Grocery store chain Sprouts Farmers Market (NASDAQ:SFM) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 18.7% year on year to $2.24 billion. Its non-GAAP profit of $1.81 per share was 16.8% above analysts’ consensus estimates.
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Sprouts (SFM) Q1 CY2025 Highlights:
- Revenue: $2.24 billion vs analyst estimates of $2.21 billion (18.7% year-on-year growth, 1.4% beat)
- Adjusted EPS: $1.81 vs analyst estimates of $1.55 (16.8% beat)
- Adjusted EBITDA: $263.2 million vs analyst estimates of $242.5 million (11.8% margin, 8.5% beat)
- Management raised its full-year Adjusted EPS guidance to $5.02 at the midpoint, a 9.1% increase
- Operating Margin: 10.1%, up from 7.9% in the same quarter last year
- Free Cash Flow Margin: 10.7%, up from 8.9% in the same quarter last year
- Same-Store Sales rose 11.7% year on year (4% in the same quarter last year)
- Market Capitalization: $16.92 billion
“We are delighted with Sprouts’ strong start to 2025,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market.
Company Overview
Playing on the secular trend of healthier living, Sprouts Farmers Market (NASDAQ:SFM) is a grocery store chain emphasizing natural and organic products.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
With $8.07 billion in revenue over the past 12 months, Sprouts is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Sprouts’s 7.1% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was tepid, but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, Sprouts reported year-on-year revenue growth of 18.7%, and its $2.24 billion of revenue exceeded Wall Street’s estimates by 1.4%.
Looking ahead, sell-side analysts expect revenue to grow 10.4% over the next 12 months, an acceleration versus the last six years. This projection is eye-popping and indicates its newer products will spur better top-line performance.
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Store Performance
Number of Stores
A retailer’s store count often determines how much revenue it can generate.
Over the last two years, Sprouts opened new stores at a rapid clip by averaging 5.9% annual growth, among the fastest in the consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Note that Sprouts reports its store count intermittently, so some data points are missing in the chart below.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.
Sprouts has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 6.6%. This performance suggests its rollout of new stores is beneficial for shareholders. We like this backdrop because it gives Sprouts multiple ways to win: revenue growth can come from new stores, e-commerce, or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Sprouts’s same-store sales rose 11.7% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from Sprouts’s Q1 Results
We were impressed by Sprouts’s optimistic EPS guidance for next quarter, which beat analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this was a solid quarter. Despite this, shares traded down 5% to $162.07 immediately after reporting.
Is Sprouts an attractive investment opportunity at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.