In addition to reporting its results for the 13-week second quarter ended June 28, Sprouts Farmers Market on Thursday said it plans to add new and expanded deli offerings in four additional stores following a successful test of the concept. Features include a new salad bar stocked with ready-to-eat salads, prepared proteins, healthy side dishes and an improved assortment of entree meals and side dishes.
“Following the rollout of these additional stores, we will be looking to incorporate many of these offerings into a greater number of stores in 2016 and beyond,” said Sprouts President and CEO Doug Sanders. “We continue to reinvest in our current stores, maintain superior store conditions and have remodeled four stores this year and have completed nearly 100 percent of our 2015 sales initiative projects. Once done, all of our stores will feature some or all of the enhanced product offerings found in our new stores opened since 2013, including expanded offerings in package grocery, and frozen foods, fresh-made sushi and Boar’s Head among other improvements.”
During the second quarter of 2015, Sprouts opened eight new stores—one each in Alabama, Arizona, California, Colorado, Georgia, Oklahoma, Missouri and its first store in Tennessee. Four additional stores have been opened in the third quarter to date, bringing 2015 new store openings to 22, for a total of 212 stores in 13 states as of Aug. 6. The Phoenix, Arizona-based company expects to open a total of 27 stores this year.
Second quarter results
Net sales for the quarter were $902.2 million, a 21 percent increase compared to the same period in 2014. Net sales growth was driven by strong performance in new stores opened and a 5.1 percent increase in comparable store sales. Gross profit for the quarter increased 18 percent to $263.6 million, resulting in a gross profit margin of 29.2 percent of sales, a decrease of 90 basis points compared to the same period in 2014. This was primarily driven by the impact of continued price investments in certain categories, partially offset by leverage in buying costs.
Net income for the quarter was $31.3 million, or diluted earnings per share of $0.20, up $1.2 million from the same period in 2014. Net income for the quarter included $5.5 million pre-tax loss on extinguishment of debt, $0.3 million of pre-tax store closure and exit costs and $0.1 million of pre-tax loss on disposal of assets. Net income for the second quarter of 2014 included $0.3 million of pre-tax loss on disposal of assets and $0.2 million pre-tax store closure and exit costs benefit. Excluding these items, adjusted net income for the quarter increased 16 percent to $35.0 million, compared to $30.2 million for the same period in 2014. Adjusted diluted earnings per share was $0.22, a 10 percent increase from adjusted diluted earnings per share of $0.20 for the same period in 2014.
“Sprouts’ healthy products at affordable prices continue to appeal to a broad base of customers. Our focus on driving top-line revenue resulted in solid sales growth, including strong new store performance,” said Sanders. “With a store count of 212 stores today and our planned 14 percent annual unit growth going forward, we continue to focus on our tremendous growth opportunities in existing markets and new markets like Tennessee, and remain confident in our long-term target of 1,200 stores across the country.”
Fiscal year-to-date results
For the 26-week period ended June 28, net sales were $1.8 billion, or a 20 percent increase compared to the same period in 2014. Growth was driven by a 4.9 percent increase in comparable store sales and strong performance in new stores opened. Net income was $68.8 million, up $4.9 million from the same period in 2014. Net income year-to-date included $5.5 million pre-tax loss on extinguishment of debt; $1.5 million pre-tax store closure and exit costs; $0.3 million pre-tax secondary offering expenses; and $0.3 million pre-tax loss on disposal of assets. Net income for the first half of 2014 included $1.4 million pre-tax secondary offering expenses; $1.0 million pre-tax loss on disposal of assets; and $0.3 million pre-tax store closure and exit costs. Excluding these items, adjusted net income increased 12 percent to $73.6 million compared to $65.6 million in the same period in 2014.
As previously reported by The Shelby Report, Sprouts also recently announced its leadership succession plan.
