Sprouts store brand rollouts play part in quarterly gains

Retailer showed declines vs. huge pandemic-gains a year ago but strong on two-year basis, driven in part by new introductions, promotions.
Dan Ochwat
Executive Editor
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Sprouts has been active with its private brand launches, rolling out more than two dozen summer exclusives in recent weeks, and the product introductions are indicative of the grocer’s strong quarterly gains.

While the numbers may not directly show it, Sprouts reported a 7% decline in net sales, reaching $1.5 billion, but that dip is more in comparison to the unprecedented pandemic gains it saw a year ago. When compared with 2019 numbers, Sprouts is up 7% in net sales.

In same-store sales, the Phoenix-based healthy grocer reported a 10% drop in sales and the two-year comparison was relatively even. Net income was $61 million compared to net income of $67 million and adjusted net income of $70 million in the same period in 2020, and compared to net income of $35 million from the same period in 2019.

The rollouts from Sprouts that hit the summer included a trending Hatch Chile lineup as well as on-the-go meal options and snacks.

"I am pleased with our strong profit results in the second quarter, continuing to build on the positive step change in financial performance we made in 2020,” said Jack Sinclair, CEO of Sprouts Farmers Market. "As I look forward to the balance of the year, I am excited about growing our differentiated brand proposition. We continue to lead with our strategic priorities of investing in innovation and our new store format, accelerating our marketing initiatives to deepen our relationship with our target customer, and leveraging an advantaged fresh supply chain, setting the foundation for Sprouts' long-term growth.”

Q2 gross profit dropped 10.2% to $550 million, resulting in a gross profit margin of 36.1%, a decline of 115 basis points compared with the same period in 2020. The result was predominantly related to lapping opportunistic produce buys and exceptionally low shrink from elevated demand last year due to the impact from the COVID-19 pandemic. However, the grocer said that efficient promotions, attractive everyday pricing, and differentiated assortment continue to result in margins superior to historic trends, contributing to a 330 basis point increase over second quarter 2019.

During the second quarter Sprouts opened one new store, resulting in a footprint of 363 stores in 23 states as of July 4. Due to continued difficulties in obtaining necessary equipment from third parties because of supply chain delays complicated by the pandemic, approximately seven planned new store-openings in the fourth quarter of 2021 may be delayed until 2022.