Why Sprouts Farmers Market Stock Plunged Today


What happened 

Shares of Sprouts Farmers Market (SFM -24.24%) fell 24.2% on Thursday after the grocery company moved to rein in investors’ growth expectations.

So what

Sprouts’ net sales grew by 4% year over year to $1.6 billion in its fiscal first quarter, which ended on April 3. The gains were driven by new store openings and a 1.6% increase in comparable-store sales. Sprouts ended the quarter with 379 locations in 23 states, up from 362 stores at the end of the first quarter of 2021. 

Image source: Getty Images.

Sprouts’ gross profit, in turn, climbed 4% to $612 million. “We delivered top-line growth, supported by both positive comps and traffic, while simultaneously maintaining our gross margin discipline,” CEO Jack Sinclair said in a press release.

All told, Sprouts’ net income increased by 6% to $88 million. And its earnings per share, which were boosted by stock buybacks, jumped 13% to $0.79.

Now what

Investors, however, appeared to focus on Sprouts’ full-year guidance. Management now expects the company’s revenue, same-store sales, and profit growth to be “at the low end” of the forecast it provided in its fourth-quarter earnings release back in February. That forecast called for net sales growth of 4% to 6%, comp growth of 0% to 2%, and adjusted earnings per share of $2.14 to $2.24. The company also reiterated its plans to open 15 to 20 new stores in 2022.

“Inflation is not slowing and customers are continuing to put a few less items in their baskets,” Chief Financial Officer Chip Molloy said. “Despite transaction comp continuing to be positive, given the level of uncertainty in the marketplace, we believe it is prudent to assume a more conservative approach to our outlook.”

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