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Sprouts continues sales rebound in Q2

Sprouts Farmers Markets saw net and comparable-store sales bounce back in its fiscal 2022 second quarter after having cycled big pandemic-fueled gains a year earlier.

For the quarter ended July 3, net sales totaled nearly $1.6 billion, up 4.8% from $1.52 billion in the fiscal 2021 quarter, when the top line declined 7%, Sprouts reported yesterday after the market close. The Phoenix-based specialty grocer attributed the uptick to higher comp-store sales and business from newly opened stores.

Second-quarter same-store sales rose 2% year over year, following a 10% decrease in the prior-year period and stepping up the momentum generated by a 1.6% gain in the 2022 first quarter.

First-half 2022 net sales came in at $3.24 billion, up 4.5% from $3.1 billion a year ago, when sales were down 5.8%. Comp-sales for the 26 weeks grew 1.8%, compared with a 9.7% decrease in the 2021 half.

Among second-quarter highlights, Sprouts cited ongoing strength in grab-and-go items in the deli department as customers continued to seek convenient meal solutions. Also generating year-over-year growth were the grocery, dairy and bakery departments. Online sales rose 15% and “remain elevated,” Sprouts reported.

“The disciplined execution of our long-term strategy, with a sharp focus on near-term initiatives, delivered results that surpassed our expectations during the second quarter,” Sprouts CEO Jack Sinclair said in a statement. “As we celebrate our company’s 20th anniversary, I want to express my sincere appreciation to all of our team members for their passion and dedication to our customers.”

During the second quarter, Sprouts opened two new stores and closed three locations upon lease expirations, ending the period with 378 stores in 23 states, compared with 363 stores a year ago. The company said it expects to open 15 to 17 new stores for fiscal 2022. Six stores were opened and one was closed in the 2022 first quarter.

At the bottom line, Sprouts topped the high end of Wall Street’s earnings-per-share forecast for the 2022 second quarter. Net income totaled nearly $62 million, or 57 cents per diluted share, compared with $61 million, or 52 cents per diluted share, a year earlier. Analysts, on average, had projected adjusted EPS of 51 cents, with estimates ranging from 49 cents to 55 cents, according to Refinitiv.

First-half 2022 net earnings came in at $150.3 million, or $1.36 per diluted share, versus $144.1 million, or $1.22 per diluted share, in the prior-year period.

“We are relatively pleased with our financial performance year-to-date and continue to be encouraged by another quarter of positive traffic,” Chief Financial Officer Chip Molloy stated. “We are cautiously optimistic that we can continue to successfully navigate the remainder of the year during these highly inflationary times while simultaneously pushing forward with our long-term strategy, which is supported by our strong cash generation.”

Looking ahead, Sprouts forecasts similar sales growth for the remainder of the year, with net sales rising 4% to 5% for fiscal 2022. Comp-store sales are expected to edge up 1% to 2% in the third quarter and finish the year at the same growth level. Adjusted EPS for fiscal 2022 is projected at $2.18 to $2.26. Wall Street’s consensus estimate is for full-year adjusted EPS of $2.14, with projections running from $1.79 to $2.21, according to Refinitiv.

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