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Sprouts Farmers Market Harvested Industry-Leading Comp Sales In Recent Quarter

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Sprouts Farmers Market Harvested Industry-Leading Comp Sales In Recent Quarter

Despite a 15 percent loss in its stock since the start of 2016, Bob Summers of Macquarie Capital argued that Sprouts Farmers Market Inc (NASDAQ: SFM) remains an "attractive long-term growth" story.

Sprouts reported its second-quarter results last Thursday. which exceeded Summers' earnings expectations. The analyst noted that the results were "strong," despite a "challenging" operating environment and a "persistent" deflation and heightened promotional operating environment.

Sprouts managed to grow its revenue by 14.2 percent year-over year and achieve a 4.1 percent comparable-store sales growth while gross margin expanded 40 basis points to 29.6 percent.

Related Link: BMO Suggests Opportunistic Investors Look For An Entry Point In Sprouts Farmers Market

Summers also pointed out that enterprise prices turned deflationary in the quarter as prices on average fell 1 percent year-over-year. The company guided towards a 1 to 2 percent deflationary environment through the rest of fiscal 2016, which resulted in a lowered guidance for the full year.

Sprouts now expects comparable-store sales to grow just 3.5 to 4.5 percent, down from a prior guidance of 4 to 6 percent. The company also revised its earnings per share estimate for the full year lower to a range of $0.92 to $0.94 from a prior guidance of $0.96 to $0.98.

Despite the near-term uncertainty, Summers stated that the company's management team is "making the proper investments necessary" to maintain its long-term growth profile and strategy of taking share away from conventional peers.

Finally, the analyst suggested that Sprouts' downward revised guidance "were widely anticipated" and reiterated an Outperform rating on the stock with a $35 price target.

At time of writing, Sprouts shares were trading down 2.33 percent at $22.47.

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Latest Ratings for SFM

DateFirmActionFromTo
Dec 2020Goldman SachsDowngradesNeutralSell
Nov 2020MKM PartnersMaintainsBuy
Oct 2020UBSMaintainsNeutral

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