Key Highlights

  • Net sales rose 5% to USD 2.30 billion, but diluted EPS of USD 1.21 trailed the USD 1.23 consensus estimate.
  • Comparable store sales fell 0.9% as transactions declined 3.3%, partly offset by a 2.5% increase in basket size.
  • Gross margin slipped to 38.2% from 38.7%, mainly on higher shrink and fuel costs during the quarter.
  • The grocer opened 15 stores, its largest quarterly cadence, ending with 504 stores across 25 states.

Sprouts Farmers Market, Inc. (NASDAQ:SFM) reported fiscal third-quarter 2026 net sales of USD 2.30 billion, up 5% from USD 2.20 billion a year earlier and below a consensus estimate of USD 2.33 billion. Diluted earnings per share were USD 1.21, compared with USD 1.22 in the prior-year quarter and below a consensus estimate of USD 1.23. Net income was USD 113.4 million versus USD 120.1 million.

New stores contributed USD 128.8 million of sales, while comparable store sales slipped 0.9% after a 5.9% gain a year earlier. About 0.6 percentage points of the decline was tied to the cyclospora outbreak that disrupted several produce categories. Management said comparable sales softened in August and September and did not improve as comparisons eased.

Margins, Store Growth and Capital Returns

Gross profit rose 3% to USD 880.8 million, and gross margin narrowed to 38.2% from 38.7%. Higher shrink weighed on margin by roughly 0.4% of sales and fuel costs by about 0.1%, while self-distribution provided a partial offset. Selling, general and administrative expense was USD 683.3 million, or 29.6% of sales versus 29.7%, as USD 43.9 million of new store costs was partly offset by a USD 15.2 million decrease in incentive compensation. Operating income was USD 152.8 million, and the effective tax rate was 25.1%.

E-commerce sales grew 12% to more than 16% of total sales, and Sprouts Brand represented about 26% of sales. Year to date, the company generated USD 555 million of operating cash flow, spent USD 275 million of net capital expenditures and repurchased 3.9 million shares for USD 299 million. USD 537 million remains on a USD 1 billion authorization, and the company bought another 0.5 million shares for USD 30.0 million from the quarter end through October 26. Cash stood at USD 228.7 million with no revolver borrowings.

Revised Outlook and Leadership Change

Management described the recent trends as a reason for a more measured view. On a 52-week basis, the company now projects total sales growth of about 4.3%, comparable sales near negative 1.7%, EBIT of about USD 605 million and diluted EPS of about USD 4.80, assuming more than USD 300 million of repurchases. It still plans 42 net new stores and capital expenditures near USD 310 million. The 53rd week adds roughly USD 190 million of sales, USD 20 million of EBIT and USD 0.16 of EPS.

For the fourth quarter, Sprouts guided to comparable sales of negative 2% to negative 4% and diluted EPS of USD 0.47 to USD 0.51, including roughly 90 basis points of gross margin deleverage from price investments. Outgoing CEO Jack Sinclair is moving to executive chairman, and the incoming chief executive plans to roll out a rebuilt pricing strategy nationally in January, with holiday price cuts on staples before then.

Numbers to Revisit

Four items frame the next report. The first is comparable sales, guided to a range of negative 2% to negative 4% after the 0.9% decline. The second is margin: management projects roughly 90 basis points of gross margin deleverage and 170 basis points of SG&A deleverage in the fourth quarter, with EBIT margin staying above 5%. The third is the January pricing rollout and holiday price cuts. The fourth is unit growth, with 42 net new stores targeted for 2026 and more than 160 approved sites in the pipeline.