Sprouts Farmers Market, Inc. SFM reported second-quarter 2026 results, wherein the top line marginally missed the Zacks Consensus Estimate, while the bottom line beat the mark. The company continued to benefit from solid new-store productivity, strength in its Sprouts brand and double-digit e-commerce growth despite a cautious consumer environment and difficult year-over-year comparisons.
SFM’s Sales Mix Gains From Digital Strength and New Stores
Sprouts Farmers reported quarterly earnings of $1.37 per share, surpassing the Zacks Consensus Estimate of $1.35. The bottom line increased from $1.35 in the year-ago quarter.
Net sales of this Phoenix, AZ-based natural and organic grocery retailer rose 4.7% year over year to $2,325.8 million. However, the figure marginally missed the Zacks Consensus Estimate of $2,329 million. Sales growth was driven by stellar new-store performance, partially offset by lower comparable-store sales.
Comparable-store sales declined 1% during the quarter, reflecting a cautious consumer backdrop and difficult prior-year comparisons. Management noted that comparable sales improved sequentially through May before softening in June due to exceptionally strong produce comparisons from last year. Business trends improved in July, with easier comparisons expected through the remainder of the year. We had expected comparable store sales to decline 0.9% during the quarter.
E-commerce sales increased more than 12% and accounted for approximately 16% of total quarterly sales, underscoring continued strength in the company's omnichannel business. Sprouts brand continued to outperform the broader business and accounted for 26% of total sales.
The company continued to strengthen its differentiated merchandising strategy through innovation and foraging initiatives. During the quarter, Sprouts introduced approximately 1,300 new products, focusing on organic, seed-oil-free, fiber-rich, gut-health and protein-oriented offerings. Organic products now account for more than 30% of total sales, including more than half of dairy and produce sales. Management also highlighted growing traction in loyalty, personalization and first-party customer data capabilities to support long-term customer engagement.
Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote
Taking a Sneak Peek Into SFM’s Margins
Gross profit increased to $900.6 million from $862.6 million in the year-ago quarter. However, the gross margin contracted 12 basis points to 38.7%, primarily due to loyalty program investments and elevated fuel costs, partially offset by benefits from self-distribution initiatives and vendor participation to support customer value. We had expected gross margin contraction of 30 basis points.
Operating income came in at $174.2 million, down from $179.4 million in the year-ago quarter. Operating margin contracted 60 basis points to 7.5% from 8.1% in the prior-year period. We had expected operating margin to shrink 80 basis points.
SG&A expenses increased 5.8% year over year to $682.6 million. As a percentage of net sales, the metric deleveraged 30 basis points to 29.3%, primarily due to fixed-cost deleverage from soft comparable-store sales and continued business investments. Cost controls and lower incentive compensation provided a partial offset. We had expected SG&A expenses to deleverage 20 basis points.
Sprouts Farmers’ Store Update
Sprouts Farmers opened seven new stores during the quarter, ending with 490 stores across 25 states. Management highlighted continued strong productivity from recently opened stores and noted a robust development pipeline, including more than 110 executed leases and 155 approved new stores, providing confidence in long-term expansion.
The company also continued advancing its supply-chain transformation. Its Northern California distribution center became operational during the quarter, while nearly 85% of stores are now supplied with fresh meat through Sprouts distribution centers. Management believes these initiatives will improve freshness, service levels, shrink and long-term profitability while supporting affordability efforts.
A Look at SFM’s Financial Position
Sprouts Farmers continued to generate healthy cash flows to support growth investments and shareholder returns. For the 26 weeks ended June 28, operating cash flow totaled $369 million, funding $186 million of capital expenditures (net of landlord reimbursements).
The company repurchased 2.8 million shares for $210 million during the first six months of 2026 and had $626 million remaining under its existing $1 billion share repurchase authorization. Sprouts Farmers ended the quarter with $224 million in cash and cash equivalents and no borrowings outstanding under its $600 million revolving credit facility.
SFM Updates 2026 View
For the third quarter of 2026, management expects comparable-store sales in the range of down 0.5% to up 1.5%, with earnings per share between $1.20 and $1.24. Management also anticipates approximately 50 basis points of EBIT margin pressure, reflecting fixed-cost deleverage from softer comparable sales and the impact of a higher number of new-store openings compared with the year-ago quarter.
On a 52-week basis, management expects net sales growth of 5.5% to 6.5%, comparable-store sales between down 0.5% and up 0.5%, EBIT in the range of $675-$685 million, capital expenditures (net of landlord reimbursements) of approximately $310 million and 42 net new stores in 2026. Earnings per share are projected between $5.32 and $5.40, assuming at least $300 million in share repurchases.
Management reiterated that fiscal 2026 will be a 53-week year, with the additional week expected to contribute approximately $200 million in sales, $28 million in EBIT and 21 cents to earnings per share.
Final Take on SFM
Sprouts Farmers delivered another resilient quarter, with earnings surpassing expectations despite softer comparable sales and a modest revenue miss. Strong new-store performance, continued momentum in e-commerce and private-label offerings, expanding innovation and ongoing supply-chain improvements reinforce the company's long-term growth strategy. Although consumer spending remains pressured and near-term margin headwinds persist, management remains confident that easing comparisons, targeted affordability initiatives and continued investment in loyalty, personalization and new-store expansion will support improving performance through the remainder of 2026.
Shares of this Zacks Rank #3 (Hold) company have climbed 2.8% over the past three months compared with the industry’s rise of 17.3%.
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United Natural Foods, Inc. UNFI distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current fiscal-year EPS stands at $2.52, which implies substantial growth from the year-ago period earnings of 71 cents. UNFI delivered a trailing four-quarter earnings surprise of 29.9%, on average.
The Vita Coco Company, Inc. COCO, a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages currently holds a Zacks Rank #1. COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average.
The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings implies growth of 31.6% and 64.7%, respectively, from the year-ago figures.
US Foods Holding Corp. USFD engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. USFD currently carries a Zacks Rank #2 (Buy). US Foods Holding delivered a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings implies growth of 5.1% and 16.3%, respectively, from the year-ago figures.
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