Whole Foods Market (NASDAQ: WFM), Sprouts Farmers Market (NASDAQ:SFM), and The Fresh Market (NASDAQ:TFM) are three of the most popular natural and organic grocers in the United States and all three have recently released their quarterly results. Let's analyze the reports to find out which company had the best quarter and could provide the highest returns for investors going forward.
The quarterly releases
Whole Foods kicked off earnings for the industry, releasing its first-quarter report for fiscal 2014 on Feb. 12; here's a breakdown and a year-over-year comparison:
|Earnings Per Share||$0.42||$0.39|
|Revenue||$4.24 billion||$3.86 billion|
- Earnings per share increased 7.7%.
- Revenue increased 9.9%.
- Comparable-store sales grew 5.4%.
- Gross profit increased 10.2% to $1.49 billion.
- Gross margin expanded 7 basis points to 35.03%.
- Whole Foods opened 10 new stores during the quarter, bringing its total to 373 in more than 40 states.
Sprouts released its fourth-quarter results for fiscal 2013 on Feb. 27; here's a breakdown and year-over-year comparison:
|Earnings Per Share||$0.07||$0.04|
|Revenue||$608.24 million||$478.94 million|
- Adjusted earnings per share increased 75%.
- Revenue increased 27%.
- Comparable-store sales grew 13.8%.
- Gross profit increased 27.7% to $174.22 million.
- Gross margin expanded 16 basis points to 28.64%.
- Sprouts did not open any new stores in the fourth quarter after it added seven stores in the third quarter; it currently operates 167 total locations in eight states.
The last of the three to report, Fresh Market, released its fourth-quarter report for fiscal 2013 on March 6; here's a breakdown and a year-over-year comparison:
|Earnings Per Share||$0.39||$0.43|
|Revenue||$425.81 million||$369.86 million|
- Earnings per share decreased 9.3%.
- Revenue increased 15.1%.
- Comparable-store sales grew 3.1%.
- Gross profit increased 13.3% to $142.68 million.
- Gross margin declined 53 basis points to 33.5%.
- The Fresh Market opened five new stores during the quarter, bringing its total to 151 in 26 states.
What will the future quarters hold?
In the first-quarter report, Whole Foods reduced its full-year guidance by calling for the following results:
- Earnings per share of $1.58-$1.65
- Revenue growth of 11%-12%
- Comparable-store sales growth of 5.5%-6.2%
- 33-38 new stores
Sprouts provided its outlook on fiscal 2014 in its fourth-quarter report with a call for the following:
- Earnings per share of $0.58-$0.60
- Revenue growth of 16%-18%
- Comparable-store sales growth of 10.5%-11.5%
- 22-24 new stores
The earnings projections would result in growth of 20.8%-25% from fiscal 2013 and the company could easily attain these results if it sees the revenue and comparable-store sales results that it expects. Also, Sprouts' expansion plans will contribute significant gains during the year and they will help the company achieve sustained growth for many years to come.
In its fourth-quarter report, The Fresh Market provided its outlook on fiscal 2014; here's what it expects for the year:
- Earnings per share of $1.56-$1.66
- Comparable-store sales growth of 1.5%-3.5%
- 23-25 new stores
The earnings per share projection represents an increase of 11.4%-18.6% from fiscal 2013. When it comes to expansion, the company added that it will open the majority of its new stores in existing markets, reducing its overall risk as a result. This outlook looks solid but you must take it with a grain of salt, because Fresh Market has missed earnings expectations for two consecutive quarters and the company has lost the trust of many investors and analysts.
And the winner is...
After reviewing the earnings reports and outlooks on the quarters ahead, Sprouts Farmers Market wins this three-way match-up. It posted very strong quarterly results and its outlook calls for significantly higher growth than that of both Whole Foods and Fresh Market. Today, its stock trades over 20% below its 52-week high, which represents a great entry point for Foolish investors who seek a high-growth opportunity. If you're looking to pick up a position in the natural and organic grocery industry, look no further than Sprouts Farmers Market.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Joseph Solitro has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market and Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.