Sprouts’ customer loyalty program is in the beta test phase

Wall Street responded favorably to Sprouts Farmers Market’s second-quarter financial earnings.

The specialty grocer saw its stock price reach an all-time high at $103.80 one day after the second quarter numbers were released before it settled on $95.88 per share, a 13% increase.

The Phoenix-based retailer posted $1.9 billion in net sales, which is a 12% increase year over year, and comparable store sales were up 6.7%.

Sprouts Farmers Market CEO Jack Sinclair had a lot of positives to share with investors during the call, and below are some of the highlights.

Loyalty is progressing nicely

Sprouts provided an update on its loyalty program during the second quarter call.

The retailer has recently started the beta test of the reward program in stores in Tucson, Ariz., and Nashville, Tenn.

Sinclair said it’s in the test-and-learn phase as feedback is gathered from associates and customers. The CEO could not stress enough how important it was to get information from shoppers because Sprouts is a specialist retailer, and there is a need to create a feeling of specialty amongst the customers.

“We’ve got a very unique proposition, and we want people to feel very special by being a part of this kind of loyalty club,” said Sinclair, who added he was encouraged by early results of the loyalty program.

Related:Sprouts launches exclusive products for July, August

It starts at Sprouts

Sprouts Farmers Market leans on the fact that there is no crossover between the products it offers and the products competitors offer. The retailer’s foraging team and innovation center are behind this success.

There is also something called pitch slams, which are when companies approach Sprouts with new products.

“We are very comfortable being the kind of beta test for these kinds of products,” said Sinclair.

The innovation center allows Sprouts to put out products that are not being offered anywhere else, and Sinclair said during the call that about 25% of the products move on to bigger retailers “pretty quickly,” and the items are then eventually pulled from the Sprouts selection.

Sprouts also keeps an eye on direct-to-consumer products online.

Also, 45% of Sprouts’ produce business is organic, separating the retailer from the rest of the field.

“This organic gap is important to us, and I think as we look at that, we’re in very good shape against everybody in that space,” said Sinclair.

Keep it regional

Sprouts Farmers Market has invested in each of its distribution centers across the country and in the relationships with local farmers to make sure when product is ready to go, Sprouts can take advantage of it.

Related:Sprouts board authorizes $600M stock buyback

Sinclair was in Colorado last weekend, and peaches were just arriving at stores, even though it could be snowing in a few weeks.

Through the innovation centers, Sprouts has talked to a lot of producers who currently do not have enough volume to supply all the stores. Instead, Sprouts tries to work them into a regional assortment so they can be launched at a few locations.

“That’s something that I think sets us apart and allows us to be differentiated in all sorts of the local ways going forward,” said Sinclair.

When will it happen?

Sprouts plans on opening a total of 35 stores during the fiscal year, and most of the openings may happen in the fourth quarter. This is not by design but because of the high interest rates preventing developers from jumping in too quickly.

Sprouts already has approval for a total of 110 new sites and has over 70 signed leases for future stores.

“We’re not going to compromise on the quality of the sites we pick,” said Sinclair. “We’re going to be choosy; we’re going to do it the right way and if that means we don’t get [to the number] this year so be it.”

Do the digital

Sprouts reported a 14% increase in ecommerce sales year over year. Before the pandemic, Sinclair said only 2% of business was done digitally.

Uber Eats, Instacart, and DoorDash have helped with the success, and Sinclair thinks all three have contributed equally.

“It’s really three partners driving it,” said Sinclair.

Let’s make it an event

Sinclair commented on a couple of unique events that happened lately where Sprouts stores capitalized on marketing opportunities.

A cherry festival was held where Sprouts Farmers Market locations promoted the cherry season with nearly 40 Sprouts brand products such as dark cherry popcorn, cherry blossom lemonade, and cherry-infused deli meats and marinades throughout the store.

“Our marketing team leveraged our social media and digital platforms to create a buzz and our operations team brought the event to life in-store with creative displays and sampling to create a one-of-a-kind Sprouts experience,” said Sinclair.

In Bakersfield, Calif., Sprouts participated in an Earth Day festival and distributed confetti made of seeds and basil plants.