Sprouts continues to focus on new products to increase basket size

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Sprouts Farmers Market, the Phoenix, Arizona-based natural products retailer, reported positive store comparison sales and an increase in comparison transactions in the first quarter of 2022, the company reported Wednesday.

Sprouts reported higher net sales, comparable store sales and EBITDA for the first quarter ended April 3. Net sales totaled $1.6 billion, an increase of 4% over the same period in 2021. Same store sales grew 1.6%. Gross margin was 37.3%, stable compared to the same period a year ago.

Sprouts reported diluted earnings per share of $0.79, compared to diluted earnings per share of $0.70 in the same period in 2021. The company also spent $600 million to repurchase 1.5 million shares during the quarter.

“We are pleased with the strong first quarter results and believe this is a sign that many of the strategic changes we have made over the past two years are beginning to materialize,” CEO Jack Sinclair said during the call for the company’s afternoon results. Wednesday. “The shift to positive offset sales supported by positive offset transactions, while maintaining stable gross margins, was extremely encouraging.”

Although the number of same-store transactions increased over the previous year, the company warned that sales growth for the year would be at the low end of the outlook provided by the company at the end of the year. financial year 2021.

“For the full year, we now expect total sales growth, same-store sales growth and earnings per share to be at the lower end of the outlook provided in our last earnings release. We We continue to expect to open between 15 and 20 new stores For the second quarter of 2022, we expect comparable store sales growth to be relatively stable and diluted earnings per share to be between $0.49 and $0.49 $.53,” Chief Financial Officer Chip Molloy said.

New products make the difference

The company continues to focus on differentiating itself from other grocers by offering new and unusual products.

“We believe this is one of the main reasons why target customers love shopping at Sprouts,” Sinclair said. To further support this strategy, the company promoted Kim Coffin, who has 10 years of experience at Sprouts, to senior vice president and “head of research.” Previously, she was vice president of the company’s grocery store. The Sprouts merchandising team continues to research unique new products that match the latest trends and healthy tastes.

Cabbage growers market

With sales of local produce steadily increasing, Sprouts Farmers Market is developing even stronger relationships with local smallholder farmers.

The stores are designed to be flexible and the company can put new products on the shelves within a week, the CEO said. During the first quarter, Sprouts launched more than 1,000 new items and revamped the produce department to improve freshness and seasonality.

“With our steadily growing sales of local produce, these teams have developed increasingly strong relationships with local smallholder farmers,” Sinclair said. “We make long-term commitments to these producers, which provides fresher produce and cost benefits that we are proud to pass on to our customers with better prices.”

Molloy added, “We continue to benefit from the strength of our deli meats business as consumers seek both healthy and easy meal options. We have also seen strength in these areas with our broader range of differentiated products, such as groceries, dairy and vitamins.

In Southern California, Sprouts is building a new, larger distribution center that will include ripening rooms, solar power, LEED certification and charging stations for electric trucks.

Sprouts opened six stores in the first quarter and expects to open between 15 and 20 this year, Sinclair said. The company currently operates 374 stores across the United States.

Encourage customers to buy more per trip

Although the number of transactions is up, shoppers are buying “one to two fewer items” per trip than a year ago, Sinclair said.

According to Molloy, “We can speculate on a variety of reasons why there are fewer units – rising gas and utility prices, prices, a flight of precious discretionary dollars to more experiential offerings, such as travel or restaurants, etc.”

Sinclair said the company is focusing on what it can control.

“It’s important for us to control what we can control and focus our efforts not only on incremental traffic but also on shopping cart creation, especially as consumers’ wallets are tight,” he said. he declares. “A few of our focus areas include inventory, bringing back a sales culture to our stores, key merchandising solutions and basket-level promotions.” The company began installing new systems to reduce the number of out-of-stock products in stores. The change is being made department by department throughout the chain, with dairy and frozen foods first. The transition is expected to be completed in early 2023, he said.

Sprouts is bringing back in-store sampling, which was halted when the COVID-19 pandemic hit the United States in March 2020; setting up innovation centers that showcase new products; and increasing its prepared food offering.

“Our customers tell us they like the convenience of being prepared, so we are increasing our exposure to daily heat-and-eat meals and one-pot meals as time becomes a more precious commodity for our consumers” , Sinclair said.

“Finally, when it comes to basket promotions, we are successful in leaning towards internal or departmental discounts rather than specific items. We find that these programs not only generate additional traffic, but also provide baskets that are two (times) the average. ,” he said.

This article originally appeared on New Hope Network, a sister website to Supermarket News.


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