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Sprouts Farmers (SFM) Up 7.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Sprouts Farmers (SFM - Free Report) . Shares have added about 7.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sprouts Farmers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Sprouts Farmers Gains as Q2 Earnings Beat & Comps Impress
Sprouts Farmers Market, Inc. reported better-than-expected second-quarter performance and provided an upbeat outlook for 2024. Both the top and bottom lines not only increased year over year but also beat their respective Zacks Consensus Estimate. The company's results were favorably impacted by decent comparable sales, positive traffic trends, accelerating unit growth, and increasing customer engagement.
Q2 in Details
The renowned grocery retailer delivered quarterly earnings of 94 cents a share, which beat the Zacks Consensus Estimate of 77 cents. The bottom line increased 32.4% from 71 cents reported in the year-ago period.
Net sales came in at $1,893.5 million, which beat the Zacks Consensus Estimate of $1,828 million. The metric increased 12% on a year-over-year basis. The growth was driven by sales from the new stores and a jump in comparable store sales.
Comparable store sales increased 6.7% during the quarter under review. We note that e-commerce sales grew 30% and represented 14% of total sales in the quarter.
Margins
The adjusted gross profit rose 14.5% year over year to $718.4 million in the quarter, while the gross margin expanded 80 basis points to 37.9% from the prior-year quarter.
Sprouts Farmers reported an adjusted operating income of $127.3 million, up from $99.7 million reported in the year-ago period. The adjusted operating margin expanded 80 basis points to 6.7%.
SG&A expenses increased 11.7% year over year to $556.4 million. As a percentage of net sales, the metric remained flat at 29.4%.
Store Update
During the quarter, Sprouts Farmers opened five new stores, thereby taking the total count to 419 stores in 23 states as of Jun 30, 2024. It plans to open about 35 new stores in 2024, with the majority of openings in the fourth quarter.
Other Financial Aspects
Sprouts Farmers ended the quarter with cash and cash equivalents of $177.3 million, long-term debt and finance lease liabilities of roughly $8.1 million and stockholders’ equity of $1,269.3 million. The company approved a fresh $600 million share repurchase plan and bought back 640 thousand shares, investing a total of $44 million during the quarter.
Sprouts Farmers generated cash from operations of $311.3 million and spent $89 million on capital expenditures, net of landlord reimbursement, year to date through Jun 30, 2024.
Management anticipates capital expenditures (net of landlord reimbursements) in the range of $225-$245 million for 2024.
Outlook
For the third quarter of 2024, Sprouts Farmers expects comparable store sales growth between 3.5% and 4.5% and adjusted earnings in the band of 71-75 cents a share compared with 65 cents reported in the year-ago period.
Sprouts Farmers expects net sales growth of 9-10% and comparable store sales growth of 4% to 5% in 2024.
Sprouts Farmers guided adjusted earnings before interest and taxes between $445 million and $455 million for 2024.
While the company anticipates the gross margin to improve in the second half, in line with the first half margin expansion, it foresees pressure on SG&A due to ongoing wage and benefits as well as strategic investments. Despite this, it expects full-year adjusted earnings in the range of $3.29-$3.37 per share, which implies an increase from the $2.84 reported in 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 8.36% due to these changes.
VGM Scores
At this time, Sprouts Farmers has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sprouts Farmers has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Sprouts Farmers (SFM) Up 7.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Sprouts Farmers (SFM - Free Report) . Shares have added about 7.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sprouts Farmers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Sprouts Farmers Gains as Q2 Earnings Beat & Comps Impress
Sprouts Farmers Market, Inc. reported better-than-expected second-quarter performance and provided an upbeat outlook for 2024. Both the top and bottom lines not only increased year over year but also beat their respective Zacks Consensus Estimate. The company's results were favorably impacted by decent comparable sales, positive traffic trends, accelerating unit growth, and increasing customer engagement.
Q2 in Details
The renowned grocery retailer delivered quarterly earnings of 94 cents a share, which beat the Zacks Consensus Estimate of 77 cents. The bottom line increased 32.4% from 71 cents reported in the year-ago period.
Net sales came in at $1,893.5 million, which beat the Zacks Consensus Estimate of $1,828 million. The metric increased 12% on a year-over-year basis. The growth was driven by sales from the new stores and a jump in comparable store sales.
Comparable store sales increased 6.7% during the quarter under review. We note that e-commerce sales grew 30% and represented 14% of total sales in the quarter.
Margins
The adjusted gross profit rose 14.5% year over year to $718.4 million in the quarter, while the gross margin expanded 80 basis points to 37.9% from the prior-year quarter.
Sprouts Farmers reported an adjusted operating income of $127.3 million, up from $99.7 million reported in the year-ago period. The adjusted operating margin expanded 80 basis points to 6.7%.
SG&A expenses increased 11.7% year over year to $556.4 million. As a percentage of net sales, the metric remained flat at 29.4%.
Store Update
During the quarter, Sprouts Farmers opened five new stores, thereby taking the total count to 419 stores in 23 states as of Jun 30, 2024. It plans to open about 35 new stores in 2024, with the majority of openings in the fourth quarter.
Other Financial Aspects
Sprouts Farmers ended the quarter with cash and cash equivalents of $177.3 million, long-term debt and finance lease liabilities of roughly $8.1 million and stockholders’ equity of $1,269.3 million. The company approved a fresh $600 million share repurchase plan and bought back 640 thousand shares, investing a total of $44 million during the quarter.
Sprouts Farmers generated cash from operations of $311.3 million and spent $89 million on capital expenditures, net of landlord reimbursement, year to date through Jun 30, 2024.
Management anticipates capital expenditures (net of landlord reimbursements) in the range of $225-$245 million for 2024.
Outlook
For the third quarter of 2024, Sprouts Farmers expects comparable store sales growth between 3.5% and 4.5% and adjusted earnings in the band of 71-75 cents a share compared with 65 cents reported in the year-ago period.
Sprouts Farmers expects net sales growth of 9-10% and comparable store sales growth of 4% to 5% in 2024.
Sprouts Farmers guided adjusted earnings before interest and taxes between $445 million and $455 million for 2024.
While the company anticipates the gross margin to improve in the second half, in line with the first half margin expansion, it foresees pressure on SG&A due to ongoing wage and benefits as well as strategic investments. Despite this, it expects full-year adjusted earnings in the range of $3.29-$3.37 per share, which implies an increase from the $2.84 reported in 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 8.36% due to these changes.
VGM Scores
At this time, Sprouts Farmers has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sprouts Farmers has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.