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Sprouts Raises Guidance after Strong 3Q17

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SFM beats consensus on top line

Sprouts Farmers Market (SFM) reported a 16.4% YoY (year-over-year) increase in total sales to $1.2 billion for the third quarter, which ended in October 2017.

The organic food retailer outperformed the Wall Street expectations of a 14% rise in sales. This was the fifth consecutive top-line beat for the company. Driving the current quarter’s growth was an impressive jump in comps, which we’ll discuss in the next section, as well as a solid performance in the company’s new stores.

“Sprouts is pleased to report strong top-line growth and demonstrate our ability to leverage those sales into exceptional earnings growth for the quarter. Sprouts’ hallmark of fresh, healthy, affordable products continues to resonate with our customers and positions us as a leader in the industry,” said Amin Maredia, chief executive officer of Sprouts Farmers Market.

How did other food retailers perform?

Supermarket giant Kroger’s (KR) top line improved 3.9% YoY to $27.6 billion during the last reported quarter. The company also outperformed analyst expectations.

Wholesaler and retailer Supervalu (SVU) recorded a 35% YoY rise in sales to $2.8 billion. However, this improvement was anchored by an acquisition-driven rise in wholesale business. SVU’s retail business posted its ninth consecutive quarterly sales decline.

Management raises guidance

Sprouts’ management raised full-year 2017 guidance for both top and bottom lines. While we’ll look at the top line guidance here, we’ll discuss the bottom line performance in part four of this series.

SFM’s management now sees a full-year top line growth of 14.5% to 15% (versus 13% to 14% guided earlier) based on a 2.5% to 3% rise in same-store sales versus 1.5% to 2% guided earlier.

Investors looking to invest in SFM through ETFs can consider the iShares Morningstar Small-Cap Growth ETF (JKK). SFM has a weight of approximately 0.4% in JKK.

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