Yahoo Finance Sprouts (NASDAQ:SFM) Delivers Strong Q2 Numbers, Stock Jumps 11.9%
Grocery store chain Sprouts Farmers Market (NASDAQ:SFM) reported Q2 CY2024 results beating Wall Street analysts' expectations , with revenue up 11.9% year on year to $1.89 billion. It made a non-GAAP profit of $0.94 per share, improving from its profit of $0.71 per share in the same quarter last year.
Is now the time to buy Sprouts? Find out in our full research report.
Sprouts (SFM) Q2 CY2024 Highlights:
Revenue: $1.89 billion vs analyst estimates of $1.84 billion (3.2% beat)
EPS (non-GAAP): $0.94 vs analyst estimates of $0.78 (20.4% beat)
EPS (non-GAAP) Guidance for Q3 CY2024 is $0.73 at the midpoint, above analyst estimates of $0.70
Gross Margin (GAAP): 37.9%, up from 37% in the same quarter last year
Free Cash Flow of $33.92 million, down 46.4% from the same quarter last year
Locations: 419 at quarter end, up from 391 in the same quarter last year
Same-Store Sales rose 6.7% year on year (3.2% in the same quarter last year)
Market Capitalization: $8.71 billion
"Sprouts saw outstanding second quarter results, thanks to exceptional teamwork and strategic focus,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market.
Playing on the secular trend of healthier living, Sprouts Farmers Market (NASDAQ:SFM) is a grocery store chain emphasizing natural and organic products.
Grocery Store
Grocery stores are non-discretionary because they sell food, an essential staple for life (maybe not that ice cream?). Selling food, however, is a notoriously tough business as grocers must deal with the costs of procuring and transporting oftentimes perishable products. Plus, the costs of operating stores to sell everything from raw meat to ice cream and fresh fruit are high. Competition is also fierce because grocers and other peers such as wholesale clubs tend to sell very similar brands and products. On the bright side, grocery is one of the least penetrated categories in e-commerce because customers prefer to buy their food in person. Still, the online threat exists and will likely increase over time rather than dwindle.
Sales Growth
Sprouts is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company's annualized revenue growth rate of 5.8% over the last five years was sluggish , but to its credit, it opened new stores and grew sales at existing, established stores.
This quarter, Sprouts reported robust year-on-year revenue growth of 11.9%, and its $1.89 billion in revenue exceeded Wall Street's estimates by 3.2%. Looking ahead, Wall Street expects sales to grow 7.8% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
Sprouts's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 3.7% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Sprouts is reaching more customers and growing sales.
In the latest quarter, Sprouts's same-store sales rose 6.7% year on year. This growth was an acceleration from the 3.2% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from Sprouts's Q2 Results
We were impressed by Sprouts's optimistic full-year earnings forecast, which blew past analysts' expectations. We were also excited its revenue outperformed Wall Street's estimates. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock traded up 11.9% to $94.69 immediately following the results.
Sprouts may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
