Sprouts Farmers Market, Inc. (SFM) Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered an EPS beat and slight top-line miss versus consensus: diluted EPS $1.22 vs $1.17*, revenue $2.20B vs $2.22B*, with EBITDA also ahead ($198.1M vs $193.0M*) .
• Comparable store sales decelerated to 5.9% amid tough laps and a softening consumer, while gross margin expanded 60 bps YoY to 38.7% on improved shrink .
• Guidance was tempered: FY 2025 comps lowered to ~7% (from 7.5–9.0%) and net sales growth to ~14% (from 14.5–16.0%); Q4 comps guided to 0–2% and EPS $0.86–$0.90 .
• Strategic catalysts: full launch of Sprouts Rewards loyalty (early signs of higher frequency/sales per customer) and continued self-distribution transition in meat/seafood to improve in-stocks; board authorized a new $1.0B repurchase (Q3 buybacks $50M) .

What Went Well and What Went Wrong

• What Went Well

  • Margin execution: gross margin rose to 38.7% (+60 bps YoY) primarily from improved shrink, supporting EBIT margin of 7.2% .
  • Private label and attributes: Sprouts Brand exceeded 25% of sales, and e-commerce grew 21% to ~15.5% of total sales (baskets strong across partners) .
  • Strategic progress: loyalty fully launched with early indicators of increased shopping frequency and sales per customer; self-distribution in meat/seafood completed at four DCs to improve fill rates .
  • Quote: “We delivered strong earnings growth, up 34% year-on-year, with a 5.9% comp…inventory management improvements contributed to expansion of our EBIT margin.” .

• What Went Wrong

  • Top-line moderation: as the quarter progressed, comps moderated faster than expected due to challenging YoY comparisons and signs of consumer softness (traffic still positive but slowed; pressure at basket tail) .
  • Q3 revenue undershot consensus and prior cadence; Q4 guide embeds flat-to-low single-digit comps reflecting 10%+ laps in Nov/Dec and macro caution .
  • Competitive dynamics: Texas produce pricing more aggressive (HEB expansion) requiring vigilance; cannibalization running ~125–150 bps as density grows .
  • Analyst concern: risk that outsized tailwinds last year (strike, supply disruptions) are now tougher laps; management flagged pockets of prior gains (Oct 2024, Feb, May/June) .

Financial Results

Estimate comparison (Q3 2025):

• Revenue: $2.200B actual vs $2.224B consensus* (miss)
• EPS: $1.22 actual vs $1.17 consensus* (beat)
• EBITDA: $198.1M actual vs $193.0M consensus* (beat)
  Values marked with * retrieved from S&P Global.

Product mix (category disaggregation):

Selected KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “In the third quarter, we delivered strong earnings growth, up 34% year-on-year, with a 5.9% comp…inventory management improvements in supply chain contributed to the expansion of our EBIT margin.” — CEO Jack Sinclair .
• “Traffic remained positive…e-commerce sales grew 21%…Sprouts Brand now represents more than 25% of our total sales.” — CFO Curtis Valentine .
• “As the quarter progressed, our comp sales moderated faster than expected as we came up against challenging year-on-year comparisons, as well as signs of a softening consumer.” — CEO Jack Sinclair .
• “Sprouts Rewards is fully launched this week…encouraging indications of increased shopping frequency and sales per customer.” — CEO Jack Sinclair .
• “Through October, we have successfully completed [meat/seafood self-distribution] transition at four DCs…anticipate completing by Q2 2026.” — CEO Jack Sinclair .
• “Quarter to date [Q4], we are just north of a 1, up against that 13% [October] last year…the two-year has started to stabilize.” — CFO Curtis Valentine .

Q&A Highlights

• Top-line cadence and Q4 comps: two-year stacks stabilizing; Q4 comps guided 0–2% given 10%+ laps in Nov/Dec; margins expected stable YoY at the EBIT level .
• Loyalty impact: initial data shows higher frequency and sales per customer; expect meaningful comp contribution in 2026 as data depth improves .
• Competition: Texas produce pricing more aggressive with HEB expansion; Amazon/Whole Foods monitored (focus shifted to 365 entry price); price gap intact elsewhere .
• Cannibalization: ~125–150 bps as density grows; viewed as within expectations and manageable .
• Capital allocation: will be opportunistic on buybacks under new $1.0B authorization (remaining ~$966M) .
• Prepared foods and protein: building salads/meals programs; protein assortment a key attribute-led growth area .

Estimates Context

• Q3 2025 actuals vs consensus: EPS $1.22 vs $1.17* (beat); revenue $2.200B vs $2.224B* (miss); EBITDA $198.1M vs $193.0M* (beat) .
• Q4 2025 guidance vs consensus: EPS $0.86–$0.90 vs ~$0.885*; revenue consensus ~$2.155B* — guidance implies subdued comps consistent with laps and macro caution .
• FY 2025: comps and net sales growth tempered; EBIT range narrowed; EPS range tightened; consensus may drift lower on sales/comp while EPS largely maintained given margin execution .
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Earnings power intact despite softer top-line: EPS/EBITDA beat driven by shrink and margin discipline; revenue miss reflects tough laps/consumer softness — near-term narrative centers on comp stabilization through Q4 .
• Guidance reset mainly on comps/sales; EPS range preserved: FY comps ~7% and sales ~14% lower than prior guide, while EPS range narrowed but maintained at mid-point — supports margin stability even at low-end comps .
• Structural levers in place for 2026: loyalty scaling (early lift), self-distribution improvements, innovation pipeline and private label penetration underpin medium-term comp/margin trajectory .
• Watch competitive intensity in Texas produce and ongoing cannibalization (~125–150 bps) as store density rises; pricing vigilance continues .
• Capital returns remain robust: $1.0B buyback authorization (~$966M remaining) with strong YTD cash from operations ($577M), providing downside support .
• Trading lens: near term, results/guidance likely pressure top-line expectations; medium term, loyalty/self-distribution and margin discipline support EPS durability; monitor Q4 two-year stacks, in-stock improvements, and early loyalty KPIs .

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Additional Q3-period press releases:

• NIL partnerships expand PowHERed by Sprouts platform, reinforcing brand positioning in wellness and community engagement .
• Row 7 Seed partnership brings flavor-first produce varieties to CA stores, supporting differentiation in perishables .
• Healthy Communities Foundation awarded $3.3M across 550+ local partners in a single day, strengthening community ties .

Structural update:

• Executed a new 10-year primary distribution agreement with KeHE (effective Aug 2025), covering bakery, bulk, dairy, deli, grocery, frozen, HBC, vitamins/supplements with defined service levels, code-life standards, fuel surcharges, and credit policies –.