What happened
Shares of Sprouts Farmers Market (SFM 0.46%) were sprouting Tuesday after the supermarket chain posted strong results in its first-quarter earnings report, which it delivered following the close of trading Monday.
As of 12:30 p.m. ET, the stock was up by 7.1%.
So what
In a difficult environment for retailers, Sprouts posted comparable-store sales growth of 3.1%, and revenue rose 6% to $1.73 billion, just above expectations of $1.72 billion.
Sprouts continues to expand its footprint. It opened eight new stores in the quarter to bring its total to 395 locations.
Gross margin improved modestly from 37.3% to 37.5%, and after adjusting for one-time store-closure expenses from two closings, earnings per share jumped by 24% to $0.98, which topped estimates of $0.85. Earnings per share also benefited from the company's stock buyback program, which reduced shares outstanding by 6% over the last year.
"We are pleased with our first quarter; we believe our long-term growth strategy is gaining traction and driving positive performance," CEO Jack Sinclair said in the earnings release.
Now what
Management guided for full-year comparable sales growth of 2% to 3% and revenue growth of 5% to 6%, compared to analysts' consensus expectation of 4.6% revenue growth. It sees adjusted earnings per share in the $2.58 to $2.68 range, up from $2.39 last year, and better than the consensus prediction of $2.48.
Sprouts also plans to add a net of 19 stores in the year as it continues to see an opening in the market for its brand, which is built around providing healthy foods at affordable prices in spacious stores.
That has proven to be a winning formula over the last few years, as the stock has more than doubled from the start of 2020. Trading at a price-to-earnings ratio of 15, the stock is positioned for more gains if the company continues to deliver solid growth.
