Sprouts Farmers Market Inc (SFM) Q2 2025 Earnings Call Highlights: Strong Sales Growth and ...

Yahoo

5 days ago

Total Sales: $2.2 billion, up 17% year-over-year.
Comparable Store Sales: Increased by 10.2%.
Diluted Earnings Per Share: $1.35, a 44% increase from the previous year.
Gross Margin: 38.8%, up 91 basis points year-over-year.
SG&A Expenses: $645 million, with 33 basis points of leverage.
Net Income: $134 million.
Operating Cash Flow: $410 million year-to-date.
Capital Expenditures: $138 million net of landlord reimbursement.
Store Openings: 12 new stores, totaling 455 stores across 24 states.
Share Repurchases: $292 million returned to shareholders, 2 million shares repurchased.
Cash and Cash Equivalents: $261 million at the end of the quarter.
E-commerce Sales Growth: 27%, representing 15% of total sales.
Sprouts Brand Contribution: 24% of total sales.
2025 Sales Growth Outlook: 14.5% to 16% total sales growth expected.
2025 Comp Sales Outlook: 7.5% to 9% expected.
2025 Earnings Per Share Outlook: $5.20 to $5.32.
2025 New Store Plans: At least 35 new stores expected to open.
Warning! GuruFocus has detected 3 Warning Signs with UDMY.
Release Date: July 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Sprouts Farmers Market Inc (NASDAQ:SFM) reported a 17% increase in total sales for the second quarter, driven by a 10.2% rise in comparable store sales and strong new store performance.
Diluted earnings per share increased by 44% to $1.35 compared to the same period last year.
E-commerce sales grew by 27%, accounting for approximately 15% of total sales, indicating strong digital engagement.
The company opened 12 new stores in the second quarter, ending with 455 stores across 24 states, and plans to open at least 35 new stores in 2025.
Sprouts Farmers Market Inc (NASDAQ:SFM) has a robust cash flow, generating $410 million in operating cash flow year-to-date, allowing for self-funded investments and shareholder returns.
Negative Points
Traffic slightly moderated from the first quarter, which was anticipated but still a point of concern.
Store closure and other costs amounted to approximately $2 million for the quarter, primarily due to exiting leases related to 2023 store closures.
The company anticipates comp sales to moderate as they cycle higher comps from late 2024, indicating potential slowing growth.
Gross margin improvements may normalize in the third quarter as the company compares to last year's improved shrink performance.
The rollout of the loyalty program, while promising, is still in early stages and its full impact on comps is expected in 2026, indicating a delayed benefit.
Q & A Highlights
Q: Can you provide more details on the loyalty program rollout and any surprises or adaptations you've made? A: Jack Sinclair, CEO: The loyalty program initially launched in 35 stores and recently expanded to all stores in Arizona, totaling about 75 stores. The sign-up rate and consumer engagement have exceeded expectations. The rollout will be completed by the end of October, and we anticipate significant benefits next year. We've focused on execution to ensure a smooth customer experience and are excited about the insights and opportunities the program will provide.
Q: Could you elaborate on the digital sales trends and the performance of your e-commerce partners? A: Curtis Valentine, CFO: Our e-commerce sales grew 27%, with shop.sprouts.com showing the fastest increase in penetration. Instacart baskets are about twice the size of brick-and-mortar baskets, while Uber Eats and DoorDash focus more on convenience items. All partners are growing well, and we're encouraged by the direct engagement with the Sprouts brand through our platform.
Q: What drove the acceleration in comparable sales in May and June, and how does this impact your guidance? A: Curtis Valentine, CFO: The acceleration was primarily due to a strong produce season and some industry disruptions that led customers to us. These factors have normalized, and we're back to a consistent 15% two-year stack run rate. This consistency gives us confidence in our guidance for the third quarter.
Q: How will self-distribution and the loyalty program impact gross margins? A: Jack Sinclair, CEO: Self-distribution will provide long-term margin benefits, but these won't be fully realized this year due to the transition period. The loyalty program involves some costs, but we expect it to drive top-line growth and eventually neutralize any margin impact.
Q: How are new stores performing, and what is the opening cadence for the rest of the year? A: Jack Sinclair, CEO: We plan to open 35 stores this year, with 12 already opened successfully. The new store format is performing well, especially in markets like the Mid-Atlantic and Florida. We expect to open 9 stores in the third quarter and 11 in the fourth quarter, with weather being the only potential disruptor.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.