Sprouts Farmers (SFM) Q2 Earnings Beat, Comps Up 2% Y/Y
Sprouts Farmers Market, Inc. SFM maintained its positive earnings surprise streak in second-quarter 2022. The renowned grocery retailer delivered quarterly earnings of 57 cents a share that surpassed the Zacks Consensus Estimate of 52 cents — marking the 12th straight beat. Impressively, the bottom line increased from 52 cents reported in the year-ago period.
Net sales of this Phoenix, AZ-based company were $1,595.5 million, up 5% from the prior-year quarter. The growth was driven by sales from new stores opened in the last 12 months and a jump in comparable store sales. The top line beat the Zacks Consensus Estimate of $1,580 million, following a miss in the preceding quarter. We note that e-commerce sales grew 15%.
Comparable store sales increased 2% during the quarter under review against a decline of 10% witnessed in the year-ago period. Differentiated departments such as Grocery, Dairy and Bakery continue to register year-over-year growth.
Shares of Sprouts Farmers jumped 8.5% in the after-market trading session on Aug 3, following better-than-expected results. This Zacks Rank #3 (Hold) stock has risen roughly 14.4% in the past three months compared with the industry’s growth of 3.9%.
Margins
Gross profit rose 6% to $580.4 million due to higher sales volume. We note that gross margin expanded 30 basis points to 36.4%, primarily driven by an improved shrink.
The company reported operating income of $86.5 million, up 3% from the year-ago period; however, operating margin shriveled 10 basis points to 5.4%. Meanwhile, EBITDA increased 3% to $118.6 million; however, EBITDA margin shrunk 20 basis points to 7.4%.
SG&A expenses jumped 6% year over year to $462.1 million, while the same, as a percentage of net sales, increased 30 basis points to 29%. The rise in SG&A expenses was driven by new stores opened since the prior-year period and increased store costs due to inflation. Higher credit card fees and e-commerce costs contributed to the increase.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote
Store Update
During the quarter, the company opened two new stores and shuttered three, taking the total count to 378 stores in 23 states as of Jul 3, 2022. The company plans to open 15 to 17 new stores in the current financial year.
Other Financial Aspects
Sprouts Farmers ended the quarter with cash and cash equivalents of $289 million, long-term debt and finance lease liabilities of $259.2 million and stockholders’ equity of $1,013.7 million. The company’s repurchased 2.4 million shares for a total investment of $65 million in the second quarter. As of Jul 3, 2022, the company had $501 million remaining under its share repurchase authorization.
The company generated cash from operations of $209 million and spent $46 million in capital expenditures, net of landlord reimbursement, year-to-date through Jul 3, 2022. Management anticipates capital expenditures (net of landlord reimbursements) to be $130-$150 million for 2022.
Outlook
Sprouts Farmers now envisions net sales growth of 4-5% and comparable store sales increase of 1-2% for 2022. It projected adjusted earnings in the band of $2.18-$2.26 per share for the financial year. Management foresees a marginal increase in gross margins in the full year.
For the third quarter, the company expects comparable stores sales growth in the bracket of 1-2% and earnings in the band of 49-53 cents a share.
3 Hot Stocks
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The Zacks Consensus Estimate for Dollar Tree’s current financial year revenues and EPS suggests growth of 6.7% and 40.5%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
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