Sprouts to expand private brands, adds TJ’s exec to board

Dan Ochwat
Executive Editor
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On the same day as its upbeat fourth-quarter earnings report, Sprouts Farmers Market announced an interesting addition to its board of directors. Joining the board is Doug Rauch, a grocery veteran who spent 31 years at Trader Joe’s — including 14 as president — helping that retailer sculpt its private label foods, strategy and personality, growing it from nine stores in California to its national status today.

The move could be seen as one more toward Sprout’s growing focus on its private brands, given that the company noted in the late earnings call Thursday that it plans to expand its store brand products. In addition, the Phoenix-based retailer expects to grow its total store count by 20.

During the earnings call, commenting on the recent fates of Lucky’s Market and Earth Fare, two other natural and organic-focused retailers, CEO Jack Sinclair said, “I think some things we probably have learned from one or two of those [bankrupt] competitors is, if you spend too much money and too much capital and invest too much in labor in certain categories, and particularly in dairy and prepared foods, you can put yourself in a place where it's very difficult to make the returns that you'd want to make."

Sprouts Farmers Market instead is focusing on a tighter promotional strategy, Sinclair said. “We focused our promotional activity by responding to opportunities in the marketplace rather than reacting to promotional pricing elsewhere, resulting in improved cost of merchandise. We focused on display and presentation of items that differentiate us in the marketplace and provide uniqueness to the customer."

Much like its private brands, the retailer is having success through differentiation. Fourth-quarter earnings reflected that: For the three months ended Dec. 29, Sprouts beat its guidance on net sales by posting $1.4 billion in revenue, an 8% increase from the same period in 2018. It also beat guidance on same-store sales, which grew 1.5%; the grocer posted two-year same-store sales growth of 3.8%. The company reported a fourth-quarter profit of $31.6 million.

Read more on the earnings results at sister publication Progressive Grocer.