Sprouts Farmers Market acquires 2 independently owned stores in California

The locations in Chula Vista had been operating under a one-of-a-kind licensing deal with the health-focused grocer for many years.
Sprouts Farmers Markets
Sprouts Farmers Market is acquiring two independently licensed grocery stores. / Photo courtesy: Sprouts Farmers Market

Sprouts Farmers Market acquired two independently owned stores in Chula Vista, California, that had been operating under a licensing deal, the grocer announced Monday.

The “legacy trademark license arrangement,” unique to these two locations, was established many years ago, Phoenix-based Sprouts said in a statement. The acquisition will broaden the expansion possibilities for Sprouts in Southern California, the retailer said.

Terms of the transaction were not disclosed.

“We are pleased to bring these two high-volume stores into the Sprouts fold, allowing us to serve more customers in the San Diego market,” CFO Chip Molloy said in a statement.

Earlier this month, Sprouts revealed it would close 11 “underperforming” stores during the first half of the year. The locations are about 30% larger than the grocer’s current preferred prototype and “generate negative four-wall cash flow,” Molloy told analysts at the time.

Despite the closures, Sprouts remains in growth mode. The company, which has nearly 390 locations in 23 states, has said it intends to open 30 new stores this year.

It has opened several new stores just this month, including locations in Norwalk, Stockton, Merced and San Jose, California; and The Villages, Florida.

Next month, Sprouts plans to open a new grocery store in Lancaster, California; followed by grand openings in Manassas, Virginia, and Las Vegas in May.

All of the new stores are about 23,000 square feet, not more than 30,000 square feet like the chain’s older markets.

“We are pleased with the performance of our more-recent store openings, especially the smaller prototypes,” Molloy said earlier this month. “We’re also encouraged by the momentum of those newer markets as we begin to densify and establish more brand awareness.”

The grocer said it expects to reach its goal of 10% annual unit growth by 2024.

Health-focused Sprouts Farmers Market opened its first store in 2002, with the goal of broadening the reach of natural and organic foods.

“Chip and I kind of got together and talked a lot about how we’re not going to beat Walmart on pricing, we’re not going to win against Amazon on convenience,” CEO Jack Sinclair said at the UBS Global Consumer and Retail Conference last week, according to a transcript from financial services site Sentieo. “But what we’ve got is a unique opportunity to be very targeted to health-enthusiastic customers, innovation-seeing customers … What we were trying to be was all things to all men, trying to chase every customer down, and it was putting a lot of pressure on the margins and a lot of pressure on the promotional intensity in the business.”

For its fourth quarter, Sprouts’ net sales totaled $1.6 billion, up 6% from the year-ago period. For the fiscal year, net sales were $6.4 billion, a 5% increase over the year before. Same-store sales grew 2.9% during the quarter and 2.2% for the year.



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