Dive Brief:

• Sprouts Farmers Market’s net sales rose 9% year over year, to $1.9 billion, and its comparable-store sales increased 4% during its first quarter, the grocery chain reported Wednesday.
• The chain’s digital sales grew 25% during Q1, accounting for 14% of total sales.
• Sprouts’ Q1 results beat Wall Street estimates and marked another consecutive quarter of strong growth for the specialty grocery.

Dive Insight:

Sprouts credited the positive traffic trends for in-store and online shopping during Q1 to its most differentiated departments such as proteins and frozen, expanded online sales, product sourcing innovation and high customer service scores. 

“We believe we have become the destination for exciting entrepreneurial food companies to introduce their unique products to the marketplace,” Sprouts CEO Jack Sinclair told investors.

Sprouts CFO Curtis Valentine said on the earnings call Wednesday that the company has focused on improving its inventory management. The grocery chain has a larger fresh assortment than most traditional grocers, Sinclair said, and a key focus has been putting the right amount of fresh inventory in the stores at the right time.

Sprouts’ e-commerce penetration, which represents e-commerce sales as a percentage of total company sales, has steadily risen from 9.4% in 2020 each year to just above 12% in 2023. For its first quarter of 2024, Sprouts saw online penetration hit 14%. At the end of the year, Sprouts linked with Uber to roll out chainwide delivery. The company also partners with Instacart and DoorDash. Valentine said the company is seeing “strong” results across the three partners as they bring in incremental revenue and broaden the grocer’s geographic reach to customers. 

Sprouts opened seven stores in Q1 and is on track to open 35 stores by the end of 2024 in its current smaller prototype, which would translate to approximately 10% annual unit growth.

Sinclair said the company has a pipeline of approximately 100 approved new stores and 70 executed leases. He also said Sprouts is getting better at brand awareness “as we continue to densify markets.”

In its earnings presentation, the grocery chain said it sees potential for more than 300 new stores in expansion markets, which include California, Texas, Florida and the Mid-Atlantic region.

Sprouts said it is planning a market test during its next quarter for its new loyalty program, which the grocery chain has positioned as a way to boost the amount of first-party shopper data it can gather. 

“As a complementary shop, we have an opportunity to deepen our engagement with our customers and grow their share of wallet through a loyalty program,” Sinclair told investors Wednesday.

For the fiscal year, Sprouts expects total sales growth to be between 7% to 8% and comp sales in the range of 2.5% to 3.5%.

“It's very difficult to define what we do within the context of the total grocery market share. But certainly since the pandemic, I think people have been more comfortable in shopping in more places, which suits us as a complementary shop,” Sinclair told investors.