Key Takeaways
- Sprouts Farmers Market fell 23% today after missing third-quarter earnings estimates and forecasting a 2% to 4% drop in fourth-quarter comparable store sales.
- Record store openings keep total sales growing, but transactions at existing stores fell 3.3%, and Sprouts plans to spend more on lower prices.
- Walmart and Costco are still winning shoppers, while Kroger’s sluggish sales suggest the soft consumer reaches traditional grocers too.
- Sprouts’ forward P/E was at a five-year low even before today’s drop.
Sprouts Farmers Market (SFM) sank 23% today after its third-quarter earnings missed estimates and its outlook got worse.
Outgoing CEO Jack Sinclair blamed “a challenging consumer environment and the cyclospora disruption,” but added that “we recognize the need to improve our performance.” That consumer isn’t hurting everyone: Walmart (WMT) and Costco (COST) keep pulling in more shoppers, while Kroger (KR) is struggling to grow sales too.
Record openings, fewer trips
Diluted EPS of $1.21 came in below the $1.23 analysts expected, and comparable store sales fell 0.9% as transactions dropped 3.3%. For the fourth quarter, Sprouts expects comps to fall 2% to 4%.
Sprouts opened a record 15 stores, and they lifted total revenue 5% to $2.30 billion, from $2.20 billion a year earlier.
CFO Curtis Valentine said comps softened in August and September “and did not improve as comparisons eased.”
Lower prices will cost something
Sprouts now plans to spend more on affordability, including a pricing reset in January. Its gross margin had already slipped to 38.2% in the third quarter, from 38.7% a year earlier.
TIKR tracks 16 analysts on Sprouts Farmers Market. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Sprouts Farmers Market, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Sprouts Farmers Market’s Analyst Ratings
The discounters are still winning
My read: the trips Sprouts is losing are going to the discounters. Walmart U.S. comparable sales rose 2.6% in the quarter to July 31, led by more transactions, even as Walmart ran more than 11,000 rollbacks. Its Nov. 19 report will show whether that held.
Costco’s comparable sales, excluding gas and currency, grew at least 6.4% in every quarter of its fiscal year to Aug. 30. Its October sales, due in early November, are the next check.
Kroger looks more like Sprouts. Its identical sales without fuel rose just 0.2% in the quarter to Aug. 15, and it cut its full-year forecast for them to 0.2%-0.8%. Will Kroger have to match Sprouts’ price cuts? Its third-quarter report, in early December, should tell us.
Cheap, and maybe cheaper
Sprouts’ forward P/E closed Wednesday at 11x, a five-year low and well below its 19x average.
Today’s drop takes it to about 8x, before any estimate cuts. RBC and BofA downgraded the stock, with targets of $49 and $47.
My take: I’d wait for the January price reset to bring shoppers back before buying. Of course, Sprouts says its 2026 stores are beating expectations, so the openings themselves are working. The fourth-quarter report, expected in February, is the next test.
So what is Sprouts Farmers Market stock actually worth?
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