Sprouts' Incoming CEO Says Its Pricing Strategy 'Has Not Delivered,' Plans National Rebuild In January
Nick Konat says deeper price cuts will weigh on margins, with fourth-quarter comparable sales guided to negative 2% to negative 4%.
Sprouts Farmers Market's "current pricing strategy has not delivered," Nick Konat, who is set to become CEO, told analysts Wednesday, adding that a rebuilt version will roll out nationally in January. The grocer, which runs specialty stores built around fresh, natural and organic food, is guiding fourth-quarter comparable sales to negative 2% to negative 4%.
A blunt admission on price
Konat said the company's efforts to date "have not been enough." The fix means "more meaningful price investments across a broader range of products," though he stressed it is not a shift to broad-based discounting or an effort to compete on price alone.
For the holidays, Sprouts will cut prices on healthy and holiday staples across the country. Konat described November and December as a test-and-learn period ahead of the January launch, timed for when the chain is most top of mind for healthy eating.
A Barclays analyst asked what justified such an aggressive margin change now. Konat answered that customers' spending shows affordability is the key issue and that the company is "acting with conviction now." He said the less engaged shopper drives the traffic decline, but the core customer has begun to soften too.
Margin hit in the guidance
Chief Financial Officer Curtis Valentine said fourth-quarter gross margin will carry about 90 basis points (0.9 percentage points) of deleverage from deeper affordability spending. He also guided fourth-quarter earnings per share to 47 cents to 51 cents, with SG&A deleverage of about 170 basis points.
For the full year on a 52-week basis, Sprouts now expects sales growth of about 4.3%, comparable sales of about negative 1.7% and earnings per share of about $4.80. Valentine said EBIT margins should stay above 5%, and called that level the hoped-for floor.
Third-quarter sales were $2.3 billion, up 5%, while comparable sales fell 0.9%. Gross margin was 38.2%, down 50 basis points, and diluted earnings per share were $1.21, down 1%. Valentine said a cyclospora disruption cut comparable sales by about 60 basis points.
A $290 billion segment to defend
Konat put the market opportunity among health-focused shoppers at more than $290 billion in U.S. food at home. New stores remain a bright spot: Sprouts opened 15 in the quarter and ended it with 504 stores in 25 states, and e-commerce grew 12% to more than 16% of sales.
Valentine said customer response to the holiday cuts and January rollout will set the pace of investment. Management plans to give 2027 guidance in February.
Sprouts plans to give 2027 guidance in February, after it sees how shoppers respond to the holiday price cuts.
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
