Sprouts Farmers Market is working on a loyalty program

Sprouts Farmers Market on Tuesday said it is working on creating a loyalty program to better engage its health-and-wellness-focused shoppers.

Phoenix-based Sprouts, in a call with analysts to discuss third-quarter results, said it intends to begin testing the loyalty program in summer 2024.

“Our initial research told us our customers strongly desire a program from Sprouts,” CEO Jack Sinclair said. “They want a program that helps them live and eat better, while driving our innovation and differentiation for them to explore. We’re working through the structure …”

Sprouts on Tuesday also promoted Curtis Valentine to chief financial officer, effective Jan. 1. Valentine will replace the retiring Lawrence “Chip” Molloy, who announced his retirement earlier this year.

Valentine is currently SVP of finance at Sprouts and brings more than 15 years of financial and retail experience, much of it at PetSmart, to the role.

For the quarter ended Oct. 1, Sprouts reported net sales of $1.7 billion, an increase of 7.6% from a year ago. Comparable-store sales grew 3.9%. E-commerce sales jumped 16% during the period and now make up 12.1% of total sales.

Sprouts’ store brand sales rose 14% during the quarter, making up 20.5% of the grocer’s total sales.

Unit growth has been an area of focus for the grocer in recent years. Sprouts opened 10 new stores during the third quarter, for a total of 401 stores in 23 states. It has opened a total of 24 locations, acquired two previously licensed locations and closed 11 underperforming stores this year.

Related:Sprouts Farmers Market to close 11 ‘underperforming’ stores

The grocer said it will likely meet its goal of opening 30 stores before the year is over, with plans to debut 35 new locations next year. All of the new locations fit under Sprouts’ smaller-sized prototype.

“I’m really pleased with the new-store performance,” Sinclair said. “I mean, there is ups and downs across the country, in our less-established markets … I’m pretty encouraged where we’re at. And the way we set this off a few years ago, and moving to smaller stores, I think, it definitely de-risked the program going forward.”

For the third quarter, Sprouts reported gross margins of 36.5%, virtually flat compared to the same period in 2022.

Margins were pressured by higher wages and increased costs from new and recently expanded warehouses in California and Texas.

“We are beginning to see labor markets loosen and wages stabilizing sequentially,” Molloy noted.

For the fourth quarter and the full year, Sprouts said it anticipates comparable-store sales growth of 3%, with net sales growth of 6.5% to 7% for the year.

Related:Sprouts Farmers Market sees green in its differentiation strategy