Why Is Sprouts Farmers (SFM) Up 7.8% Since Last Earnings Report?

Core Viewpoint - Sprouts Farmers Market, Inc. reported mixed results in its Q3 2025 earnings, with a notable increase in earnings per share but a decline in net sales compared to expectations, indicating potential challenges ahead for the company [3][4]. Financial Performance - The company reported quarterly earnings of $1.22 per share, exceeding the Zacks Consensus Estimate of $1.17, and up from $0.91 in the same period last year [4]. - Net sales reached $2,200.4 million, falling short of the Zacks Consensus Estimate of $2,229 million, but representing a 13% year-over-year increase driven by new store sales and comparable store sales growth [4]. - Comparable store sales rose by 5.9% during the quarter, although this growth rate has decelerated from previous quarters [5]. Margins and Expenses - Gross profit increased by 14.9% year over year to $851.1 million, with gross margin expanding by 60 basis points to 38.7% [6]. - Operating income rose to $157.4 million from $122.5 million in the prior year, with operating margin expanding by 90 basis points to 7.2% [6]. - SG&A expenses increased by 12.6% year over year to $653.3 million, but as a percentage of net sales, it improved to 29.7% due to lower compensation expenses [7]. Store Expansion and Financial Health - Sprouts Farmers opened nine new stores during the quarter, bringing the total to 464 stores across 24 states, with plans to open 37 new stores in 2025 [8]. - The company ended the quarter with cash and cash equivalents of $322.4 million and long-term debt of approximately $53.4 million [8]. Future Guidance - For Q4 2025, Sprouts Farmers expects comparable store sales growth to be flat to 2% and adjusted earnings in the range of $0.86 to $0.90 per share [11]. - The company anticipates 2025 net sales growth of 14% and comparable store sales growth of 7%, revising earlier projections downward [11]. - Management has guided earnings before interest and taxes between $675 million and $680 million for 2025, with full-year earnings expected between $5.24 and $5.28 per share [12]. Market Sentiment - Recent estimates for the company have trended downward, with a consensus estimate shift of -8.89% [13]. - Sprouts Farmers currently holds a Zacks Rank of 4 (Sell), indicating expectations of below-average returns in the coming months [15].