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Coronavirus Ruining Your Portfolio? Bet On Sprouts Farmers

Zacks Equity Research

The rapidly spreading novel coronavirus has claimed innumerable lives, roiled the stock market and brought the economy to standstill. The retail sector, in particular, has been hit hard by this pandemic. Supply-chain bottlenecks and reduced traffic has led to a number of store closures, which in turn hurt sales and productivity. Moreover, some of the companies are even slashing pays and furloughing employees.

However, even amid such crisis Sprouts Farmers Market, Inc. SFM looks quite resilient owing to the company’s business model and products it offers, which have been in demand since the outbreak. Notably, shares of this provider of fresh, natural, and organic food products have gained 5.6% in the past three months against the industry’s decline of 27.6%. Even the stock has fared far better than the Retail – Wholesale sector and the S&P 500 index that have fallen 8.4% and 15.3%, respectively, in the aforementioned period.

Let’s Introspect

A paradigm shift in consumers buying behavior is being noticed due to the pandemic. People are shopping essential items rather than making discretionary purchases. There has been an increased demand for grocery, packaged water, hand sanitizers, tissue paper, cleaning wipes, infant supplies and related staples.

In an effort to expand customer base, Sprouts Farmers is taking several initiatives focused on product innovation, customer experience and technology. The company is lowering operational complexity, optimizing production and improving in-stock position. It has launched Sprouts.com website and mobile app to help customers experience hassle-free shopping. Moreover, the company has partnered with Instacart to offer same-day delivery to customers. The home delivery business is now available in most of the company’s stores.

The company’s digital subscribers increased significantly last year. The company has tested self-checkout in few of its stores and will extend the same to other stores in the current financial year. The company is trying all means to provide ready-to-eat, ready-to-heat, and ready-to-cook items to customers. Apart from these, the company is trying to expand private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands. Product innovation continues to drive sales in private label items.

Management continues with its investment to improve operating efficiencies. Sprouts Farmers’ fresh item management technology in all its departments to lower operational complexity, optimize production, improve in-stock position, reduce shrink and drive incremental sales. The company has entered into the second phase of Fresh Item Management Technology, deploying computer-assisted ordering. This will provide fresher product to customers, improve sales floor conditions and lower unproductive inventory.

Wrapping Up

From aforementioned discussions, it is quite evident that Sprouts Farmers with a Zacks Rank #1 (Strong Buy) and a VGM Score of B appears a safe bet even amid the time of this catastrophe. The company has a trailing four-quarter positive earnings surprise of 28.7%, on average and a long-term earnings growth rate of 5.8%. Moreover, the Zacks Consensus Estimate for its current financial year earnings has improved by a penny in the past seven days.

3 More Stocks to Safeguard the Portfolio

Hain Celestial HAIN has a trailing four-quarter positive earnings surprise of 7%, on average. The stock flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Build-A-Bear Workshop BBW reported a positive earnings surprise in the last reported quarter. It sports a Zacks Rank #1.

Costco COST has a long-term earnings growth rate of 8.4%. The stock carries a Zacks Rank #2 (Buy).

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The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
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