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    SFM
    Earnings call· Mar 2026(Q1 FY26)

    Sprouts Farmers Market Q1 FY26 earnings call SFM

    Apr 29, 2026 Source

    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

    10
    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

    Operational metrics

    19
    Total sales growth
    4%YoY
    Q1 FY26

    Total sales were $2.3 billion, up $93 million or 4% compared to the same period last year. This growth was driven by strong new store performance, partially offset by a 1.7% decline in comparable store sales.

    E-commerce sales growth
    10%YoY
    Q1 FY26

    E-commerce sales grew 10% and represented approximately 16% of total quarterly sales.

    E-commerce penetration
    16%
    Q1 FY26

    E-commerce sales grew 10% and represented approximately 16% of total quarterly sales.

    Sprouts brand sales growth
    faster than the rest of the business
    Q1 FY26

    Sprouts brand also continued to perform well, growing faster than the rest of the business and representing more than 26% of total sales.

    Sprouts brand penetration
    more than 26%
    Q1 FY26

    Sprouts brand also continued to perform well, growing faster than the rest of the business and representing more than 26% of total sales.

    Depreciation and amortization (excluding COGS)
    $42M
    Q1 FY26

    Depreciation and amortization, excluding depreciation included in the cost of sales was $42 million.

    Capital expenditures (net of landlord reimbursement)
    $98M
    Q1 FY26

    For the first quarter, we generated $235 million in operating cash flow, which enabled self-funding of our investments in capital expenditures of $98 million, net of landlord reimbursement.

    Share repurchases
    $140M1.9 million shares
    Q1 FY26

    We also returned $140 million to our shareholders by repurchasing 1.9 million shares and have $696 million remaining under our $1 billion share repurchase authorization.

    Share repurchase authorization remaining
    $696Munder $1 billion authorization
    Q1 FY26 end

    We also returned $140 million to our shareholders by repurchasing 1.9 million shares and have $696 million remaining under our $1 billion share repurchase authorization.

    Produce sales from organic
    more than 55%
    Q1 FY26

    In the first quarter, more than 55% of produce sales were organic and over 34% of total sales came from organic products.

    Total sales from organic products
    over 34%
    Q1 FY26

    In the first quarter, more than 55% of produce sales were organic and over 34% of total sales came from organic products.

    New items launched
    1,500
    YTD FY26

    We've already launched 1,500 new items this year, including brands like PRESS Coffee, Cold Brew Protein drink, Pendulum Probiotics for gut health and Proda, a protein soda.

    Wellness bowls price point
    under $10
    Q1 FY26

    We're working to bring healthy, delicious meal solutions such as wellness bowls under $10, $5 Sushi Wednesday and our $4.99 sandwiches.

    Sushi Wednesday price point
    $5
    Q1 FY26

    We're working to bring healthy, delicious meal solutions such as wellness bowls under $10, $5 Sushi Wednesday and our $4.99 sandwiches.

    Sandwiches price point
    $4.99
    Q1 FY26

    We're working to bring healthy, delicious meal solutions such as wellness bowls under $10, $5 Sushi Wednesday and our $4.99 sandwiches.

    New yogurt parfaits launched
    2
    Q1 FY26

    As we innovate, we remain focused on maintaining the right balance of everyday wellness essentials to curated premium wellness items, ensuring relevance, value and quality for our customers.

    Health enthusiast market size
    $200B
    Current

    We've talked about our $200 billion health enthusiast market. Whether you're new in the space or been there, I think that provides a lot of opportunity for growth for us overall.

    Traffic
    negative
    Q1 FY26

    So a positive basket, negative traffic kind of gets us to the Q1 comp.

    Basket size
    positive low single digits
    Q1 FY26

    So a positive basket, negative traffic kind of gets us to the Q1 comp.

    Industry KPIs

    9
    MetricValueDetails
    Sg a rate$659MUSD
    Gross margin drivers39.4%%
    Fuel gas station economics—
    Warehouse store club count483stores
    Comparable same store sales-1.7%%
    E commerce digital sales growth10%%
    Advertising retail media revenue—
    Private label own brand penetration>26%% of total sales
    Category level comps and inflation deflationlow 2s%

    Product announcements

    3
    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

    1
    Northern California distribution centeron 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

    7
    Tough comparisonsQ1 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 backdropQ1 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 investmentQ1 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 performanceQ1 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 deleverageQ1 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 costsQ2 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

    5

    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.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.