Q4 2024 Earnings Summary
- Strong Comparable Store Sales Growth and Momentum: Sprouts reported a significant increase in comparable store sales, with Q4 2024 comps up 11.5% and expects Q1 2025 comps to be in the range of approximately 10% to 11%. This growth is broad-based and balanced across channels, geographies, baskets, and traffic , driven by both new and existing stores . The company is also seeing strong e-commerce growth, with sales increasing approximately 37%, representing 14.5% of total sales.
- Strategic Expansion Plans and New Store Openings: Sprouts plans to open at least 35 new stores in 2025 , with a smooth opening schedule throughout the year. The company is focused on densifying its current footprint and setting the stage for future expansion into new regions, including the Midwest and Northeast . Discussions indicate potential expansion into East Coast markets, such as Westchester County , highlighting opportunities for growth in underserved areas.
- Margin Expansion and Operational Efficiency Enhancements: The company anticipates continued expansion of gross margins, expecting an improvement of approximately 25 to 30 basis points for 2025. This is driven by efforts to reduce shrink and leverage the supply chain. Investments in technology like self-checkout have enhanced store capacity, supporting increased traffic and basket size without compromising customer experience. Additionally, Sprouts is transitioning to self-distribute its meat and seafood categories, further improving supply chain efficiency and margins .
- Uncertainty in the marketplace: Sprouts Farmers Market's management acknowledged significant uncertainty in the marketplace, which may impact future growth and has led to cautious guidance for 2025. This uncertainty is due to economic factors affecting consumer behavior and could result in sales volatility.
- Store growth below long-term targets: The company plans to open at least 35 new stores in 2025, which is below their long-term target of 10% growth. They face constraints such as developer issues, high interest rates, and steel tariffs, which may hinder their ability to accelerate store growth and affect overall expansion.
- Potential capacity constraints with smaller stores: Sprouts' shift to smaller store formats may lead to potential capacity constraints if high sales growth continues. This could limit the company's ability to fully capitalize on increased customer traffic and higher basket sizes in existing stores.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 18% increase (from $1,698M in Q4 2023 to $1,996M in Q4 2024) | Robust sales momentum driven by higher comparable store sales, new store openings, and expanded e-commerce operations—factors that had already been strengthening in previous periods—fueling an 18% growth in revenue. |
Perishables Revenue | 18% increase (from $959.39M in Q4 2023 to $1,135.77M in Q4 2024) | Increased consumer focus on health and fresh offerings, coupled with improved in-store traffic and product availability (continuing trends from Q3 improvements), contributed to an 18% rise in perishables revenue. |
Non-Perishables Revenue | 16.5% increase (from $739.16M in Q4 2023 to $860.42M in Q4 2024) | Overall sales expansion and enhanced e-commerce activity—which had already started to boost the non-perishables segment in previous periods—drove a 16.5% YoY rise in non-perishables revenue. |
Operating Income | 53% increase (from $69,438K in Q4 2023 to $106,463K in Q4 2024) | Improved gross margins (rising from previous quarter levels) and efficient cost management, including operational optimizations and scale benefits from higher sales, led to a significant 53% increase in operating income. |
Net Income | 59% increase (from $50,049K in Q4 2023 to $79,602K in Q4 2024) | Strong sales growth, better margin performance, and reduced relative SG&A expenses (partly due to operational improvements like those seen in earlier periods) resulted in a nearly 59% jump in net income, with EPS improvements reflecting these operational gains. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable Store Sales Growth | Q1 2025 | no prior guidance | Expected to be in the range of 10% to 11% | no prior guidance |
Adjusted EPS | Q1 2025 | no prior guidance | Expected to be between $1.51 and $1.55 | no prior guidance |
Gross Margin | Q1 2025 | no prior guidance | Expected to improve by approximately 50 basis points | no prior guidance |
SG&A Margin | Q1 2025 | no prior guidance | Expected to improve by approximately 75 basis points | no prior guidance |
Total Sales Growth | FY 2025 | no prior guidance | Expected to be 10.5% to 12.5% | no prior guidance |
Comparable Store Sales Growth | FY 2025 | no prior guidance | Expected to be in the range of 4.5% to 6.5% | no prior guidance |
New Store Openings | FY 2025 | no prior guidance | At least 35 new stores planned | no prior guidance |
Adjusted EBIT | FY 2025 | no prior guidance | Expected to be between $590 million and $610 million | no prior guidance |
Adjusted EPS | FY 2025 | no prior guidance | Expected to be between $4.52 and $4.68 | no prior guidance |
Corporate Tax Rate | FY 2025 | no prior guidance | Expected to be approximately 25% | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | Expected to be between $230 million and $250 million, net of landlord reimbursements | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | Anticipated to expand, driven by reductions in shrink and supply chain leverage (offset by loyalty program rollout costs) | no prior guidance |
SG&A Margin | FY 2025 | no prior guidance | Expected to show slight leverage as higher incentive compensation from 2024 is lapped, partially offset by pressures from new store growth and e-commerce sales | no prior guidance |
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Gross Margin Expansion
Q: What's the outlook for gross margin expansion this year?
A: Curtis Valentine expects gross margin to expand by about 25 to 30 basis points for the year, with approximately 50 basis points leverage in the first quarter and slight leverage in subsequent quarters. -
Store Growth Plans
Q: Can you update us on your store growth and path back to 10%?
A: Sprouts plans to open at least 35 new stores this year, slightly accelerating from last year but not yet at the 10% long-term target. Jack Sinclair acknowledges ongoing constraints with developers and interest rates but is confident in reaching 35 stores and building more in the future. -
Comps Acceleration
Q: Are you hitting a brand tipping point with comps acceleration?
A: Jack Sinclair notes significant opportunity as the target customer base grows and spends more. While confident in the underlying business, the company maintains a 2% to 4% comp growth algorithm, aiming to deliver consistent results each quarter. -
Supply Chain Expansion
Q: How far can you push supply chain expansion into meat and seafood?
A: Jack Sinclair explains that Sprouts has built capacity and capability to handle more categories, starting with fresh meat this year. Future expansion could include private label products, but there's no plan to enter commissary operations. -
Comp Guidance Uncertainty
Q: Could comps outperform guidance given current momentum?
A: Curtis Valentine acknowledges uncertainty due to the long year ahead and macro factors. While confident in the 2% to 4% comp guidance, the company is cautious about overpromising given the unusual comparisons ahead. -
Self-Distribution Impact
Q: What's the P&L impact of moving to self-distribution?
A: Curtis Valentine expects long-term benefits from fresher products and lower costs, improving gross margin in 2026 and beyond. The transition year in 2025 is not expected to have a material impact. -
Shrink and Margins
Q: Do you expect shrink benefits to reverse as comps normalize?
A: Curtis Valentine doesn't anticipate giving back shrink benefits when comps normalize. Improvements are attributed to process efficiency and inventory management, which should continue. -
E-commerce Growth
Q: How do you view e-commerce growth in 2025?
A: Nick Konat expects e-commerce to continue growing faster than the core business, driven by differentiation and unique products. While growth may not match recent acceleration, e-commerce penetration should increase. -
Marketing Strategies
Q: How is marketing contributing to customer engagement and growth?
A: Sprouts is differentiating its marketing with authentic storytelling and tailored media, leading to balanced growth in new customers and increased visits from existing ones. -
Loyalty Program Rollout
Q: Any learnings from the loyalty program pilot?
A: Curtis Valentine reports exceeding expectations in early indicators like sign-ups and engagement. A national rollout is planned for the second half of the year to drive further customer growth. -
Potential Tariffs
Q: How will potential tariffs affect your imports?
A: Jack Sinclair notes that most products are from the U.S., with some produce from Central and South America. Sprouts is ready to adjust sourcing and manage price gaps regardless of tariff changes. -
Store Capacity
Q: Are stores too small for current growth opportunities?
A: Jack Sinclair believes the current store format is sufficient to handle increased volume, with investments in self-checkout and efficient use of space. There's room to grow without compromising customer experience. -
Wildfire Impact
Q: Have wildfires impacted your business quarter-to-date?
A: Curtis Valentine states that the impact is immaterial to comps, though some team members were displaced. Jack Sinclair praises the resilience of teams supporting affected communities. -
Store Closure Costs
Q: Will store closure costs from 2023 run off soon?
A: Curtis Valentine expects these costs to taper off over time as leases end or subleases are secured. Disaster recovery expenses are also included in this SG&A bucket. -
Health Care and SNAP
Q: Are you exploring health care partnerships or SNAP changes?
A: Jack Sinclair mentions that while health care trends are important, Sprouts is focused on unit growth and expanding its proposition. SNAP is not a significant part of their business but remains on the radar.
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