.
Sprouts has posted strong earnings throughout 2017 – in its first quarter, when other retailers were mired in price deflation, the grocer was on solid ground. With its most recent third quarter financial report, showing net sales hitting $1.2 billion, a 16% increase from the same period last year, and a 32% net income jump to $31 billion, it is proving itself to be a resilient model for other grocers.
The Sprouts results are a contrast to those of Whole Foods Market, which, while posting record sales for its latest quarter, saw same store sales continue to decline.
The store’s continuing relationship with Amazon Prime Now continues to boost its sales. The grocer had said it will expand to more than 20 locations by the end of the year but no mention of that was made in the third quarter call.
. The results are a testament to consumer demand for natural and organic products, as well as Sprouts’ recent strategic moves. The company, which does around 60% of its sales in produce and other perishable items, has increased its private label selection to around 12% of total sales. Significantly, basket sizes of shoppers who purchase private label are 50% higher than others, said Jim Nielsen, president and COO.
Sprouts has also rolled out an enhanced deli program that includes grab-and-go sandwiches, soups and other prepared items. The grocer, whose stores average 30,000 square feet, wants to be a meal destination for consumers.
The company plans to accelerate these programs and introduce new ones, as well. Next year it will introduce a revamped web site that promotes its value message and includes more information about store products, including private label.
Maredia has also credited online ordering and delivery with helping brand awareness for the company. It’s the largest grocery partner for Amazon Prime Now, offering delivery in several metropolitan markets. During an industry conference this summer, Maredia said delivery has extended Sprouts’ market reach beyond the five to seven-minute radius that shoppers are typically willing to travel to reach one of its stores. This has provided incremental gains in the form of added sales and new customers. It’s also provided the grocer with valuable consumer data.
As for the future, Maredia says, "We'll continue to accelerate strategic priorities that will enhance our business - from product assortment to the digital experience to customer service. These, coupled with our technology investments to drive efficiencies, will provide the flexibility to make future investments where needed to ensure Sprouts is well-positioned for the future."
Analysts were impressed with the results, given they occurred in the same quarter Amazon acquired Whole Foods Market and received extensive attention for cutting prices on basics such as bananas and avocados.
Sprouts opened eight new stores in the third quarter, and will end the year with 285 stores in 15 states. The grocer will open its first mid-Atlantic store in Maryland in early 2018 and it plans to expand further into the states of Washington, South Carolina and Pennsylvania.