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Category: Stock Market and Sprouts Farmers Market
Date: 6 May 2020 Stock Price: $22.26 We take a look at the 1st quarter 2020 earnings report of Sprouts Farmers Market a fast growing retailer in the United States with 340 stores and more than 32 000 employees.
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About Sprouts Farmers Market
Sprouts Farmers Market, Inc., one of the fastest-growing retailers in the country, has made healthy living accessible to shoppers for nearly two decades by offering affordable, fresh, natural and organic products. True to its farmers market heritage, Sprouts is known for pioneering its unique grocery model by offering a welcoming store layout featuring fresh produce at the center of the store, an expansive bulk foods section, and a vitamin department focused on overall wellness. Sprouts also offers a unique assortment of healthier products with special attributes, such as plant-based, gluten-free, keto-friendly, and grass-fed, to meet the growing and diverse needs of today’s consumer. Headquartered in Phoenix, Ariz., Sprouts employs more than 32,000 team members and operates over 340 stores in 23 states from coast to coast.
Overview of Sprouts Farmers Market's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Net sales: $1.646 billion (up from $1.413 billion for the same quarter of the previous year)
- Net sales increased by 16.5% over the last 12 months
- Cost of sales: $1.052 billion (up from $929.538 million for the same quarter of the previous year)
- Cost of sales increased by 13,1% over the last 12 months
- So some margin gain for Sprout Farmers Market, as their net sales grew at a rate faster than that of their cost of sales
- Net income of Sprout Farmers Market: $91.810 million (up from $56.392 million for the same quarter of the previous year)
- Diluted earnings per share: $0.78 (up from $0.46 for the same quarter of the previous year)
- PE ratio of Sprout Farmers Market : 6.9
- Diluted number of shares in issue: 117.748 million (down from 123.926 million for the same quarter of the previous year)
- Cash and cash equivalents: $247.101 million
- Cash and equivalents per share: $2.09
- Cash and cash equivalents makes up 9.4% of Sprout Farmers Market's market capital
- Cash and cash equivalents makes up 8.7% of Sprout Farmers Market's total assets
- Inventories of Sprout Farmers Market: $253.191 million
- Inventores makes up 8.8% of Sprout Farmers Market's total assets
- Goodwill of Sprout Farmers Market: $368 million
- Goodwill per share: $3.12
- Goodwill makes up 1.3% of Sprout Farmers Market's total assets
- Stockholders equity in Sprout Farmers Market: $670.722 milion
- Stockholders equity per share: $5.69
- So Sprout Farmers Market is trading at times its stockholders equity which is within the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.34 times. Read more about the S&P 500 here
- Cash generated from operation: $277.072 million
- Cash generated from operation per share: $2.36
Sprouts Farmers Market's management commentary on their 1st quarter 2020 earnings
PHOENIX, Ariz. – (Globe Newswire) – May 5, 2020 – Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week first quarter ended March 29, 2020, an update on second quarter results and outlined its strategy for profitable long-term growth.
COVID-19 Update
In recognition of its team members’ instrumental commitment to serving customers during this unprecedented time, Sprouts Farmers Market provided the following benefits:
• Paid equivalent of $2 extra per hour for hours worked during the crisis in March through bonuses and pay adjustments, with more bonuses planned throughout the crisis.
• Provided up to 14 days additional paid time off and job protection.
• Provided eligible team members access to subsidized childcare benefits.
• Created a COVID-19 relief fund to help our team members who face hardships due to this crisis.
• Closed Easter Sunday with pay to give all 32,000 store team members time to rest and spend time with loved ones.
Additional measures were taken to safeguard our team members and customer wellbeing:
• Increased cleaning and sanitation measures across the store.
• Invested additional labor in stores to allow time for increased cleaning, additional required hand washing, and assisting customers with special needs. • Operated under modified store hours, closing at 8 p.m. during the month of April instead of 10 p.m., to allow team members time off to rest and refresh.
• Implemented social distancing protocols inside and outside of the store.
• Installed plexiglass register barriers at the register.
• Providing gloves and masks to all team members and requiring this personal protective equipment on every shift.
• Requiring team members to complete a health screen questionnaire prior to working.
Update on Current Performance and 2020 Outlook
We have been closely monitoring our results and certain trends we saw in the later part of the first quarter have continued into April. Elevated levels of grocery spend have continued as many consumers have increased their food at home spend. Social distancing has changed consumer behavior from customers consolidating trips and increasing use of ecommerce services. For the month of April, our comparable store sales increased 7.2%, compared to the same period last year notwithstanding the closure of all our stores on Easter Sunday, and ecommerce sales represented 13% of our net sales. While these increased sales, as well as our strategic initiatives around smarter promotions remain a benefit to operating margin, the timing of significant investments to enhance team members pay and benefits, and to implement additional safety and cleansing measures will weigh heavier in the second quarter compared to the first quarter. Because of this, we do not believe we will sustain the same level of operating margin expansion experienced in the first quarter.
“The COVID-19 crisis has created a lack of visibility for the remainder of 2020 with many unknowns,” said Denise Paulonis, chief financial officer of Sprouts Farmers Market. “While April sales trended higher than average, we are making significant investments in pay, benefits and safety measures, as the health of our team members and customers is our number one priority. We remain uncertain as to when consumer behavior will return to normal or what may emerge as the ‘new normal’. This environment is making it difficult to predict specific outcomes, and accordingly we are not reaffirming or stating a new outlook range, however, we currently expect that we will be able to meet or exceed our previous annual outlook.”
In recognition of its team members’ instrumental commitment to serving customers during this unprecedented time, Sprouts Farmers Market provided the following benefits:
• Paid equivalent of $2 extra per hour for hours worked during the crisis in March through bonuses and pay adjustments, with more bonuses planned throughout the crisis.
• Provided up to 14 days additional paid time off and job protection.
• Provided eligible team members access to subsidized childcare benefits.
• Created a COVID-19 relief fund to help our team members who face hardships due to this crisis.
• Closed Easter Sunday with pay to give all 32,000 store team members time to rest and spend time with loved ones.
Additional measures were taken to safeguard our team members and customer wellbeing:
• Increased cleaning and sanitation measures across the store.
• Invested additional labor in stores to allow time for increased cleaning, additional required hand washing, and assisting customers with special needs. • Operated under modified store hours, closing at 8 p.m. during the month of April instead of 10 p.m., to allow team members time off to rest and refresh.
• Implemented social distancing protocols inside and outside of the store.
• Installed plexiglass register barriers at the register.
• Providing gloves and masks to all team members and requiring this personal protective equipment on every shift.
• Requiring team members to complete a health screen questionnaire prior to working.
Update on Current Performance and 2020 Outlook
We have been closely monitoring our results and certain trends we saw in the later part of the first quarter have continued into April. Elevated levels of grocery spend have continued as many consumers have increased their food at home spend. Social distancing has changed consumer behavior from customers consolidating trips and increasing use of ecommerce services. For the month of April, our comparable store sales increased 7.2%, compared to the same period last year notwithstanding the closure of all our stores on Easter Sunday, and ecommerce sales represented 13% of our net sales. While these increased sales, as well as our strategic initiatives around smarter promotions remain a benefit to operating margin, the timing of significant investments to enhance team members pay and benefits, and to implement additional safety and cleansing measures will weigh heavier in the second quarter compared to the first quarter. Because of this, we do not believe we will sustain the same level of operating margin expansion experienced in the first quarter.
“The COVID-19 crisis has created a lack of visibility for the remainder of 2020 with many unknowns,” said Denise Paulonis, chief financial officer of Sprouts Farmers Market. “While April sales trended higher than average, we are making significant investments in pay, benefits and safety measures, as the health of our team members and customers is our number one priority. We remain uncertain as to when consumer behavior will return to normal or what may emerge as the ‘new normal’. This environment is making it difficult to predict specific outcomes, and accordingly we are not reaffirming or stating a new outlook range, however, we currently expect that we will be able to meet or exceed our previous annual outlook.”
Sprouts Farmers Market (NASDAQ: SFM) stock price history
The image below obtained from Google shows Sprouts Farmers Market stock price for the last 5 years. And its not been a good time for Sprouts Farmers Market stockholders. 5 years ago the stock of Sprouts Farmers Market was trading around $27.30 a stock and its currently trading at $22.26. That's a loss of -18.5% suffered by Sprouts Farmers Market stockholders over the last 5 years.
The stock of Sprouts Farmers Market is trading a lot closer to its 52 week high of $22.67 than it is to its 52 week low of $13. This to us is a clear indication that the short term momentum and sentiment towards Sprouts Farmers Market stock is very positive.
The stock of Sprouts Farmers Market is trading a lot closer to its 52 week high of $22.67 than it is to its 52 week low of $13. This to us is a clear indication that the short term momentum and sentiment towards Sprouts Farmers Market stock is very positive.
Recent Google search trends for SFM stock price
The graphic below shows the trend in Google searches for SFM stock price over the last 12 months in the United States as obtained from Google Trends. As it shows the searches for SFM stock price has been very erratic over the last 12 months with not a lot of consistent searches for it over the 12 month period.
Recent coverage of Sprouts Farmers Market
The extract below covers the latest regarding Sprouts Farmers Market as obtained from WeeklyOracle.com
Sprouts Farmers Market Inc. (NASDAQ: SFM) closed at $22.26 in the last trading session, however, in current session, it gained 7.01% adding 1.56 points with the share price of $23.82. In the past 3-month period alone, shares of Sprouts Farmers Market Inc. have appreciated $8.91 – or +58.93%. The stock’s 52-week range is $13.00 to $22.67, and its 3-month range is $13.00 to $24.25. After the latest session, which saw the stock close at a price of $22.26, SFM sits 5.07% below its 52-week high. SFM’s average trading volume of 2.53 million during the past month is 32.53% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.
Sprouts Farmers Market Inc. (NASDAQ: SFM) closed at $22.26 in the last trading session, however, in current session, it gained 7.01% adding 1.56 points with the share price of $23.82. In the past 3-month period alone, shares of Sprouts Farmers Market Inc. have appreciated $8.91 – or +58.93%. The stock’s 52-week range is $13.00 to $22.67, and its 3-month range is $13.00 to $24.25. After the latest session, which saw the stock close at a price of $22.26, SFM sits 5.07% below its 52-week high. SFM’s average trading volume of 2.53 million during the past month is 32.53% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.
Sprouts Farmers Market (NASDAQ:SFM) stock valuation
So based on Sprouts Farmers Markets 1st quarter 2020 earnings report what do we value Sprouts stock at? Based on their earnings reported our valuation model provides a target price (full value price) for Sprout Farmers Market at $32.70 a stock
We therefore believe that the stock of Sprouts Farmers Market is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $32.70. A good entry price into Sprouts Farmers Market would therefore be at $29.40 or below.
Since the stock of Sprouts Farmers Market is trading at well below our suggested entry point we rate the stock a buy
We therefore believe that the stock of Sprouts Farmers Market is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $32.70. A good entry price into Sprouts Farmers Market would therefore be at $29.40 or below.
Since the stock of Sprouts Farmers Market is trading at well below our suggested entry point we rate the stock a buy
Next earnings release of Sprouts Farmers Market
Sprouts Farmers Market Inc is expected to release their 2nd quarter 2020 earnings report in early August 2020