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Sprouts Farmers Market Reported another Comps Slowdown in 4Q16

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Feb. 27 2017, Published 4:05 p.m. ET

SFM beats consensus on top line in 4Q16

Sprouts Farmers Market (SFM) reported a 6% YoY (year-over-year) rise in its sales to $986 million in 4Q16, ~$11 million higher than analysts’ expectations.

The company witnessed another slowdown in its same-store sales during the quarter. Its sales comps rose 0.7% in 4Q16, compared to average comps growth of ~9% between 2013 and 2015. Nevertheless, 4Q16 was SFM’s 39th consecutive quarter of positive sales comps.

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What’s impacting comps?

Although SFM’s comps continue to stay positive, they’ve worsened continuously over the last five straight quarters. According to the company’s management, quarter-over-quarter, persistent deflation and a highly promotional environment have been behind its slowing comps.

“Deflation of 2.5% in the fourth quarter reached its highest level for the year, mainly driven by deepening produce deflation during December,” commented Bradley Lukow, chief financial officer of Sprouts.

Other top supermarkets also have deflation woes

Deflation has equally impacted other food retailers, with supermarkets bearing the maximum pain. Sales comps of Whole Foods Market (WFM) and SUPERVALU (SVU) have been in the red for more than six consecutive quarters.

While Kroger (KR) continues to post positive comps, it’s also witnessed severe deterioration. The company’s identical supermarket sales excluding fuel rose 0.1% during the last quarter, compared to an average rise of 4.3% in the last 24 quarters.

Investors looking to invest in SFM through ETFs can choose to invest in the First Trust Consumer Staples AlphaDEX ETF (FXG). SFM has a weight of ~0.82% in FXG.

Read the next section to know about SFM’s 4Q16 margins and profitability.

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