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Why Sprouts Farmers Market Stock Was Shooting Higher Today

By Jeremy Bowman – Feb 21, 2020 at 12:37PM

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Shares of the supermarket chain gained after strong profit growth in its fourth quarter.

What happened

Shares of Sprouts Farmers Market (SFM 1.20%) were moving higher today after the natural-foods grocer posted a better-than-expected fourth-quarter earnings report. As a result, the stock was up 16.4% as of 11:03 a.m. EST.

So what

Comparable sales at Sprouts rose 1.5% in the quarter, and overall revenue increased 8% to $1.36 billion, which matched analyst estimates. Gross margin in the quarter improved from 33.2% to 34.4%, showing the company successfully managed pricing and inventory as it lapped deep promotions in the fourth quarter of 2018. That result led to strong growth on the bottom line as earnings per share jumped from an adjusted $0.19 a year ago to $0.27, blowing past expectations of $0.13. 

The interior of a Sprouts store

Image source: Sprouts Farmers Market.

"During the fourth quarter, I was encouraged by the Sprouts team's dedication to driving same store sales growth, while we simultaneously delivered positive margins," CEO Jack Sinclair said.

Now what

Looking ahead to 2020, management expects comparable sales growth of flat to 1% and overall revenue growth of 5.5% to 6.5% for both the first quarter and the full year, which is actually below analyst estimates of between 7% and 8%.

On the bottom line, it sees earnings per share of $0.45 to $0.47 for the first quarter in line with estimates of $0.46, and EPS of $1.17 to $1.23, which compares to the consensus of $1.12.

Though Sprouts continues to face tough competition from pushes in online grocery from Amazon.com's Whole Foods as well as Walmart and Kroger, investors seem pleased with the profit expansion both in the fourth quarter and heading into 2020. 

 

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.

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Stocks Mentioned

Sprouts Farmers Market, Inc. Stock Quote
Sprouts Farmers Market, Inc.
SFM
$27.77 (1.20%) $0.33
Walmart Stock Quote
Walmart
WMT
$130.06 (-2.50%) $-3.33
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.78 (-3.01%) $-3.53
The Kroger Co. Stock Quote
The Kroger Co.
KR
$44.86 (-1.41%) $0.64

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