Sprouts' partnership with Amazon Prime Now could expand to half the store network, predicts CEO

In a call with analysts after posting a 15% rise in sales to $1.2bn and a 10% rise in net income to $41m in the second quarter, CEO Amin Maredia said: “We will be delivering Sprouts products through the Prime Now service​* ​to over 20 locations across many of our major markets by year-end… ​

"We think that that number could be somewhere in the one-third to 40% range maybe to half of the stores, but the key point there is it helps us extend our trade area.”​

Asked whether the growth of ecommerce meant Sprouts would ultimately open fewer stores than originally anticipated, he said: “Over a five, 10-year period we'll certainly be smarter about placement of stores, but at this stage, we don't think that we would have a smaller network of stores than the 1,200-plus stores that we always thought of sitting here today.”​

As to how many Sprouts stores the market can sustain in future, he said: “Our view has just become that number just keeps going up over time. And I think the key there is we're operating as a convenient, healthy grocery store and it's a fuller shop…​

“The leverage that we see in our mature markets when we open more stores has been incredible.”​

Sprouts… a destination store for deli, meat and seafood?​

As for addressing growing demand for grab & go prepared foods, he said that the enhanced deli program “is now in more than 120 stores and is driving more lunch-time and dinner-time traffic… I'm very pleased with our fresh team's progress in this department. ​

“Data is showing that more and more customers are viewing Sprouts Deli as well as the Sprouts meat and seafood department as their primary destination for these items.”​

Sprouts Farmers Market, which started in Arizona in 2002 and now operates 279 stores (the bulk are in Colorado, Texas, Arizona and California), has a mantra of 'helping customers live a healthy lifestyle at an affordable prices.’

*Under the tie up, Amazon Prime members get free two-hour delivery on groceries from Sprouts Farmers Market using Amazon Prime Now​​ (the minimum order is $20).

Sprouts stores - which are generally between 28,000-30,000 sqft - use a ‘flipped’ conventional food retail store model, positioning produce at the center of the store, surrounded by groceries. Typically around 15% of the square footage is dedicated to produce, while the stores are designed with open floor plans and low displays, enabling customers to view the entire store. 

Asked how the price war between Walmart and Lidl on the east coast might impact Sprouts, CFO Brad Lukow said: “We've all certainly seen the headlines of Lidl and Walmart in certain pockets of the country, and that doesn't really impact Sprouts. That's a discounter model that historically has not been our shopper.”​