Sprouts Still Looks Positive as Management Confident in Double-Digit Growth

Oppenheimer consumer analysts Rupesh Parikh said he’s still positive on Sprouts Farmers Market (SFM) after meeting with Chief Financial Officer Brad Lukow and vice president of investor relations Susannah Livingston this week.

Management is still confident in the possibilities for double-digit earnings growth, Parikh said. Instacart seems to be off to a “very strong” start, the environment is still stable and management comments suggested they haven’t yet seen an impact from the Amazon (AMZN) takeover of Whole Foods (WFM).

Sprouts still feels confidence about the company’s competitive position and pricing gaps, he said. Investments in technology should deliver financial benefits next year, and management said they continue to see strong performance from new stores, Parikh said.

“We continue to look favorably upon SFM’s intermediate- to longer-term prospects, but expect limited food inflation and competitive concerns to weigh on the shares at least through the second-quarter report,” he said.

Lukow said during Oppenheimer’s Consumer Conference on Tuesday customers are “feeling good” and that the tax reforms passed at the end of 2017 put “more dollars in the jeans of consumers,” which is helping sales. Still, he said, consumers want value.

Sprouts’ competitors aren’t by and large opening new stores as most are focused on e-commerce, Lukow said.

“When we look at who’s opening stores, it’s really not in the mainstream in terms of who our competitor set are,” he said at the conference. “I’d say there’s a lot more headlines and companies doing some work on the e-commerce side, which we have also been engaged in recently.”

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