Sprouts Farmers Market, Inc. (SFM) Q1 2025 Earnings Summary

Executive Summary

Beat-and-raise quarter: Q1 revenue $2.24B and diluted EPS $1.81 vs S&P Global consensus $2.21B and $1.55; management raised full-year 2025 outlook (sales, comps, EBIT, EPS) and introduced Q2 guidance, citing broad-based traffic growth, gross margin gains, and strong new-store performance . Consensus values marked with asterisks are from S&P Global.*
Gross margin expanded 129 bps YoY to 39.6%, driven by inventory/category management and shrink leverage amid supply tightness; comps rose 11.7% (about 50 bps aided by a Colorado strike and a strong cold/flu season) .
Strategy execution advancing: loyalty program set for a phased national launch in 2H25; self-distribution of meat/seafood progressing with bridge solutions in place; e-commerce penetration reached 15%, and Sprouts Brand hit 24% of sales .
Full-year guidance raised: net sales growth to 12–14% (from 10.5–12.5%), comps to 5.5–7.5% (from 4.5–6.5%), EBIT to $640–$660M (from adj. EBIT $590–$610M), EPS to $4.94–$5.10 (from adj. $4.52–$4.68); Q2 EPS guided to $1.19–$1.23 with comps 6.5–8.5% .

What Went Well and What Went Wrong

What Went Well
- Double-digit comp growth (11.7%) and broad-based strength (brick-and-mortar traffic, category/geography balance); gross margin +129 bps to 39.6% on inventory/category management and shrink leverage . “Our diluted earnings per share reached $1.81, reflecting a 62% increase compared to the same period last year” .
- Loyalty program progressing to a national phased launch in Q3; test metrics (sign-ups/scans) meeting/slightly exceeding targets, reinforcing stickiness and personalization opportunity .
- Robust unit economics/new-store vintages and disciplined capital: new stores outperforming older cohorts; Q1 OCF $299M funded growth and $219M buybacks; 443 stores at quarter-end .
What Went Wrong
- Supply constraints and transition to self-distribution created tight in-stocks (helped shrink but risked some missed sales); eggs impacted by avian flu; management trimmed promos late in Q1 to manage supply .
- Margin normalization expected from Q2 as shrink tailwinds fade; management flagged gross and SG&A rate normalization even as they still see ~60 bps EBIT margin expansion YoY in Q2 .
- Cannibalization headwind ~100–150 bps where densifying existing markets; offset by strong new store comp contribution as higher vintages roll into the base .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$1.95	$2.00	$2.24
Diluted EPS ($)	$0.91	$0.79	$1.81
Gross Margin (%)	38.1%	38.1%	39.6%
EBIT ($USD Millions)	$122.45	$106.46	$226.33
Net Income ($USD Millions)	$91.61	$79.60	$180.03
Comparable Store Sales (%)	8.4%	11.5%	11.7%

Results vs S&P Global consensus (Q1 2025):

Metric	Consensus*	Actual
Revenue ($USD Billions)	$2.206*	$2.236
Diluted EPS ($)	$1.55*	$1.81

Estimate sources: Values retrieved from S&P Global.*
Management color: ~50 bps of comp help from a Colorado strike and a harsh cold/flu season (vitamins) .

KPIs and mix:

KPI	Q3 2024	Q4 2024	Q1 2025
Stores (end of period)	428	440	443
New stores opened	9	12	3
E-commerce as % of Sales	14.5%	14.5%	15%
Sprouts Brand % of Sales	23%	23%	24%
Cash & Equivalents ($M)	$311.7	$267.2	$285.7

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth	FY 2025	~10.5%–12.5%	12.0%–14.0%	Raised
Comparable Store Sales	FY 2025	4.5%–6.5%	5.5%–7.5%	Raised
EBIT	FY 2025	Adjusted EBIT $590–$610M	EBIT $640–$660M	Raised (and moved to GAAP)
Diluted EPS	FY 2025	Adjusted $4.52–$4.68	$4.94–$5.10	Raised (and moved to GAAP)
Unit Growth	FY 2025	At least 35 new stores	At least 35 new stores	Maintained
Capex (net of landlord reimb.)	FY 2025	$230–$250M	$230–$250M	Maintained
Corporate Tax Rate	FY 2025	~25%	~24%	Lowered
Comparable Store Sales	Q2 2025	n/a	6.5%–8.5%	New
Diluted EPS	Q2 2025	n/a	$1.19–$1.23	New

Notes: FY24 guide used “Adjusted” metrics; FY25 updated guide provided GAAP EBIT/EPS .

Earnings Call Themes & Trends

Topic	Q3 2024 (Q-2)	Q4 2024 (Q-1)	Q1 2025 (Current)	Trend
Loyalty & Personalization	Tests with sign-ups/scans meeting/exceeding goals; data foundation build	Pilot expanded to 24 more stores; phased rollout planned in 3Q25	Positive KPIs in 35 stores; national phased launch in 2H25 (start AZ)	Accelerating
Supply Chain & Self-Distribution	Planning capacity expansion; advantaged supply chain emphasis	2025 transition to self-distribute meat/seafood; benefits mainly 2026+	Bridge solution in place; some Q1 supply tightness; ramping toward DC in-sourcing from 3Q	Implementation phase
Gross Margin/Shrink	+150 bps vs adj. prior; inventory mgmt, shrink gains	38.1%; further improvement expected FY25	39.6% (+129 bps); some normalization from Q2	Strong, normalizing
Traffic vs Basket	Split fairly evenly; strong in-store/online traffic	Strong traffic across channels	~70% traffic contribution	Traffic-led
E-commerce	36% growth; 14.5% of sales	37% growth; 14.5% of sales	~28% growth; 15% of sales; broad partner strength	Gradually rising
Tariffs/Build Costs	—	Food sourcing largely U.S.; monitoring tariffs; limited impact on FY25 openings	Watching steel/lumber tariffs; no 2025 impact expected; monitoring build costs	Monitor

Management Commentary

Strategic focus: “We’re committed to enhancing our offerings, increasing customer engagement, optimizing our supply chain… We’re focused on our greatest strength, our differentiation” .
Self-distribution: “We’re taking control… to self-distribute our meat and seafood… on track to begin in-sourcing from our first Sprouts DC in the third quarter” .
Category performance and innovation: Attribute-led products (organic, gluten-free, high-protein, heritage meats) continue to outgrow; marketing events (e.g., Lemon Event, Discovery Days) drove traffic .
Financial discipline and outlook: “For 2025, we expect total sales growth to be 12% to 14%… EBIT $640–$660M… EPS $4.94 to $5.10… we do expect to continue to repurchase shares opportunistically” .
Resilience narrative: “If it’s tough, we’ll do fine. And if it’s not tough, we’ll do fine” (on recessionary risk and health-enthusiast customer behavior) .

Q&A Highlights

Investment vs margin: Continued investment in loyalty, supply chain systems/IT, and self-distribution, balanced with earnings growth ambitions; expect margin rate normalization from Q2 while still expanding EBIT margin ~60 bps YoY in Q2 .
Loyalty rollout and impact: Early KPIs strong (sign-ups/scans); focus on omnichannel experience streamlining; phased national rollout begins 2H25; aim to increase frequency and share of wallet .
Supply constraints/shrink: Meat self-distribution transition and avian flu (eggs) contributed to tight in-stocks and shrink leverage; pulled back promos late in Q1 to manage supply; expect some effects to “leak into Q2” .
Traffic-led comps: About 70% of comp from traffic; Q2 comp guide 6.5–8.5% with similar shape to Q1; business off to a good start .
Cannibalization/density: Cannibalization ~100–150 bps where densifying established markets; offset by strong new-store comps and growing pipeline (nearly 120 approved, 85+ leases signed) .

Estimates Context

Q1 2025: Revenue $2.236B vs $2.206B consensus* (+~1.4%); EPS $1.81 vs $1.55 consensus* (+~16.8%). Beat drivers: double-digit comps (traffic-led), gross margin expansion on improved inventory/category management and shrink leverage; minor one-timers (~50 bps comps) from a Colorado strike and strong cold/flu season vitamins . Consensus values from S&P Global.*
FY25: Raised outlook suggests upward estimate revisions for sales, EBIT, and EPS; management also lowered expected tax rate to ~24%, modestly accretive to EPS .

Key Takeaways for Investors

Beat-and-raise quarter with robust quality of beat (traffic-driven comps, structural gross margin improvements), positioning SFM for upward estimate revisions and supportive sentiment into 2H25 .
Margin sustainability is likely “strong but normalizing”: gross margin gains should moderate as supply tightness eases, yet EBIT margin expansion continues (guided +~60 bps YoY in Q2) .
Loyalty personalization is a 2H25 catalyst (national rollout), with early test KPIs encouraging for frequency and basket uplift; watch for monetization of customer data and targeted offers .
Self-distribution of meat/seafood is a 2026+ margin lever; 2025 is a transition year with bridge solutions in place—expect some near-term operational noise but long-term gross margin potential .
Growth runway intact: at least 35 openings in 2025, pipeline expanding, and new stores outperforming; cannibalization remains manageable (100–150 bps) and offset by strong new-store comp contribution .
Mix tailwinds persist: e-commerce penetration ~15% and Sprouts Brand 24% both rising, supporting loyalty engagement and profitability .
Watch items: supply normalization (eggs/avian flu), tariff-driven build costs (no 2025 impact expected), and how comps trend as prior-step-ups are lapped in 2H25 .

Footnote: Consensus values marked with asterisks (*) are Values retrieved from S&P Global.

Citations:

Q1 2025 press release and financials
Q1 2025 earnings call remarks and Q&A
Q4 2024 press release and call
Q3 2024 press release and call