Sprouts Farmers (SFM) Up 7.1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Sprouts Farmers Market, Inc. reported strong second-quarter earnings, exceeding expectations and providing a positive outlook for 2024, driven by solid comparable sales and customer engagement [2][3][9]. Financial Performance - The company achieved quarterly earnings of 94 cents per share, surpassing the Zacks Consensus Estimate of 77 cents, marking a 32.4% increase from 71 cents in the previous year [3]. - Net sales reached $1,893.5 million, exceeding the Zacks Consensus Estimate of $1,828 million, and reflecting a 12% year-over-year growth [3]. - Comparable store sales rose by 6.7% during the quarter, with e-commerce sales growing by 30%, accounting for 14% of total sales [4]. Margins and Expenses - Adjusted gross profit increased by 14.5% year-over-year to $718.4 million, with gross margin expanding by 80 basis points to 37.9% [5]. - Adjusted operating income rose to $127.3 million from $99.7 million in the prior year, with adjusted operating margin also expanding by 80 basis points to 6.7% [5]. - SG&A expenses increased by 11.7% year-over-year to $556.4 million, remaining flat at 29.4% of net sales [5]. Store Expansion - The company opened five new stores during the quarter, bringing the total to 419 stores across 23 states as of June 30, 2024, with plans to open approximately 35 new stores in 2024 [6]. Cash Flow and Capital Expenditures - Sprouts Farmers ended the quarter with cash and cash equivalents of $177.3 million and long-term debt of approximately $8.1 million [7]. - The company generated cash from operations of $311.3 million and plans capital expenditures between $225 million and $245 million for 2024 [8]. Future Outlook - For Q3 2024, the company expects comparable store sales growth of 3.5% to 4.5% and adjusted earnings between 71-75 cents per share, compared to 65 cents in the previous year [8]. - For 2024, Sprouts Farmers anticipates net sales growth of 9-10% and comparable store sales growth of 4% to 5%, with adjusted earnings before interest and taxes projected between $445 million and $455 million [9]. - The company expects full-year adjusted earnings in the range of $3.29-$3.37 per share, an increase from $2.84 reported in 2023 [10]. Estimate Revisions - Estimates for the company have trended upward, with a consensus estimate shift of 8.36% over the past month [11]. Investment Score - Sprouts Farmers holds an average Growth Score of C, a Momentum Score of F, and a Value Score of D, resulting in an aggregate VGM Score of D [12].