Sprouts Farmers' New Stores Power Impressive Comparable Sales Growth
SFM focuses on accelerating the performance of new locations, targeting an average of $13 million in annual sales in the first year, with expectations for 20% to 25% growth over the following four years. This expansion strategy is supported by a more efficient, smaller box format that reduces risk while enhancing profitability. With plans to open at least 35 new stores in 2025 and ample "white space" identified for future growth, the strong initial comparable sales from these new openings point to a promising trajectory for Sprouts Farmers.
The company's revamped site selection model focuses on optimizing convenience for health-conscious shoppers, while its differentiated offering of fresh, attribute-driven products continues to resonate. New stores are opening with healthy sales volumes and ramping up quickly, making meaningful contributions to overall comparable sales growth.
The consistent strength in comps from new stores highlights that these openings are more than just incremental additions. They are positioning SFM to capture a greater share of the fast-growing $290 billion health-focused grocery market. Beyond driving sales, these newer locations are expected to support long-term EBIT margin stability through fixed cost leverage and ongoing supply-chain optimization.
How Do DG and TGT Stack Up Against SFM's Sales Surge?
Dollar General Corporation DG reported a 2.4% increase in first-quarter fiscal 2025 same-store sales, driven by a 2.7% rise in the average transaction amount, though partially offset by a 0.3% decline in customer traffic. Dollar General saw growth across all key product categories, including consumables, seasonal, home products and apparel. Dollar General now expects same-store sales to rise between 1.5% and 2.5% compared to its prior forecast of 1.2% to 2.2%.
Target Corporation TGT experienced a 3.8% decline in comparable sales, following a 1.5% increase in the preceding quarter. This drop was attributed to a 5.7% fall in Target's comparable store sales, which was somewhat offset by a 4.7% increase in comparable digital sales. Target highlighted that traffic, or the number of transactions, dropped 2.4%, and the average transaction amount decreased 1.4%.
SFM's Price Performance, Valuation and Estimates
Sprouts Farmers stock has been a standout performer, with shares rallying 30.4% year to date, outpacing the industry 's growth of 22.5%.
From a valuation standpoint, SFM's forward 12-month price-to-sales ratio stands at 1.75, higher than the industry's ratio of 0.27. SFM carries a Value Score of C.
The Zacks Consensus Estimate for Sprouts Farmers' current financial-year sales and earnings per share implies year-over-year growth of 13.6% and 35.5%, respectively.
Sprouts Farmers Market currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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Target Corporation (TGT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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