Is Sprouts Farmers Losing Momentum or Just Hitting Tough Comps?

Core Insights - Sprouts Farmers Market, Inc. (SFM) reported third-quarter 2025 results that were decent but fell short of expectations due to a deceleration in comparable-store sales momentum [1][8] - Management noted that the performance moderated faster than anticipated, with sales trends weakening towards the end of the quarter [1][3] Sales Performance - Comparable-store sales increased by 5.9% in the quarter, below the projected 7.6% increase, and decelerated from 10.2% and 11.7% in the previous two quarters [2][8] - The growth rate was impacted by tough year-over-year comparisons and a softening consumer backdrop, with last year's third quarter showing an 8.4% growth [2][4] Consumer Behavior - Traffic remained positive, and customer retention from last year's surge was stable, indicating that the slowdown was due to smaller basket additions rather than a loss of shoppers [3][5] - The deceleration was attributed more to macro pressures in certain demographics, particularly middle-income and younger households, rather than competitive dynamics [3][5] Future Outlook - Management provided a conservative outlook for the final quarter of 2025, guiding for flat to 2% comparable-store sales growth, compared to 11.5% growth in the same quarter last year [4][8] - Despite the challenges, the company maintains its core strategy, supported by steady customer retention and expanding private-label penetration [5] Market Position - Over the past year, SFM's shares have dropped by 42.2%, contrasting with a 14.5% decline in the industry, while Walmart shares increased by 21.9% and Target shares fell by 42.6% [6] - SFM's forward 12-month price-to-sales ratio is 0.83, higher than the industry's 0.24, indicating a valuation premium over Target but a discount compared to Walmart [9] Financial Estimates - The Zacks Consensus Estimate for SFM's current financial-year sales and earnings per share suggests year-over-year growth of 14.2% and 40.5%, respectively [10] - For the current quarter (December 2025), the sales estimate is $2.16 billion, with a year-over-year growth estimate of 8.14% [11]