Sprouts Officials Tout Delivery Growth, Eye Pickup Expansion

Pleased with the sales lift and customer reaction coming from the addition of a home delivery option through Instacart, Sprouts Farmers Markets has begun testing a click-and-collect offer that also uses the crowdsourced concierge.

Jim Nielsen, COO and interim co-CEO for the Phoenix-based natural foods retailer, said the growth of home delivery has been “fantastic” and that the retailer was achieving “best-in-class” reviews and Net Promoter Scores on Instacart, which replaced a nascent Amazon Prime Now home delivery business at Sprouts when Amazon devoted its home-delivery efforts to its acquired Whole Foods business.

Home delivery is now available in more than 200 of Sprouts' 313 stores, with the retailer determined to expand it companywide by the second half of its new fiscal year, Nielsen told analysts in a conference call. Sprouts by that time also expects to move to a “white label” online offering, reflecting a unified platform that will provide shoppers with a more authentic user interface.

Nielsen cautioned that the sales tailwind from home delivery was not material to the retailer’s comps yet, but “the top-line growth rate is significant and we like the trajectory.” An average basket of around $80 for home delivery is also significantly higher than in-store rings, he added.

Nielsen said the company was also testing click-and-collect with Instacart at a small number of stores that also offer delivery as an added option. Nielsen said he envisions such an offering to be “table stakes” in the industry but suggested Sprouts was in a position to benefit more than peers for offering it because its in-store service is superior.

“If you go back and look at the people that do really well with click-and-collect today, it’s generally some of those that don't [have good in-store experience],” he said.

In financial results for the fourth quarter ended Dec. 30, Sprouts said sales improved by 11% to $1.3 billion, with comparable-store sales growing by 2.3%. Net income of $12.7 million was down from last year’s fourth quarter due in part to effects of lapping a tax benefit last year and for charges this year for two recent store closures and a payment to outgoing CEO Amin Maredia. Adjusted for these items, earnings were up by 15% to $24 million.

Nielsen has been co-CEO with CFO Brad Lukow since the departure of Maredia in December. The retailer retained a search firm in November focused on finding a successor, which Lukow said this week typically takes to six to nine months. “In the meantime, Jim and I are just keeping our heads down and working together,” Lukow said in response to an analyst’s question on the succession. “When we have an update, you’ll hear.”

Lukow said Sprouts was expecting net sales growth of 9% to 10.5% in the new fiscal year, driven by new store growth and full-year comp sales in the range of 1.5% to 3%.

Sprouts will open 28 new stores this year but realize a net store increase of 27 because one expiring lease will be not be renewed, Lukow added.