Strong holiday sales help Sprouts overcome price pressure
Q4 comps positive despite deep produce deflation
Sprouts Farmers Market eked out a slight gain in comparable-store sales during the fiscal fourth quarter despite produce deflation that was greater than anticipated.
The Phoenix-based retailer posted 0.7% comps — a figure that exceeded analyst expectations of a slight comp decline — on a 0.4% increase in store traffic and a 0.3% improvement in ticket. This came as Sprouts cycled 7.6% comps in last year’s fourth quarter and retail deflation of 2.5% led by deep reductions in produce costs including berries, apples and tomatoes.
In a conference call discussing results, Sprouts CEO Amin Maredia termed the results “truly remarkable,” and credited a strong holiday sales program and growing private label sales increasing baskets in part for the positive results. Officials however maintained a cautious outlook for the fiscal year, citing expectations of continued deflation in fresh categories and associated competitive promotional activity at least for the first half of the year.
For the 13-week period, which ended Jan. 1, sales of $986 million increased 6% from the 14-week 2015 fourth quarter, and by 14% on a 13-week basis. Net income totaled $17 million. Adjusted earnings per share of 13 cents were down from last year’s fourth quarter but beat analyst estimates by a penny.
“Clearly, this has been the most challenging deflationary environment we have experienced since 2009 and the longest period of sustained food deflation in decades,” Maredia said. “The competitive promotional environment continues throughout the fourth quarter. We expect this environment to remain for the near term until deflation subsides. During this time, we will continue to maintain our competitive position by being price right and focus on customer initiatives to drive traffic to our stores.