For the second quarter in a row, the fast-growing retailer reported strong sales driven both by new stores – and more notably – strong same-store sales.
In the company’s second quarter, net sales increased 6% year-over-year to $1.7bn and comparable store sales grew 3.2%. This helped reinforce increases in gross profit, which reached nearly $626m compared to about $580m in the same quarter last year. Net income also increased to slightly more than $67.3m compared to less than $62m in the same period last year. This builds on a strong first quarter in which Sprouts drove sales up 6% to $1.7bn and aw new and comparable stores sales increase 3.1%.
“We continue to be encouraged by our performance to date driven by the strategic changes we’ve made over the past few years. Our differentiated products are resonating with our core consumer segments, supply chain continues to get stronger and more efficient, we are accelerating our store growth with our new prototype, we are improving customer experience both in-store and online, and slowly but surely connecting more effectively with current an potential customers,” CEO Jack Sinclair told investment analysts earlier this week.
A ‘treasure trove’ of unique products to entice innovation-seeking consumers
He explained innovation-seeking consumers continue to favor Sprouts Farmers Market because it offers a “treasure trove of products from locally sourced produce to our private label Sprouts brand.”
For example, he noted, half of the retailer’s beef sales are grass-red, more than half of its chicken sales are organic and 90% of all grocery sales “have specific diet attributes such as vegan and non-GMO.”
The retailer also is investing heavily in private label innovation with more than 200 new Sprouts brand items coming to market this year, with a focus on “relevant test profiles and health attributes,” Sinclair said.
The retailer’s efforts are gaining attention not only from shoppers, but also the larger industry.
“We were honored this year to receive many Vertex awards, including Retailer of the Year and several gold, silver and bronze awards for our curated products. With eliminating the guesswork of finding health alternatives, because differentiated healthy options are who are and what we sell,” he said.
Sprouts improves shopping experience in stores and online
As part of the retailer’s strategy to appeal to “health enthusiasts” who are willing to pay more for higher quality products, Sprouts also is actively improving the shopping experience in store and online, said Sinclair.
“We rolled out a more active sampling program that helps support trial and basket growth of our unique and heathy offerings, including Sprouts brand products. And while our enhanced customer service program is just off the ground, we’re seeing scores for in-store satisfaction improve beyond our early goals,” he said.
A redesign and optimized search function also helped boost the retailer’s e-commerce shopping experience, making it more personalized and relevant for shoppers thanks to a menu redesign and the introduction of a shoppable flyer.
“Communicating and connecting with customers more effectively continues to be a top priority and opportunity for Sprouts. Almost 80% of our media is now spent on digital aimed at driving more shopping occasions with our target customers, and supported by data-driven plans,” Sinclair added.
“Our Find Your Healthy creative campaign is evolving to use more enticing food photography to communicate freshness and more away from animations. Our new creative approach is designed to work in tandem with our digital media plan that focuses on each stage of the customer journey,” he explained.
With these new initiatives in place, and as illustrated by the past two quarters’ results, Sinclair says he is confident in Sprouts’ strategy to become the “healthy specialty retailer of choice” in even in a challenging macro environment.
