Sprouts Targets 14% Sales Growth with 37 New Stores in 2025 Amid Challenges
Earnings Call Insights: Sprouts Farmers Market (SFM) Q3 2025
Management View
Jack Sinclair, CEO of Sprouts Farmers Market, shared the company's strong performance in the third quarter, reporting a 34% year-over-year increase in earnings. This growth was fueled by a 5.9% rise in comparable store sales and robust performance from new locations. Sinclair emphasized that the company’s success is rooted in its strategic execution, with increased customer traffic driven by effective engagement with its target audience. He noted that the brand’s unique and attribute-based products continue to drive sales as the company expands its footprint.
Sinclair acknowledged that comparable sales growth slowed more quickly than anticipated, attributing this to challenging year-over-year comparisons and signs of a weakening consumer environment. Despite these headwinds, he reiterated confidence in the company’s ability to manage operations effectively and maintain earnings growth moving forward.
Curtis Valentine, CFO, provided additional insights into the financial results. Total sales for the quarter reached $2.2 billion, marking a 13% increase compared to the previous year. E-commerce sales grew by 21%, accounting for 15.5% of total sales. Valentine expressed that while the results were solid, the company had expected stronger top-line performance due to the impact of lapping strong numbers from the prior year and a softening consumer backdrop.
The gross margin improved to 38.7%, an increase of 60 basis points, primarily due to better inventory shrinkage management. The company also opened 9 new stores during the quarter, bringing the total number of locations to 464.
Valentine highlighted that the company generated $577 million in operating cash flow year-to-date, invested $194 million in capital expenditures, and returned $342 million to shareholders through share repurchases. Additionally, the company announced a new $1 billion share repurchase authorization, with $966 million remaining under the program.
Sinclair outlined ongoing investments in innovation, digital capabilities, and store expansion. He noted that the Sprouts brand now accounts for over 25% of sales, with the launch of new wellness bowls and the introduction of 7,000 new products planned for 2025. The Sprouts Rewards loyalty program has been fully launched, showing early signs of increased shopping frequency and higher sales per customer.
Outlook
For the full year 2025, Sprouts expects total sales growth of approximately 14% and comparable sales growth of around 7%. The company plans to open 37 new stores in 2025. Earnings before interest and taxes are projected to be between $675 million and $680 million, with earnings per share expected to range from $5.24 to $5.28. Capital expenditures are anticipated to fall between $230 million and $250 million.
Looking ahead to the fourth quarter, Sprouts forecasts comparable sales growth in the range of 0% to 2% and earnings per share between $0.86 and $0.90. Valentine stated that despite pressure on the top line, the company expects to grow EBIT dollars in line with sales growth, maintaining stable year-over-year margins in the fourth quarter.
Financial Results
In the third quarter, net income was $120 million, with diluted earnings per share of $1.22, representing a 34% increase from the previous year. EBIT for the quarter totaled $157 million. The gross margin was reported at 38.7%, and SG&A expenses amounted to $653 million.
Sprouts ended the quarter with $322 million in cash and cash equivalents. The company also closed a $600 million revolving credit facility, replacing the previous $700 million facility.
Q&A Highlights
During the Q&A session, several analysts raised questions about competition, cyclical headwinds, and the sustainability of recent growth. Sinclair addressed concerns about tough comparisons and a softer consumer environment but remained confident in the company’s strategy and innovation pipeline.
Valentine highlighted pockets of outsized growth and gains, noting some softness in middle-income and younger trade areas. Sinclair attributed the comp slowdown to difficult comparisons and a weaker consumer, emphasizing the company’s strength in managing margins and costs.
Konat, President & COO, indicated that the company’s most differentiated and innovative products continue to drive strong comp growth, with wallet share holding steady or slightly increasing. Valentine reported stabilization in fourth-quarter comp expectations, though caution remained. Sinclair and Konat expressed optimism about the loyalty program’s potential to drive engagement and growth in 2026.
Additional topics included the pace of investment amid moderation, aggressive share buybacks, and regional competitive dynamics, particularly in Texas and against competitors like Whole Foods and Amazon.
Sentiment Analysis
Analysts expressed concerns about the slowdown in comp sales, competitive pressures, and the durability of recent growth, adopting a slightly negative or cautious tone. They frequently probed into competitive dynamics and consumer softness.
Despite these concerns, management maintained a confident tone, repeatedly citing the strength of their innovation pipeline, store expansion, and cost management. Sinclair stated, "We're pretty confident about the future," even as he recognized near-term challenges.
Compared to the previous quarter, there was a noticeable shift from positive momentum to a more defensive and cautious management tone, particularly around consumer trends and comp sales outlook.
Quarter-over-Quarter Comparison
Guidance was revised downward from the previous quarter, where the company had expected total sales growth of 14.5% to 16% and comp sales of 7.5% to 9%. The Q3 update targets 14% and 7%, respectively, reflecting a more conservative outlook.
Comp sales growth moderated from 10.2% in Q2 to 5.9% in Q3, with management acknowledging faster-than-expected deceleration. Gross margin improvement slowed compared to Q2's 91 basis points increase.
Analyst focus shifted from expansion and innovation to concerns over lapping strong prior-year results, consumer softness, and market share dynamics. Management’s tone became more cautious, emphasizing resilience and cost control over aggressive growth.
Risks and Concerns
Management cited challenging year-over-year comparisons and signs of a softening consumer as primary concerns. Valentine pointed to "pockets and windows where we've had some outsized growth and gains" that will be tougher to lap.
Analyst questions highlighted risks such as increased competition, regional pricing pressures, cannibalization from new stores, exposure to SNAP policy changes, and macroeconomic uncertainty impacting customer spending behavior.
Management addressed these concerns by reiterating ongoing investment in innovation, loyalty, and cost control, while noting the flexibility to adjust share buybacks and capital allocation as needed.
Final Takeaway
Sprouts Farmers Market leadership conveyed confidence in the company’s long-term growth trajectory, emphasizing continued investment in differentiated products, store expansion, and digital engagement. While management acknowledged slower comparable sales growth and a more challenging consumer environment, they underscored the durability of their strategy, ongoing cost discipline, and a robust pipeline of innovation and store openings as key drivers for sustained earnings growth into 2026 and beyond.
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