Sprouts Farmers Market Q3 Earnings Call Highlights

Key Points

• Q3 sales increased 5% to $2.3 billion, driven by new-store growth, but comparable-store sales fell 0.9% as transactions declined 3.3%. A cyclospora disruption reduced comparable sales by approximately 60 basis points, while EPS decreased 1% to $1.21.
• Sprouts opened a quarterly-record 15 stores and grew e-commerce sales 12%, with digital sales exceeding 16% of total revenue. The company reiterated plans for 42 net new stores in 2026 and cited strong performance from recent store vintages.
• The company lowered its full-year outlook and plans deeper investments in pricing, affordability, technology and supply chain capabilities. It expects about 4.3% sales growth, -1.7% comparable-store sales and approximately $4.80 in diluted EPS for the year.

Sprouts Farmers Market NASDAQ: SFM reported third-quarter 2026 sales growth driven by new stores, but comparable-store sales declined as customer traffic softened and a cyclospora disruption affected results. The company lowered its full-year outlook and said it plans deeper investments in affordability, pricing, technology and supply chain capabilities to improve traffic and strengthen its core-store performance.

Total sales rose 5% from a year earlier to $2.3 billion, an increase of $104 million. The growth reflected strong performance from newly opened stores, partly offset by a 0.9% decline in comparable-store sales. Comparable transactions fell 3.3%, while comparable basket size increased 2.5%.

CFO Curtis Valentine said the cyclospora disruption reduced comparable sales by approximately 60 basis points during the quarter. Comparable sales had shown progress through July but softened in August and September, he said, and did not improve even as comparisons became easier.

Net income was $113 million, while diluted earnings per share totaled $1.21, down 1% from the prior-year period. Third-quarter EBIT was $153 million. Gross margin declined 50 basis points to 38.2%, primarily due to higher shrink associated with lower sales and the cyclospora disruption, as well as higher fuel costs. Those factors were partly offset by benefits from self-distribution.

Store growth and digital sales remain areas of strength

Sprouts opened 15 stores during the quarter, its largest quarterly opening cadence, and closed one underperforming location when its lease expired. The company ended the quarter with 504 stores in 25 states and has opened 27 net new locations year to date.

The company reiterated its expectation to open 42 net new stores in 2026. Management said its 2026 store class is exceeding expectations, while recent store vintages are generating positive comparable sales in their second, third and fourth years.

“New stores remain a key proof point around the overall potential of our model,” Valentine said, adding that the company has more than 105 executed leases and more than 160 approved new stores in its pipeline.

E-commerce sales increased 12% and represented more than 16% of total sales. Sprouts also expanded its delivery reach through the launch of Shipt as its fourth e-commerce platform. Its Sprouts Brand private-label offering represented about 26% of sales and continued to outpace national brands, according to management.

President, Chief Operating Officer and incoming CEO Nick Konat said the digital business reflects demand for products that can be harder to find elsewhere. He said e-commerce customers have larger baskets and tend to shop across channels.

Company plans pricing reset as traffic pressure broadens

Management said it is responding to increased competition, greater customer focus on affordability and softening behavior among both less-engaged and core shoppers. Konat said the largest traffic losses have continued to come from less-engaged customers, particularly those with somewhat lower incomes, though the company recently saw some softening in trips and units purchased among its core customers as well.

“Our efforts to date have not been enough, and our current pricing strategy has not delivered against that goal,” Konat said.

Sprouts plans to reduce prices on healthy and holiday staples during the fourth quarter and will launch a rebuilt national pricing strategy in January. Konat said the strategy is not intended to be broad-based discounting or an attempt to compete solely on price. Instead, it will focus on improving value within Sprouts’ differentiated assortment, including more affordable entry points, high-frequency “trust builder” products and items important to its target health-focused customer.

Management cited products including Wellness Bowls priced below $10, $29.99 family meals for four and $4 fresh-baked organic sourdough as examples of offerings that combine convenience, differentiation and value.

The company said prior pricing and assortment tests produced positive item- and category-level responses, but were not broad or deep enough to generate sufficient overall traffic gains. It plans to assess customer response to its next round of investments before determining the pace and scale of additional actions.

Lower outlook reflects investments and continued sales pressure

For the full year, on a 52-week basis, Sprouts now expects total sales growth of about 4.3% and comparable-store sales of approximately negative 1.7%. The company expects EBIT of roughly $605 million, capital expenditures net of landlord reimbursements of about $310 million, and diluted earnings per share of approximately $4.80, assuming more than $300 million in share repurchases.

For the fourth quarter, Sprouts projected comparable-store sales of negative 2% to negative 4% and diluted EPS of $0.47 to $0.51. The forecast includes approximately 90 basis points of gross-margin deleverage from affordability investments and roughly 170 basis points of SG&A deleverage, reflecting fixed-cost pressure from lower sales and higher store labor and benefits costs.

The company said 2026 is a 53-week fiscal year and expects the additional week to contribute approximately $190 million in sales, $20 million in EBIT and $0.16 in diluted EPS.

Valentine said Sprouts expects EBIT margins to remain above 5% as it invests in the business, though it has not yet provided 2027 guidance. Management pointed to self-distribution, retail media, loyalty data, vendor partnerships, sourcing initiatives and cost savings as potential longer-term offsets to affordability investments.

Sprouts generated $555 million in operating cash flow year to date and invested $275 million in capital expenditures net of landlord reimbursements. It repurchased 3.9 million shares for $299 million through the third quarter and had $537 million remaining under its $1 billion repurchase authorization.

Outgoing CEO Jack Sinclair, who will become executive chairman, said the company’s recent performance needs to improve. He expressed confidence in Konat, who will assume the CEO role, and said the company will work on both short- and long-term actions to reposition Sprouts for future growth.

About Sprouts Farmers Market (NASDAQ:SFM)

Sprouts Farmers Market, Inc NASDAQ: SFM is a specialty grocery retailer focused on fresh, natural and organic foods. Its stores offer a broad selection of fresh produce, meat and seafood, dairy products, bulk foods, vitamins and supplements, pantry staples, bakery items, deli products and prepared foods. The company emphasizes products that support healthy eating, including organic, plant-based and specialty-diet options.

Founded in 2002, Sprouts Farmers Market grew from its first store in Chandler, Arizona, into a national grocery chain.

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