How Did SFM Beat Top Line Estimates in 3Q15?



SFM reports strong 3Q15 revenue numbers

Sprouts Farmers Market (SFM) reported strong 3Q15 results, beating analysts’ top and bottom line estimates. In the current section, we’ll discuss the company’s 3Q15 revenue performance, and in the next section, we’ll take a look at its costs and margins.

Sprouts Farmers Market reported total sales of $903 million in 3Q15, slightly better than Wall Street’s consensus estimate of $899 million. Its revenue rose by an impressive 18% YoY (year-over-year) on the back of higher traffic and an increase in store count. Same-store sales stood at 5.8% during the quarter. The company opened 26 new stores before the third quarter and eight in the third quarter itself.

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SFM’s performance has been particularly impressive given that other organic players have unable to drive traffic to their stores and are losing market share. One example is The Fresh Market (TFM), which reported a fall of 3.7% in same-store sales due to a 3.7% fall in traffic during its last-reported quarter.

Those looking to invest in SFM through ETFs can choose to invest in the SPDR S&P Retail ETF (XRT), the Fidelity MSCI Consumer Staples ETF (FSTA), and the Guggenheim S&P MidCap 400 Pure Growth ETF (RFG). SFM has weights of approximately 1.1%, 0.11%, and 1.8%, respectively, in the above-mentioned ETFs.

Sprouts manages the best top line growth in its peer group

Sprouts’ top line performance in the third quarter was the best among its supermarket peers. While Kroger’s (KR) sales excluding fuel grew by 5.5% during its last-reported quarter, Whole Foods Market (WFM) and The Fresh Market saw weakening sales, which grew by 3% and 3.2%, respectively. Sprout’s pricing strategy of heavily discounting its produce while maintaining quality has been successful in attracting shoppers while forcing players such as WFM to cut prices.

Sprouts Farmers Market, The Fresh Market, Kroger, and Whole Foods Market are a part of the Fidelity MSCI Consumer Staples ETF and account for 2.6% of the index’s weight.

Though SFM’s top line growth has been quite impressive, the company still had to incur some costs to pull in such traffic. Move on to the next section to read more about SFM’s profitability in 3Q15.


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