Sprouts CFO Says Traffic Isn't Recovering Even Against Easier Comparisons, Cuts Outlook
Sprouts says shopper traffic kept falling as year-ago comparisons eased, so it will cut prices and lower its full-year forecast.
Sprouts Farmers Market, the Phoenix-based specialty grocer focused on fresh, natural and organic food, has concluded its weak shopper traffic is not a passing cycle, Chief Financial Officer Curtis Valentine told analysts on the company's third-quarter earnings call on Wednesday. Comparable store sales fell 0.9%, and the company is lowering its outlook to fund deeper price cuts.
Traffic that would not turn
Valentine said traffic, units and frequency "are not recovering, even against easier compares that began late in the third quarter." He called that "an important signal that the pressure on the business was not cyclical."
The comparable-sales decline came from a 3.3% drop in comparable transactions, partly offset by a 2.5% rise in the average basket. The cyclospora disruption cut comparable sales by roughly 60 basis points (0.6 percentage points) in the quarter, he said. Total sales were $2.3 billion, up 5%, driven by new stores.
The fourth-quarter guide is for comparable sales down 2% to 4% and diluted earnings per share of 47 to 51 cents. For the full year, on a 52-week basis, Sprouts now expects comparable sales of about negative 1.7% and earnings per share of about $4.80.
Core shoppers now softening
President and incoming CEO Nick Konat said the less engaged customer has driven the traffic decline, but the core customer has shown "a little bit of softening," which he called a key reason to act now. Asked by a UBS analyst, he cited three pressures: intensifying competition, affordability and a macro environment that is "not helping," with shoppers migrating to value channels.
An analyst at Guggenheim asked about the gap between strong new stores and weakening existing ones. Valentine called it "unique" and "not what you would expect to see," adding that the problem lies in core stores.
Price cuts and a margin reset
Konat said the current pricing strategy has not delivered, and Sprouts will roll out a rebuilt approach nationally in January, with holiday price cuts on healthy staples before then. He said it is not a move to broad discounting.
Valentine said the fourth-quarter outlook includes about 90 basis points of gross margin deleverage from deeper affordability investment, plus about 170 basis points of SG&A deleverage. Management expects EBIT margins to stay above 5%, and he said it hopes that level is a floor. Guidance for 2027 will come in February.
Cyclospora remains a slight headwind so far in the fourth quarter but is improving, Valentine said. Konat said the company will start testing refreshes of legacy stores soon.
Sprouts will watch customer response over the holidays and January before setting the pace of its price investments, with 2027 guidance due in February.
Sources
- Sprouts Farmers Market, Inc. Reports Third Quarter 2026 Results – Company Announcement - FT.com — Financial Times
- What's Sprouts Farmers' Probability of an Earnings Beat This Season? — Yahoo Finance
- Insights Into Sprouts Farmers (SFM) Q3: Wall Street Projections for Key Metrics — Yahoo Finance
- Sprouts Farmers (SFM) Misses Q3 Earnings and Revenue Estimates — Yahoo Finance
- Sprouts Farmers Market (SFM) Stock Fair Value Edges Lower After Mixed Analyst Revisions — Yahoo Finance
