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Sprouts Farmers Market (SFM) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Consumer Staples· Apr 29, 2026

Source: earnings call transcript

Executive summary

Sprouts Farmers Market Q1 FY26 — New Store Performance and Loyalty Investment

Sprouts Farmers Market navigated Q1 FY26 with disciplined execution, seeing strong performance from new stores and growth in e-commerce and private label. While comparable store sales declined amidst a cautious consumer backdrop, the company is investing in loyalty and targeted value actions, expecting sequential improvement in the business as comparisons ease in the second half of the year. Management remains confident in its long-term strategy focused on differentiation, customer engagement, and new store growth.

Highlights

6

  • Total sales increased 4% to $2.3 billion, driven by strong new store performance.

  • E-commerce sales grew 10%, representing 16% of total quarterly sales.

  • Sprouts brand sales grew faster than the rest of the business, representing over 26% of total sales.

  • Opened 6 new stores, ending the quarter with 483 stores across 25 states, including entry into New York.

  • Generated $235 million in operating cash flow, enabling self-funding of investments.

  • Increased full-year diluted EPS outlook to between $5.32 and $5.48.

Concerns

6

  • Comparable store sales declined 1.7% in Q1 FY26.

  • Gross margin decreased 20 basis points to 39.4%, primarily due to loyalty investment and unfavorable shrink.

  • Diluted earnings per share were $1.71, a decrease of 6% compared to the prior year.

  • SG&A totaled $659 million, an increase of $36 million and 42 basis points of deleverage.

  • Q2 FY26 comp sales are expected to be in the range of negative 2% to 0%.

  • Q2 FY26 EBIT margin pressure is expected to be approximately 75 basis points due to fixed cost deleverage, loyalty investment annualization, and higher fuel costs.

Guidance & targets

CategoryTargetConfidence
Total sales growth
4.5% to 6.5%
high materiality
High
Comparable store sales
-1% to +1%
high materiality
High
New store openings
at least 40
medium materiality
High
Earnings Before Interest and Taxes (EBIT)
$675 million and $695 million
high materiality
High
Corporate tax rate
approximately 25.5%
low materiality
High
Capital expenditures (net of landlord reimbursements)
$280 million and $310 million
medium materiality
High
Diluted Earnings Per Share (EPS)
$5.32 and $5.48
high materiality
High
Comparable store sales
negative 2% to 0%
high materiality
High
Diluted Earnings Per Share (EPS)
$1.32 and $1.36
high materiality
High
EBIT margin pressure
approximately 75 basis points
medium materiality
High

SFM operating KPIs by quarter

SFM operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Stores
483 On unit growth, we opened 6 new stores, ending the quarter with 483 stores across 25 states, including our entry into New York. Source: earnings call transcript
490 We opened seven new stores, ending the quarter with 490 stores across 25 states. Source: earnings call transcript
+1.4%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
PRESS Coffee, Cold Brew Protein drink, Pendulum Probiotics, Proda protein sodalaunch
Regenerative Organic Certified Coffee, Seed Oil-free Hummus, Beef Tallow Kettle Chipslaunch
Wellness bowls, $5 Sushi Wednesday, $4.99 sandwiches, 2 new yogurt parfaitslaunch

Capital programs

Northern California distribution center on track

Benefit:Complete initial meat self-distribution journey, improve service levels, inventory management, and responsiveness to demand shifts.

Our plan to open our new Northern California distribution center in the second quarter is on track and will complete our initial meat self-distribution journey.

Risks & headwinds

Tough comparisons Q1 FY26, easing in H2 FY26

Q1 FY26 played out largely as expected, working through tough comparisons.

Mitigation:Expect sequential improvement as comparisons ease in the back half of 2026.

Cautious consumer backdrop Q1 FY26, ongoing

Impacts less engaged customers, creating uncertainty in the marketplace.

Mitigation:Focusing on making life as good as possible for customers through price investments and deli offerings; doubling down on core strengths.

Loyalty investment Q1 FY26, annualizing in Q2 FY26

Contributed to 20 bps decrease in gross margin in Q1 FY26.

Mitigation:Expected to be fully anniversaried by end of Q3 FY26; vendor funding expected to ramp up as the year evolves.

Unfavorable shrink performance Q1 FY26, easing in H2 FY26

Contributed to 20 bps decrease in gross margin in Q1 FY26.

Mitigation:Easier shrink comparison in H2 FY26, particularly Q4; continued focus on improving inventory management and markdowns.

Fixed cost deleverage Q1 FY26, Q2 FY26

42 bps of SG&A deleverage in Q1 FY26; expected to contribute to 75 bps EBIT margin pressure in Q2 FY26.

Mitigation:Focus on cost discipline and leveraging scale; expect SG&A pressure to moderate as comps return to algorithm range in latter part of the year.

Higher fuel costs Q2 FY26

Expected to contribute to approximately 75 bps EBIT margin pressure in Q2 FY26.

Mitigation:Factored into Q2 outlook; will monitor evolution in H2 FY26.

Uncertain inflation environment (fuel, fertilizer) Future

Uncertain how fuel and fertilizer costs will play out; fertilizer costs not yet flowing through to cost base.

Mitigation:Focus on serving customers well in health and wellness; potential to double down on organics if fertilizer costs rise; conscious of providing affordable health and wellness products.

What to watch in Q2 FY26

Comparable store sales

Q2 FY26
Current -1.7% (Q1 FY26)
Target -2% to 0% (Q2 FY26 guidance)

Why it matters

Key indicator of customer demand and operational leverage, with management expecting sequential improvement.

For the second quarter, we expect comp sales to be in the range of negative 2% to 0% and earnings per share to be between $1.32 and $1.36.

Find out whether SFM delivers this. Inve re-checks your case every morning.

Q&A highlights

What are you seeing regarding the health of different consumer segments (low, middle, high income) given macro concerns?

Loyal customers are sticking with Sprouts, while less engaged customers are feeling more pressure, likely across all income levels. The company is focusing on internal actions like price investments and deli offerings to support customers.

“Certainly, the macro environment suggests that our loyal customers have stuck very much to us going forward. The less engaged customers are feeling a little bit more pressure, and it could well be to do with the income levels, but I think it's a kind of general pattern across our customer base.”

asked by Rupesh Parikh · answered by Jack Sinclair

2 min read 6 chapters

Detailed narrative

Strategic Priorities and Execution

Sprouts is focused on strengthening differentiation through foraging and innovation, reinforcing the in-store experience, accelerating customer engagement via loyalty, building an advantaged supply chain, expanding new store growth, and taking targeted actions to strengthen value. Q1 execution balanced early loyalty investment and targeted value actions with cost control, while advancing capabilities for long-term growth. The company expects sequential improvement as comparisons ease in the second half of 2026.

Differentiation Through Foraging and Innovation

The company emphasizes its leadership in health and wellness, with over 55% of produce sales being organic and over 34% of total sales coming from organic products. Sprouts launched 1,500 new items this year, including unique brands like PRESS Coffee and Proda protein soda, and Sprouts brand innovations such as Regenerative Organic Certified Coffee and Seed Oil-free Hummus. They continue to attract emerging health and wellness brands as preferred launch partners, leveraging their reputation and innovation center.

Customer Experience and Affordability

Sprouts maintains its core differentiator of in-store experience, supported by knowledgeable team members. Efforts to make healthy eating accessible and affordable include offering wellness bowls under $10, $5 Sushi Wednesday, and $4.99 sandwiches. Targeted price reductions on essential SKUs like coffee and a focused promotional plan aim to drive greater value on categories and items most important to customers, with early tests showing volume increases.

Loyalty Program and Personalization

The loyalty program continues to scale, showing positive customer response to both broad-based and targeted offers, including loyalty multipliers. Insights from Q1 are being used to accelerate the pace of testing and learning, with investments in capabilities and tools to scale successful programs. Strong vendor participation and demand reinforce the ability to expand these programs over time, aiming to deepen customer engagement and drive behavior.

Supply Chain and New Store Growth

The new Northern California distribution center is on track to open in Q2, which will complete the initial meat self-distribution journey and enhance service levels and inventory management. New stores are performing strongly, reinforcing confidence in the long-term strategy, with 6 openings in Q1, including entry into New York. The company has nearly 150 approved new stores and over 105 executed leases in its pipeline, sharpening site selection as it scales.

Macro Environment and Consumer Behavior

Management acknowledges a cautious consumer backdrop and macro concerns, focusing on controllable actions. Loyal customers remain engaged, while less engaged customers may feel more pressure, potentially due to income levels. The company is testing price investments and seeing positive responses in certain categories and deli offerings, aiming to drive volume through price elasticity rather than direct price comparisons with competitors.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.