SFM Q2 2025: Comps Accelerate to 15% Two-Year Stack
- Robust Loyalty Program Rollout: Early pilot results and rapid expansion, particularly in Arizona and recently across multiple stores, suggest strong customer engagement. The management's confidence in its eventual positive impact on comps and customer retention underpins long‑term revenue growth.
- Digital and E‑Commerce Momentum: The fastest growing penetration rate on shop.sprouts.com, coupled with strong performance from multiple digital partners, supports a rising trend in online sales and brand loyalty, reinforcing Sprouts' competitive positioning.
- Strong Innovation and Product Differentiation: Ongoing emphasis on launching innovative, attribute‑based products and securing long‑term supplier contracts in organic produce helps create a moat against competitors, positioning the company favorably to capture a growing segment of health‑conscious consumers.
- Margin Pressure Risk: The transition to self-distribution in meat and seafood is expected to deliver long‐term margin benefits, but in the near term, it adds transitional costs and uncertainty over how quickly these benefits will materialize.
- Cannibalization and Store Density Risk: With significant new store growth—including the impact of the 2024 vintage stores entering the comparable store base—there is a risk of cannibalization as increased density could pressure sales across locations.
- Delayed Loyalty Program Benefits: Although the new loyalty program is rolling out, its positive impact on comps is anticipated mainly in 2026, leaving near-term performance dependent on execution and growth in customer engagement.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable Store Sales Growth | Q2 2025 | 6.5% to 8.5% | no current guidance | no current guidance |
Diluted EPS | Q2 2025 | $1.19 to $1.23 | no current guidance | no current guidance |
EBIT Margin Expansion | Q2 2025 | 60 basis points | no current guidance | no current guidance |
Comparable sales growth | Q3 2025 | no prior guidance | 6% to 8% | no prior guidance |
EPS | Q3 2025 | no prior guidance | $1.12 to $1.16 | no prior guidance |
Total Sales Growth | FY 2025 | 12% to 14% | 14.5% to 16% | raised |
Comparable sales growth | FY 2025 | 5.5% to 7.5% | 7.5% to 9% | raised |
EBIT | FY 2025 | $640 million to $660 million | $675,000,000 to $690,000,000 | raised |
EPS | FY 2025 | $4.94 to $5.10 | $5.2 to $5.32 | raised |
Corporate Tax Rate | FY 2025 | 24% | 24% | no change |
Capital expenditures net of landlord reimbursements | FY 2025 | $230 million to $250 million | $230,000,000 to $250,000,000 | no change |
New store openings | FY 2025 | 35 new stores | 35 new stores | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Loyalty Program Development | Early calls (Q1 2025, Q4 2024, Q3 2024) focused on a test-and-learn approach in 35 stores, pilot success, and data gathering for future comparable sales improvements | Q2 2025 features an expanded rollout (35 stores initially, expanding to 70–75 in Arizona with expectations for a nationwide rollout by October 2025) and emphasizes smooth execution and strong customer signup | Rollout accelerated; transition from pilot testing to full-scale execution with improved customer enrollment and data integration. |
Digital and E-Commerce Momentum | Discussions in Q1 2025, Q4 2024, and Q3 2024 highlighted robust e-commerce growth (growth rates ranging 28%–37%), key role of partnerships (Instacart, DoorDash, Uber Eats), and omnichannel strategy | Q2 2025 maintains strong digital momentum with 27% e-commerce growth, emphasis on shop.sprouts.com performance, and a shift toward personalized outreach | Consistent digital growth with steady performance; minor tactical refinements in digital strategy and personalization efforts. |
Self-Distribution Transition | Q1 2025 and Q4 2024 discussions noted challenges in self-distribution (particularly for fresh meat/seafood) with short-term margin risks and empty shelves, balanced by long‐term efficiency expectations | Q2 2025 continues to highlight short-term operational challenges that may impact margins while stressing that long-term supply chain efficiency will be enhanced as self-distribution matures | Ongoing transitional challenges remain; focus persists on long-term benefits despite current short-term margin risks. |
New Store Expansion | Prior periods (Q1 2025, Q4 2024, Q3 2024) emphasized regional growth, an expanding pipeline (ranging from around 110 new stores to nearly 120 approved), cannibalization risk estimation, and strong new store comps | Q2 2025 reaffirms the expansion strategy with plans to open 35 new stores and a robust pipeline of over 130 approved locations, while managing cannibalization tradeoffs | Accelerated expansion with robust pipeline; confidence in performance even as potential cannibalization is managed. |
Innovation and Product Differentiation | Previous calls (Q1 2025, Q4 2024, Q3 2024) stressed rapid product innovation with thousands of new items, emphasis on organic, gluten-free, and attribute-based offerings, and a strong Sprouts Brand | Q2 2025 continues a strong innovation agenda with plans to release over 350 new products, reinforced by loyalty program data to better tailor organic and attribute-based offerings | Sustained focus on innovative product introductions and differentiation; integration of loyalty data deepens the strategy. |
Margin Expansion and Operational Efficiency | Earlier periods (Q1 2025, Q4 2024, Q3 2024) highlighted improvements in gross margins through better inventory management, shrink control, and technology investments such as self-checkout and process enhancements | Q2 2025 continues to emphasize margin gains driven by effective inventory and category management while signaling ongoing technology and process improvements | Consistent operational improvements and margin gains; strategic initiatives remain steady with continuous process enhancements. |
Supply Chain and Inventory Management | Q1 2025 noted issues like avian flu impacting eggs and tight inventory levels, while Q4 2024 and Q3 2024 discussed improvements in shrink management and ongoing distribution challenges | Q2 2025 stresses that past disruptions have normalized and highlights efforts to further expand distribution capacity and advance self-distribution initiatives | Shift from disruption-driven volatility to stabilization; focus now is on capacity expansion and self-distribution improvements. |
Macroeconomic and Marketplace Uncertainty | In Q1 2025, Q4 2024, and Q3 2024 there were discussions of consumer confidence, tariff/building cost pressures, and cautious store development in an uncertain economic environment | Q2 2025 notes consistent inflation trends matching the CPI, strong customer resilience, and careful focus on challenges like produce freshness in new markets | Ongoing external uncertainties persist, yet customer resilience and strategic cautiousness maintain overall growth optimism. |
Distribution Center Expansion | Q1 2025, Q4 2024, and Q3 2024 mentioned plans and initial steps for DC expansion to support self-distribution with improvements in existing centers and plans in key regions | Q2 2025 discusses further expansion plans in Northern California, with future builds in the Midwest and Northeast coupled with self-distribution for fresh meat and seafood | Continued strategic expansion of DC capacity to underpin self-distribution and support regional growth. |
One-Time Sales Drivers | In Q1 2025, Q4 2024, and Q3 2024, one-time events (e.g. a harsh cold & flu season, grocer strike, modest hurricane effects, or wildfires) were noted as temporary boosts or immaterial in net impact | Q2 2025 explains that previous one-time drivers (a strong produce season and disruptions in the natural organic space due to UNFI) have normalized, returning sales to a stable baseline | Declining emphasis on one-time events; earlier anomalous sales drivers have normalized, indicating a more stable, recurring sales run rate. |
Health and Wellness Trends | Past calls (Q1 2025, Q4 2024, and Q3 2024) uniformly underscored the shift toward health and wellness with robust organic growth, tailored attribute-based offerings and expanding demand among discerning customers | Q2 2025 maintains a strong focus on health-oriented trends with organic products accounting for a significant sales share, continued product innovation, and integration with loyalty insights | Sustained robust consumer demand; health and wellness remain core to Sprouts' identity with deepening integration into product innovation and marketing strategies. |
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Comp Momentum
Q: Sustainable comps acceleration?
A: Management noted a strong two‐year comp acceleration in May and June, driven by a robust produce season and organic performance, and they expect a steady 15% two-year stack moving forward with further clarity from upcoming periods. -
Margin Outlook
Q: Impact of supply issues on margins?
A: Leadership explained that recent UNFI challenges were minimally disruptive, and while current margins benefit from improved shrink and supply chain efficiencies, self‑distribution in meat and seafood will drive long‑term margin gains rather than immediate changes. -
Loyalty Program
Q: When will loyalty benefits show?
A: Management described an evolving loyalty rollout—initially strong in Arizona with near-immediate signups, but they expect significant comp benefits to materialize in 2026 once the program’s data matures and full rollout is complete. -
New Store Performance
Q: How are new stores faring?
A: They reported outstanding performance from 12 new stores and are on track to open 35 more stores this year, with new-format operational consistency helping to integrate these locations into the comp base effectively. -
Growth & Wallet Share
Q: Can wallet share improve significantly?
A: Management is targeting higher wallet share by leveraging prepared foods and health-focused attributes; while current share is about 13%, they see potential to improve this, though reaching 20% remains uncertain. -
Digital Strategy
Q: What’s driving digital growth?
A: Leaders highlighted that the company’s digital platform, particularly shop.sprouts.com, is experiencing the fastest penetration due to enhanced customer engagement and a seamless digital experience. -
Product Innovation
Q: How is product innovation maintained?
A: The firm continues to invest in entrepreneurial sourcing and long-term supplier partnerships, ensuring a steady flow of innovative, organic, and attribute-based products that differentiate its offerings.
Research analysts covering Sprouts Farmers Market.