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Sprouts to Plow Momentum into Customer Experience, CEO Says

Preliminary Q4 comps grew by 4.6% on strong holiday sales

Sprouts Farmers Market said comparable-stores sales in its fiscal fourth quarter grew by about 4.6% on strong holiday sales, capping a fiscal year in which total sales grew by about 15.3%.

The Phoenix-based natural foods retailer announced the unaudited, preliminary results ahead of an investor presentation at the ICR Conference in Orlando, Fla., on Tuesday.

Sprouts’ fourth quarter and fiscal year ended Dec. 31.

In remarks at the ICR event, Sprouts CEO Amin Maredia said the company would be “laser-focused” on improving the customer experience both in and out of its stores in 2018 as it looks to capitalize on recent investments to grow service offerings such as deli departments in stores, and to engage customers digitally to build drawing power to its units, which he said are positioned to benefit as a result of brand equity in health and value.

CEO

“More than ever, customers are looking for great products and great experiences,” Maredia said. “I would agree with recent reports that say the strong are getting stronger. There are 30,000 conventional food stores and they will continue to get shaken out.”

Sprouts will introduce a mobile social platform that will play to the value and health trends, Maredia added.

Separately on Tuesday, Spouts said it will roll out grocery delivery through a new partnership with Instacart beginning this week at its stores in Arizona. Sprouts also has a delivery partnership with Amazon Prime in eight markets. Maredia declined comment on the Amazon relationship, but said grocery delivery in general was especially beneficial for Spouts, because it can extend the geographic reach of its stores without impacting traffic to the same degree that might be seen at denser, conventional supermarket competitors.

He said long-standing equity in health and value also provides Sprouts an intangible edge vs. competitors that have attempted similar models offering sharp pricing and fresh products in a small footprint, such as Whole Foods’ 365 and Kroger’s recently shuttered Main & Vine.

“Every format is easy to emulate and copy,” he said. “You could walk into Chick Fil-A now and say, 'How hard is this?' But it is,” he maintained. “It’s something we’ve built over 20 years and it’s special. It starts with the authenticity of the healthy products; the assortment, merchandising, partnerships and relationships. There’s so much noise in the industry about pricing and pressing vendors. That’s not an issue for us because our team has the best execution and relationships with vendors over time.”

Sprouts said it expects to report comparable-store sales growth of 4.6% in the fourth quarter. For the fiscal year, it expects to report net sales growth of 15.3%, same-store sales growth of 2.9%, and earnings per share slightly above its previously announced guidance range of 98 to 99 cents.

Maredia noted the comp figure is typically impacted by 1.25% to 1.5% by cannibalization from new stores. “With flat inflation, a 6% comp in food retail is pretty good,” he said. “We’re excited about what the consumer is doing. And our our products, merchandising and innovation is the best I’ve seen since I’ve been at the company.”

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