What happened

Shares of Sprouts Farmers Market (SFM 10.92%) popped 14% last week, according to data from S&P Global Market Intelligence, after the grocery chain announced healthy growth in sales and profits.

So what

Sprouts' net sales rose 5% year over year to $1.6 billion in its fiscal third quarter ended Oct. 2. New store openings and higher sales at existing locations drove the gains. Sprouts opened one new store during the quarter, bringing its total count to 379 locations across 23 states as of Oct. 2. That's up from 366 stores at the end of the third quarter of 2021. The company's comparable store sales, meanwhile, increased by 2.4%.

Notably, Sprouts' e-commerce sales jumped 19%, accounting for over 11% of its total sales. The company's profitability also continued to improve. Its gross margin increased 90 basis points (one basis point equals 0.01%) to 36.7% due, in part, to less promotional activity. All told, Sprouts' earnings per share, which were boosted by stock repurchases, climbed 9% to $0.61.

Now what

Encouraging ongoing sales trends prompted Sprouts to lift its full-year financial forecast. Management now expects:

  • Net sales growth of 4.5% to 5%, up from a prior projection of 4% to 5%
  • Comparable store sales growth of approximately 2%, up from 1% to 2%
  • Adjusted earnings per share of $2.32 to $2.36, up from $2.18 to $2.26

Additionally, the company plans to accelerate the pace of its store openings. "We expect to open at least 30 new stores next year on a path to 40 plus by 2024," CEO Jack Sinclair said during a conference call with analysts. That would represent a marked increase from the 16 new locations Sprouts intends to open in fiscal 2022.