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Sprouts Farmers' (SFM) Omnichannel Offering to Propel Sales

Zacks Equity Research
·4 min read

Sprouts Farmers Market, Inc. SFM has been taking several initiatives focused on product innovation, customer experience and targeted marketing with everyday great pricing and technology to expand its customer base. The company is focused on creating a robust omnichannel experience for customers.

It has been providing hassle-free shopping through the Sprouts.com website and mobile app as well as creating a supply chain that provides the freshest produce while updating store prototypes. The company’s partnership with Instacart enables it to better respond to customer demand and provide same-day delivery. In the second quarter of 2022, e-commerce sales grew 15% and represented approximately 11.1% of total sales.

The company’s store expansion strategy also looks impressive. In the financial year 2022, the company plans to open 15 to 17 new stores. Markedly, management now focuses on smaller-sized stores, which are more profitable, and emphasizes areas like produce and frozen. We believe these efforts are likely to boost sales. Also, the company is gradually heading toward its strategic goal of 10% unit growth per year and currently plans to open at least 30 new stores in 2023.

Sprouts Farmers is steadily expanding its presence in the natural organic space, given the huge demand in the segment. It has been reducing operational complexity, optimizing production, improving the in-stock position and updating to smaller format stores. Apart from these, the company is trying to expand private-label offerings in departments under the Sprouts Market Corner Deli and The Butcher Shop at Sprouts. Product innovation continues to drive sales of private-label items.

Management anticipates net sales growth of 4-5% and comparable store sales growth to be 1-2% in 2022. It projects earnings in the band of $2.18-$2.26 per share, which suggests an increase from earnings of $2.10 per share reported in 2021.

Wrapping Up

Sprouts Farmers, which shares space with Kroger KR, SpartanNash Company SPTN and Dollar General DG, has been strengthening omnichannel solutions, expanding its customer reach and focusing on private-label offerings to gain market share.

A Synopsis of Other Stocks

Kroger’s second-quarter fiscal 2022 top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. The company registered growth in identical sales without fuel.

In the second quarter of fiscal 2022, Kroger posted adjusted earnings of 90 cents a share, which surpassed the Zacks Consensus Estimate of 84 cents and increased from 80 cents reported in the prior-year quarter. Total sales of $34,638 million beat the Zacks Consensus Estimate of $34,414 million. Markedly, the metric rose from $31,682 million reported in the year-ago period. We note that identical sales, without fuel, jumped 5.8%.

SpartanNash Company registered a solid performance in the second quarter of 2022, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year over year. The company posted adjusted earnings from continuing operations of 66 cents a share, outperforming the Zacks Consensus Estimate of 58 cents.

SpartanNash Company’s consolidated net sales of $2,273.9 million rose 7.9% year over year and surpassed the consensus mark of $2,130 million. Retail comparable store sales rose 6.5% in the second quarter of 2022.

Dollar General’s second-quarter fiscal 2022 top and bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company witnessed same-store sales growth and gained market share in the Consumables category.

The quarterly earnings came in at $2.98 per share, which beat the Zacks Consensus Estimate of $2.93 and increased 10.8% from the prior-year period. Dollar General’s net sales of $9,425.7 million rose 9% on sales contributions from new stores and growth in same-store sales. The top line came ahead of the Zacks Consensus Estimate of $9,400 million.


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Dollar General Corporation (DG) : Free Stock Analysis Report
 
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Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
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