Why Sprouts Farmers Market Offers Enormous Growth Potential

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Sprouts Farmers Market (NASDAQ: SFM  ) needs to be on your watchlist. It's possible that the company will fall flat on its face at some point in the future, but this isn't a likely scenario. And if you're looking to invest in companies with enormous growth potential prior to them becoming known names, then this is a risk you must be willing to take.

Sprouts Farmers Market has great potential for one simple reason: It offers differentiation by selling healthy foods for less. Actually, "Healthy Living for Less" is the company's tag line. The word "living" is used instead of "food" because Sprouts Farmers Market isn't just about selling natural and organic food but educating its customers on the benefits of certain foods. No, these employees won't hunt you down while you're in the store, but they will be available if you have a question. This is a nice twist on the Whole Foods Market (NASDAQ: WFM  ) concept.

While Whole Foods is known for offering quality customer service, Sprouts Farmers Market has trained professionals who can provide more detailed information on food items and other products like vitamins and supplements. 

Other features for Sprouts Farmers Market include low shelving, bright lights, wide aisles, wooden barrels filled with surprise healthy treats, and more. All stores are set up to mimic an open-air market. And instead of having to zigzag through the store to find produce, the produce is located right in the center of the store. 

Now that you know a little about Sprouts Farmers Market, how do you think it would perform if it expanded into new geographical areas? So far, Sprouts Farmers Market has been well received in every market it has entered. Therefore, the odds of success are high.

Southeastward expansion
In the middle of the second quarter, Sprouts Farmers Market will open new stores in the Atlanta area, including Snellville, Ga., Cumming, Ga., Dunwoody, Ga., John's Creek, Ga., and Norcross, Ga. All stores will be leased. Sprouts Farmers Market plans to establish regional supervision with an eventual plan of producing a distribution center in the southeast.

Sprouts Farmers Market isn't heading to the Atlanta area by accident. It wants to set itself up in densely populated suburban areas. The store sizes will average 22,000 to 28,000 square feet, which is about half the size of a traditional supermarket. This should help personalize the shopping experience.

Future industry trends
Sprouts Farmers Market is perceived as a supermarket that sells healthy, organic, fresh, and affordable food in a friendly atmosphere. By offering affordability, Sprouts Farmers Market differentiates itself from Whole Foods. And by offering friendly and personalized service, Sprouts Farmers Market differentiates itself from Wal-Mart Stores (NYSE: WMT  ) .

Wal-Mart has had to deal with the rise of the dollar stores over the past several years. It's fighting back with its Walmart Express stores. However, the majority of Wal-Mart's revenue now comes from food, and it looks as though another rising threat in another category is approaching. Sprouts Farmers Market is likely seen as irrelevant by Wal-Mart right now, but while Wal-Mart doesn't have to worry about Whole Foods much due to price differential, Sprouts Farmers Market will eventually tread on Wal-Mart territory.

Growth and recognition
Sprouts Farmers Market won the 2013 Supermarket News Retail Excellence Award. That alone is telling. Sprouts Farmers Market is also three times larger than it was three years ago. What's the secret to its success? Sprouts Farmers Market establishes long-term relationships with growers and suppliers, which then leads to lower costs. These savings can be passed onto customers in the form of lower prices.

The Foolish bottom line
Sprouts Farmers Market is likely to see market share gains thanks to its proven business plan and geographic expansion. There are no guarantees, but if you're looking for a high-potential investment while the company is still in its very early stages, then you're not going to find many better opportunities. Please do your own research prior to making any investment decisions. 

Another trend that might be highly profitable.... 
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 07, 2014, at 11:22 AM, bridomuga wrote:

    I live in Johns Creek, GA so I'll have to check it out.

  • Report this Comment On February 19, 2014, at 5:55 PM, dayna123 wrote:

    I agree that Sprouts has growth potential. It has a broader appeal than Whole Foods as the stores are locating in working class neighborhoods and people love them. I have a store two blocks from my house.

    A lot of people shop here because of convenience and simplicity, it doesn't have the razmatazz of Whole Foods and seems more accessible to a broader spectrum of customers.

  • Report this Comment On December 24, 2014, at 9:16 PM, dagger2112 wrote:

    Oh, I don't know about all of that. From what can tell, this company is on the fast track to nowheresville. But hey, it's your money.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2820489, ~/Articles/ArticleHandler.aspx, 9/3/2015 1:19:14 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Moskowitz

Dan Moskowitz spends the majority of his time researching stocks. He believes that fundamentals, and logic pertaining to industry trends, win out over the long haul.

Today's Market

updated Moments ago Sponsored by:
DOW 16,438.77 87.39 0.53%
S&P 500 1,953.27 4.41 0.23%
NASD 4,759.27 9.29 0.20%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 1:03 PM
SFM $20.55 Up +0.18 +0.88%
WFM $32.43 Up +0.16 +0.48%
Whole Foods Market CAPS Rating: ****
WMT $64.93 Up +0.49 +0.76%
Wal-Mart Stores CAPS Rating: ***