Sprouts Farmers Market Finds the Recipe for Success Again in 4Q15
A quick look at 2015
As discussed in Part One of the series, Sprouts Farmers Market (SFM) declared its 4Q15 and 2015 earnings on February 25, 2016. The company reported solid results, which outperformed the Market’s expectations and were in-line with the company’s own guidance.
We discussed the company’s fourth quarter results in the previous two sections, so let’s turn to its 2015 performance.
2015 results highlights
- Net sales stood at $3.6 billion, a 21% YoY (year-over-year) rise.
- Comparable store sales growth was 5.8%, and two-year combined comparable store sales growth was 15.7% (both on a 52-week basis).
- Adjusted net income rose to $134.7 million, a 21% YoY increase.
- Adjusted diluted earnings per share stood at $0.86, a 19% rise from 2014.
- Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was $302.1 million, a 14% rise from the previous year.
SFM registered a sales increase of 21% YoY, within its goal of 19%–21% growth in 2015. The rise in sales was a result of solid comps (comparable sales) and commendable performances by the company’s 27 new stores. Comps for 2015 came in at 5.8%, in-line with the company’s long-term guidance.
Focus on value and lower priced produce is key to success
Sprouts’ product pricing strategy involves selling select similar products offered by Whole Foods Market (WFM) and pricing them lower than Whole Foods and somewhat in-line with traditional grocers such as Kroger (KR). This strategy has led to increased traffic and a strong top line for Sprouts.
The company’s top line grew by a spectacular 47% CAGR (compound annual growth rate) between 2010 and 2015. In comparison, Kroger, Whole Foods Market, and The Fresh Market (TFM) grew by 7%, 11%, and 15% CAGRs, respectively, between 2010 and 2015. However, SFM is still a smaller growth phase company, accounting for just one-fifth of Whole Foods and 2% of Kroger in terms of revenue.
Investors looking for exposure to Sprouts Farmers Market through ETFs can invest in the SPDR S&P Retail ETF (XRT), the Fidelity MSCI Consumer Staples Index ETF (FSTA), and the Guggenheim S&P MidCap 400 Pure Growth ETF (RFG). SFM has weights of approximately 1.1%, 0.11%, and 1.8%, respectively, in these ETFs.
Continue reading to know more about the company’s bottom line and margins.
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