What happened

Shares of Sprouts Farmers Market (NASDAQ:SFM) gave up 14% in November, according to data from S&P Global Market Intelligence, after investors fled the natural foods grocer's stock when its CEO suddenly announced he was stepping down.

As you can see from the chart below, the stock was steady for nearly the whole month, until CEO Amin Maredia announced his resignation on November 30. 

SFM Chart

SFM data by YCharts

So what

Investors were taken aback by the surprising announcement from Maredia, who at 46 was expected to lead the company for several more years. A sudden resignation by a CEO can sometimes signal problems lurking within the company, out of view of investors, but that does not seem to be the case here. According to the press release announcing the move, Maredia was leaving to "pursue other interests."  

The entrance to a Sprouts store

Image source: Sprouts Farmers Market.

Sprouts said COO Jim Nielsen and CFO Brad Lukow will serve as co-interim CEO's until the company finds a permanent successor. Maredia, who had served as the company's CEO since 2015, will remain in an advisory role while the transition takes place.  

Now what

Shares of Sprouts essentially traded sideways during Maredia's three-plus years at the helm as the company faced challenges like food price deflation and Amazon's entry into the sector through its acquisition of rival Whole Foods Market. However, despite those challenges and the stock's middling performance, Maredia leaves the company in solid shape. 

In its third-quarter earnings report, comparable sales increased 1.5% for a two-year total of 6.1%, and earnings per share increased from $0.23 to $0.27 with the help of a lower tax rate from the new tax law. Sprouts also raised its full-year adjusted EPS guidance to between $1.28 and $1.30 from between $1.24 and $1.28, and continues to expand, with 30 new stores expected this year.

While investors never like uncertainty, the 15% sell-off seems like a bit much given the company's stable position and performance. Shares have already recovered some of those losses in December, with the stock up 6.8% thus far this month.

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.