Sprouts sales decline, private brands on the rise

Sprouts Farmers Market saw a decrease in sales compared to Q3 of last year, but leadership says that own brands will help the chain bounce-back.
Zachary Russell
Associate Editor
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Phoenix-based Sprouts Farmers Market teased additions to its own brand program during its Q3 financial call that saw sales dip overall, but private brand innovation is on the way.

The chain recently added 16 new fall-centric own brand items to its portfolio, including an oatmilk creamer, and during the call reported another similar innovation will be joining the portfolio for the holidays.

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“Internally, we're also keeping the innovation train moving and held our first Al brand Vendor Summit with over a few hundred participants,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market. “We have launched our own brand plant-based oat whipping cream and oatmilk nog just in time for the holidays. As well, we have included new wood-fired flatbread pizzas from Italy, organic oat milk, the first of its kind in our dairy set and a vast probiotic program in the vitamin department. I think private brands will play an even bigger role in that innovation going forward. So when it comes to innovation, produce, vitamins, I think we do have differentiation.”

With innovation looking to build up Sprouts, for the third quarter ended Oct. 3, the retailer did post slight decreases across the board, but leadership remains confident that the numbers will rebound.

“Our third quarter sequential improvement in sales and robust profits, combined with the early performance of our two newly designed stores, give us confidence we are making progress in transforming Sprouts, built on the long-standing foundation of a farmer’s market heritage," said Sinclair. "Moving forward, while there is work to be done, we are supported by a robust unit growth story, passionate team members, a loyal customer base, and our fresh differentiation, providing the ingredients for long-term success as a specialty store destination."

Sprouts ended Q3 with net sales of $1.5 billion, a 4% decrease from the same period in 2020 and a 5% increase from the same period in 2019. Sprouts noted that lower 2020 numbers could be attributed to the pandemic.

"I think private brands will play an even bigger role in that innovation going forward. So when it comes to innovation, produce, vitamins, I think we do have differentiation.”
Jack Sinclair, Sprouts

Comparable store sales growth dropped 5.4%, and two-year comparable store sales growth dropped by 2.1%. Sprouts’ net income at the end of Q3 was $64 million, compared to net income of $60 million and adjusted net income of $62 million in the same period in 2020, and $26 million from the same period in 2019.

Selling, general and administrative expenses ("SG&A") for the quarter decreased $52 million to $423 million, or 28% of sales, reflecting lower COVID-19 pandemic response costs, including incentive compensation in the prior year, along with lower marketing and e-commerce expenses. Compared to the same period in 2019, SG&A increased 4.7%.

During the third quarter of 2021, Sprouts opened three new stores and had one relocation with its new store format, resulting in 366 stores in 23 states as of Oct. 3. Due to continued difficulties in equipment from third parties because of supply chain delays complicated by the COVID-19 pandemic, Sprouts said that six planned new store openings in the fourth quarter of 2021 will be delayed until 2022.