Sprouts Farmers Market Q1 Earnings Call Highlights

Key Points

• Sprouts reported Q1 sales up 4% to $2.3 billion driven by strong new-store performance while comparable-store sales declined 1.7%; e-commerce grew 10% (about 16% of sales) and diluted EPS was $1.71, down 6% year‑over‑year.
• The company opened six stores (including its entry into New York) bringing the total to 483, repurchased $140 million of stock with $696 million remaining under its authorization, and raised full‑year EPS to $5.32–$5.48 while maintaining sales growth (4.5%–6.5%) and EBIT guidance ($675–$695M).
• Management is prioritizing loyalty, targeted value actions, organics/innovation and supply‑chain improvements (including a Northern California meat self‑distribution center) to restore margin momentum, though Q2 comps are guided to -2% to 0% with about 75 basis points of near‑term EBIT margin pressure.

Sprouts Farmers Market NASDAQ: SFM reported first-quarter 2026 results that management said largely played out as expected as the company worked through “tough comparisons” and a cautious consumer environment, while continuing to invest in loyalty, targeted value actions, and supply chain initiatives.

First-quarter results: Sales growth led by new stores, comps declined

In prepared remarks, Chief Financial Officer Curtis Valentine said total sales rose 4% year over year to $2.3 billion, driven by “strong new store performance,” partially offset by a 1.7% decline in comparable store sales. Valentine also noted e-commerce sales grew 10% and represented about 16% of quarterly sales.

Valentine said Sprouts’ owned brands continued to outperform: “Sprouts brand also continued to perform well, growing faster than the rest of the business and representing more than 26% of total sales.”

On profitability, Valentine reported gross margin of 39.4%, down 20 basis points from the prior year, primarily reflecting planned loyalty investment and “unfavorable shrink performance,” partially offset by benefits from self-distribution. SG&A was $659 million, up $36 million, and deleveraged 42 basis points year over year due mainly to fixed-cost deleverage from lower comparable sales.

Earnings before interest and taxes (EBIT) were $215 million. Net income was $164 million, and diluted earnings per share were $1.71, down 6% year over year. The company’s effective tax rate was 24%.

Store growth and capital allocation: Entry into New York, repurchases continue

Sprouts opened six new stores during the quarter, ending with 483 stores across 25 states, including its entry into New York, Valentine said. The company generated $235 million in operating cash flow and funded $98 million in capital expenditures net of landlord reimbursements.

Valentine said Sprouts returned $140 million to shareholders through share repurchases, buying back 1.9 million shares. The company had $696 million remaining under its $1 billion authorization and ended the quarter with $252 million in cash and cash equivalents and $22 million in outstanding letters of credit.

2026 outlook maintained for sales and EBIT; EPS raised

Valentine said the company expects year-over-year comparisons to improve in the back half of the year and reminded investors that 2026 will be a 53-week year, with the extra week at the end of the fourth quarter. On a 52-week basis, Sprouts maintained its full-year outlook for total sales growth of 4.5% to 6.5% and comparable sales between -1% and +1%.

Sprouts still plans to open at least 40 stores in 2026, with expected full-year EBIT of $675 million to $695 million. The company expects a corporate tax rate of about 25.5% and capital expenditures net of landlord reimbursements of $280 million to $310 million.

Valentine said Sprouts increased its full-year EPS outlook to $5.32 to $5.48, assuming at least $300 million in share repurchases.

For the second quarter, management guided to comparable sales of -2% to 0% and EPS of $1.32 to $1.36. Valentine said EBIT margin pressure is expected to be about 75 basis points due to fixed-cost deleverage from lower comps, annualizing loyalty points investment, and higher fuel costs.

Strategy updates: innovation, organics, affordability, and loyalty

CEO Jack Sinclair emphasized Sprouts’ near-term priorities including “foraging and innovation,” in-store experience, loyalty and personalization, supply chain, and new store growth, along with “targeted actions to strengthen value.” He said the company is expecting “sequential improvement” through 2026 as comparisons ease.

Sinclair said attribute-driven products and organics remain central to Sprouts’ differentiation. In the quarter, he said more than 55% of produce sales were organic and “over 34% of total sales came from organic products.” He also said the company has already launched 1,500 new items in 2026, citing examples including Press Coffee, Pendulum Probiotics, and a protein soda. Sinclair pointed to Sprouts-branded innovations such as “regenerative organic certified coffee, seed oil-free hummus, and beef tallow kettle chips.”

On affordability, Sinclair said the company is working to provide meal solutions such as “Wellness Bowls under $10,” “$5 Sushi Wednesday,” and “our $4.99 sandwiches.” He added that Sprouts took initial price reductions on a small number of SKUs, including coffee and other essentials, and is reshaping promotions to be “more streamlined and targeted.”

President and COO Nick Konat told analysts the deli value initiatives have been effective, saying Wellness Bowls, parfaits, and value meal programs have driven “both basket and traffic” in those areas. He said pricing efforts are focused on putting “a few more items in the basket” and getting core customers to return more frequently.

On loyalty, Konat said customer sentiment remained favorable after updates made in early 2026, including more tangible value through point multipliers and personalization. He said core loyalty customers have been steady and that new members are joining and “continuing to spend and spend more.” Sinclair said Sprouts is adding resources to increase the pace of testing and learning, while noting vendor participation has been strong.

Q&A highlights: consumer pressure, comps cadence, fuel, and supply chain

During Q&A, Sinclair said Sprouts’ “loyal customers have stuck very much to us,” while “less engaged customers are feeling a little bit more pressure,” which he suggested could relate to income levels. He said the company is focused on actions within its control, including value and expanded deli options for “healthy, cheaper food.”

Valentine provided detail on first-quarter comp cadence, citing a competitor strike benefit last year that affected comparisons. He said February was the weakest month, while January and March were similar. Entering April, Valentine said Sprouts was “just slightly ahead of the midpoint” of its second-quarter comp guidance. He also highlighted moving parts from last year including favorable produce seasonality in May and June and a June tailwind from a cyber incident affecting the natural and organic space.

On fuel, Valentine said higher costs are embedded in second-quarter expectations, but not much is assumed for the second half given volatility. He said Sprouts expects margins to stabilize as loyalty investment is fully anniversaried in the third quarter, shrink comparisons ease (particularly in the fourth quarter), and benefits from meat self-distribution become clearer after the Northern California distribution center opens.

Sinclair said the Northern California distribution center is on track to open in the second quarter and will complete Sprouts’ initial meat self-distribution journey. He also said the company is seeing strong performance from new stores, including its early results entering New York, and noted a pipeline of nearly 150 approved new stores and more than 105 executed leases.

About Sprouts Farmers Market NASDAQ: SFM

Sprouts Farmers Market, Inc NASDAQ: SFM is a specialty grocery retailer focused on fresh, natural and organic foods. Headquartered in Phoenix, Arizona, the company operates stores designed to offer an open-market shopping experience, emphasizing quality produce sourced from regional farmers alongside organic pantry staples, dairy, meat and seafood. Sprouts' product assortment also includes bulk foods, vitamins and supplements, a deli and prepared foods, reflecting its commitment to wellness and affordable healthy living.

Founded in 2002 by members of the Boney family, Sprouts began as a single farmers market in Chandler, Arizona.

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