SFM

It has been about a month since the last earnings report for Sprouts Farmers (SFM). Shares have lost about 6.7% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Sprouts Farmers due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Sprouts Farmers Market, Inc. before we dive into how investors and analysts have reacted as of late. Sprouts Farmers Market, Inc. 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. 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. 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. 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 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. 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. 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. In the past month, investors have witnessed a downward trend in fresh estimates. Currently, Sprouts Farmers has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the second quintile for this investment strategy. Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Sprouts Farmers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Total Sales: $2.3 billion, up $105 million or 5% year-over-year. Comparable Store Sales: Declined 1% in the second quarter. Gross Margin: 38.7%, a decrease of 12 basis points year-over-year. SG&A: $683 million, an increase of $38 million with 30 basis points of deleverage. Earnings Before Interest and Taxes (EBIT): $174 million for the quarter. Net Income: $129 million. Diluted Earnings Per Share (EPS): $1.37, up 1% year-over-year. E-commerce Sales: Grew more than 12%, representing approximately 16% of total quarterly sales. Private Label (Sprouts Brand) Sales: Represented 26% of total sales. Store Count: Opened seven new stores, ending the quarter with 490 stores across 25 states. Operating Cash Flow (Year-to-Date): $369 million. Capital Expenditures (Year-to-Date): $186 million, net of landlord reimbursement. Share Repurchases (Year-to-Date): Returned $210 million to shareholders by repurchasing 2.8 million shares. Cash and Cash Equivalents: $224 million at the end of the quarter. Full-Year 2026 Outlook (52-week basis): Total sales growth between 5.5% to 6.5%; comp sales between negative 0.5% to positive 0.5%; 42 net new stores; EBIT between $675 million and $685 million; diluted EPS between $5.32 and $5.40. Third Quarter 2026 Outlook: Comp sales in the range of negative 0.5% to positive 1.5%; diluted EPS between $1.20 and $1.24. Warning! GuruFocus has detected 1 Warning Sign with SPCX. Is SFM fairly valued? Test your thesis with our free DCF calculator. Release Date: July 29, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. New store performance remains strong, with recent vintages comping positive and a robust pipeline of 155 approved new stores. E-commerce sales grew over 12% and now represent 16% of total sales, driven by strong partnerships with delivery platforms. Innovation and foraging continue to outperform, with 1,300 new items launched and Sprouts brand representing 26% of sales. Supply chain advancements, including the Northern California DC and fresh meat self-distribution, are improving control and supporting affordability. The company is investing in loyalty and personalization, with early progress in vendor participation and data-driven marketing. Comparable store sales declined 1% in Q2, with traffic and units per basket under pressure from a challenging consumer environment. The affordability tests produced mixed results, with traffic response developing more gradually than expected. Elevated fuel costs are creating a headwind, impacting gross margin and leading to a lowered EBIT outlook. The Cyclospora outbreak is impacting sales of lettuces and salads, adding near-term uncertainty. Lower-engaged and lower-income customers remain the biggest challenge, with reduced trip frequency and basket size. Q: Can you provide more color on July's performance versus the Q3 guide, any impact from Cyclospora, and the monthly comparison cadence moving forward? A: Curtis Valentine (CFO) stated that comps sequentially improved through May, with June being the toughest month due to strong prior-year produce performance and a natural/organic supply chain disruption that drove customers to Sprouts. These difficult comparisons are now behind them, and comparisons will sequentially ease month-to-month. July landed slightly negative but within the guidance range. Regarding Cyclospora, it is a live issue impacting the last two weeks, primarily affecting lettuce, salads, and salad-related items, shifting customer purchases from fresh to frozen. There have been no product recalls in their stores, and food safety remains the top priority. Q: The affordability tests produced mixed results. Can you elaborate on what you learned and how you are adjusting your second-half approach? A: Jack Sinclair (CEO) explained that the tests have been mixed across different departments and items, and the company is focused on investing in the items that matter most to customers within their financial model. Nicholas Konat (President & COO) detailed a three-pillar approach: 1) Assortment efforts are showing strong momentum, particularly in healthy meal solutions, with all fresh-made salads now under $9 and new $29.99 family meals. 2) Price and promotion efforts are seeing good basket and unit velocities, but it's tougher to move the customer in this environment, so they are continuing to test and learn. 3) Personalization and loyalty efforts are being accelerated to help move existing customers. Q: Why did you narrow the comp guidance for the year, and what gives you confidence in getting back to your algorithm by the fourth quarter? A: Jack Sinclair (CEO) cited the challenging macro environment, with rising grocery and gas prices pressuring customers, making it difficult to predict consumer behavior. The guidance reflects a confident but disciplined view. Curtis Valentine (CFO) added that they expect sequential improvement in traffic and units, not from average unit retail (AUR), as the comparisons get easier. The company expects to return to its algorithm in due course as the difficult prior-year comparisons fade. Q: Can you clarify the drivers behind the EBIT guidance revision and whether vendor participation in the loyalty program is starting to ramp? A: Curtis Valentine (CFO) clarified that the $5 million midpoint-to-midpoint EBIT change is primarily due to elevated fuel costs, embedding $2.5 million per quarter in the second half. Nicholas Konat (President & COO) stated that vendor participation in the loyalty program is still in early stages, having just opened it up at the beginning of the year. However, they are seeing more vendors participate and benefit from the program, and they expect this to continue ramping as they build out the capability and invest in technology over the next several years. Q: Can you discuss the cohort performance demographically, particularly the emerging health enthusiasts, and what is working versus not working from a pricing standpoint? A: Nicholas Konat (President & COO) noted that the macro environment is tough, and the customer is proving harder to move overall. The less engaged, lower-income customer is the hardest to move, partly due to lapping prior-year growth. However, the core customer remains resilient. The company is seeing success with new product innovation, which is significantly outperforming the overall box, and they are using loyalty, personalization, social media, and marketing to introduce these new items to customers. Q: Can you help quantify the gap between improving unit movement and slower-than-expected traffic response from the affordability tests, and what you've learned about elasticity? A: Curtis Valentine (CFO) declined to provide specific quantification but emphasized that it's challenging to move the customer in the current environment. Things that worked last year aren't working as well this year, leading to a lot of learning and readjusting. Jack Sinclair (CEO) added that the biggest challenge is moving traffic, particularly with the lower-engaged customers who came to Sprouts last year under unique circumstances. As the lapping of those comparisons fades, they are confident that the work on value will help drive traffic, though it will take a bit longer. Q: How do you feel about your price gaps and the competitive promotional front, given many players are highlighting price investments? A: Jack Sinclair (CEO) stated that they continue to pay close attention to pricing, particularly in produce, where they feel they are in a good place relative to the competition. The company is confident that its differentiated assortment allows it to focus on value for the items that matter most to its health-enthusiast customers. Nicholas Konat (President & COO) added that they aim to bring in brands with less competition and be everyday competitive, while also focusing on innovation to differentiate. Q: Are new stores still performing well despite the difficult backdrop, and are there any challenges in how they ramp? A: Curtis Valentine (CFO) confirmed that new stores continue to open well across the country, performing ahead of expectations and in line with the last couple of years. Recent vintages are comping positive, which is a strong proof point for the model. In newer markets, stores start a bit lower and build faster as customers figure out the brand, but the customer mix is not materially different from the broader footprint. Q: How are you thinking about the timing for insourcing additional categories for self-distribution, and does the meat experience pull up the timeline? A: Nicholas Konat (President & COO) expressed satisfaction with the meat rollout completion and the work of the supply chain teams. The company is starting to dip its toe into self-distribution for a couple of Sprouts brand items using existing capacity, aiming to improve service levels and profitability. They will take a measured approach over the next couple of years, continuing to look for ways to take more control where it makes sense. Jack Sinclair (CEO) added that they are investing appropriately in supply chain, having built four distribution centers in recent years, with more to come to support the growing store base. Q: Can you break down the components of the expected 50 basis points of EBIT margin pressure in Q3? A: Curtis Valentine (CFO) explained that the Q3 margin pressure will look similar to Q2, with slightly negative gross margins, slightly negative SG&A, a little pressure in D&A, and the new store openings folding into the SG&A pressure. The fuel headwinds are also a contributing For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Sprouts Farmers Market, Inc. SFM delivered a mixed second quarter as new-store productivity supported sales growth while comparable-store sales remained soft. Earnings per share came in above the Zacks Consensus Estimate, but the underlying demand picture was less favorable.That split makes the second half especially important. Sprouts is accelerating openings and continuing loyalty, affordability and supply-chain investments while management expects near-term margin pressure to persist. Second-quarter earnings were $1.37 per share, above the Zacks Consensus Estimate of $1.35. Net sales increased 4.7% year over year to about $2.33 billion but produced a 0.1% negative sales surprise.Comparable-store sales declined 1%, following a 1.7% decrease in the first quarter. The combination points to new units as the larger contributor to top-line growth while demand at established stores remains under pressure. Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote Sprouts opened seven stores during the quarter and ended June with 490 locations across 25 states. Management plans 42 net new stores in fiscal 2026, including 43 openings and one closure.The development pipeline includes more than 110 executed leases and 155 approved stores. Costco Wholesale Corporation COST reported a 10.7% increase in July net sales, showing that large-format food retail demand remained healthy in parts of the market. BJ’s Wholesale Club Holdings, Inc. BJ is also investing in club growth and member value, providing another expansion-focused peer for comparison. Gross margin declined 12 basis points to 38.7% as loyalty investments and elevated fuel costs outweighed part of the benefits from self-distribution and vendor participation. Operating margin contracted 60 basis points to 7.5%.Selling, general and administrative expenses rose 5.8% to $682.6 million and deleveraged 30 basis points. Lower comparable sales reduced fixed-cost absorption as Sprouts continued investing in the business. For the third quarter, management expects comparable-store sales between down 0.5% and up 1.5%, with earnings of $1.20-$1.24 per share. EBIT margin is expected to decline about 50 basis points.The pressure reflects fixed-cost deleverage from softer comps and a heavier opening schedule. Sprouts expects at least 15 new stores in the third quarter, making traffic improvement and expense absorption key measures of operating progress. Image Source: Zacks Investment Research Operating cash flow totaled $369 million in the first half of 2026. Sprouts invested $186 million in capital expenditures, net of landlord reimbursements, and repurchased 2.8 million shares for $210 million.The company ended the quarter with $224 million in cash and cash equivalents and no borrowings under its $600 million revolving credit facility. That liquidity supports new stores, supply-chain projects, loyalty initiatives and shareholder returns. The near-term setup remains balanced. Store expansion, differentiated merchandising and cash generation provide support, but negative comps and ongoing margin pressure leave execution risk elevated as Sprouts moves through the second half.SFM currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A, Value Score of B, Growth Score of B and Momentum Score of B. The favorable Style Scores indicate solid characteristics across those investing styles, while the Zacks Rank suggests a more neutral near-term earnings-revision backdrop. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report BJ's Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report Costco Wholesale Corporation (COST) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Wednesday, July 29, 2026 at 5 p.m. ET Chief Executive Officer - Jack Sinclair Chief Financial Officer - Curtis Valentine President and Chief Operating Officer - Nicholas Konat Investor Relations - Susannah Livingston Operator: Hello, and welcome to Sprouts Farmers Market Second Quarter 2026 Earnings Conference Call. I would now like to hand the conference over to Susannah Livingston. You may begin. Susannah Livingston: Thank you, and good afternoon, everyone. We are pleased you are joining Sprouts on our second quarter 2026 earnings call. Jack Sinclair, Chief Executive Officer; Curtis Valentine, Chief Financial Officer; and Nick Konat, President and Chief Operating Officer, are with me today. The earnings release announcing our second quarter 2026 results, the webcast of this call and financial slides can be accessed through the Investor Relations section of our website at investors.sprouts.com. During this call, management may make certain forward-looking statements, including statements regarding our expectations for 2026 and beyond. These statements involve several risks and uncertainties that could cause results to differ materially from those described in the forward-looking statements. For more information, please refer to the risk factors discussed in our SEC filings and the commentary on forward-looking statements at the end of our earnings release. Our remarks today include references to non-GAAP financial measures. Please see the tables in our earnings release for a reconciliation of our non-GAAP financial measures to the comparable GAAP figures. With that, let me hand it over to Jack. Jack Sinclair: Thanks, Susannah, and good afternoon, everyone. Our second quarter results were in line with our expectations, and the core elements of our strategy remain strong. New stores continue to perform well. Our differentiated and attribute-based assortment continues to resonate and our teams are moving with urgency to sharpen value, improve communication and support customers in the areas that matter most. The consumer environment remained challenging, with customers continuing to make thoughtful choices around the healthy grocery spend, and we continue to face difficult year-on-year comparisons. With that said, our most difficult prior year comparisons are behind us and become more manageable as the year progresses. We continue to see opportunities to improve our business in the short, medium and long term. The short term, we are taking a balanced approach, investing to strengthen support for customers today while building capabilities to support our proposition for the long term, ensuring sustainable growth into the future. In a moment, Curtis will review our second quarter results and our updated outlook. After that, I'll come back to discuss the key business priorities we are advancing across affordability, loyalty and personalization, innovation, real estate, supply chain and our teams. Curtis? Curtis Valentine: Thanks, Jack, and good afternoon, everyone. In the second quarter, our results played out in line with our outlook as we continue to lap outsized growth from the prior year and help our customers navigate the affordability challenges that they face in the current environment. Total sales were $2.3 billion, up $105 million or 5% compared to the same period last year. This growth was driven by strong new store performance, partially offset by a 1% decline in comparable store sales. We saw sequential comp improvement through May. June, as expected, we had our lowest comp of the quarter as we lapped strong last year produce performance and the disruption in the natural and organic supply chain that sent more customers to our stores. Starting in July, the business has improved in line with expectations. The sequential improvement has been driven by modest improvements in both traffic and units in the basket. E-commerce sales grew more than 12% and represented approximately 16% of total quarterly sales. Sprouts brand also continued to perform better than the rest of the business, representing 26% of total sales. Our second quarter gross margin was 38.7%, a decrease of 12 basis points compared to the same period last year. This primarily reflects our loyalty investment and elevated fuel costs. These headwinds were partially offset by benefits from self-distribution and vendor participation to help support customer value. SG&A for the quarter totaled $683 million, an increase of $38 million and 30 basis points deleverage compared to the same period last year. This was primarily driven by fixed cost deleverage from lower comparable store sales and investments in the business, partially offset by disciplined cost management and lower incentive compensation. Depreciation and amortization, excluding depreciation included in the cost of sales, was $43 million. For the second quarter, our earnings before interest and taxes were $174 million. Interest income was approximately $68,000 and our effective tax rate was 26%. Net income was $129 million and diluted earnings per share were $1.37, an increase of 1% compared to the same period last year. Turning to unit growth. We opened seven new stores, ending the quarter with 490 stores across 25 states. Our pipeline remains robust with more than 110 executed leases and 155 approved new stores, giving us confidence in our ability to continue expanding access to Sprouts over the long term. Our balance sheet and cash generation remains strong and provide flexibility. Year-to-date, we have generated $369 million in operating cash flow, which enabled self-funding of our investments in capital expenditures of $186 million, net of landlord reimbursement. Through the second quarter, we also returned $210 million to our shareholders by repurchasing 2.8 million shares and have $626 million remaining under our $1 billion share repurchase authorization. We ended the second quarter with $224 million in cash and cash equivalents and $22 million of outstanding letters of credit. As we look to the balance of 2026, we are beginning to move past the most difficult compares and seeing early progress, though the operating environment remains uneven. We believe our initiatives in affordability, innovation, personalization, marketing and supply chain will strengthen engagement over time. Customer behavior is evolving gradually, and we recognize it will take time for our actions to fully gain traction in this macro environment. The lower engaged customer remains an opportunity, and all customers are managing units in the basket. Given that context, we continue to take a disciplined view of the back half while investing in the actions we believe will support engagement and long-term growth. As a reminder, 2026 will be a 53-week year, with the extra week falling at the end of the fourth quarter. For the full year, on a 52-week basis, our outlook for total sales growth is between 5.5% to 6.5%, with comp sales between negative 0.5% to positive 0.5%. We now plan to open 42 net new stores in 2026. This accounts for 43 new openings as well as closure of an underperforming store with an expiring lease. Earnings before interest and taxes is expected to be between $675 million and $685 million. We expect our corporate tax rate to be approximately 25.5%, and we expect capital expenditures net of landlord reimbursements to be approximately $310 million. Our diluted earnings per share outlook is expected to be between $5.32 and $5.40, assuming at least $300 million in share repurchases. This updated outlook also reflects the current consumer backdrop, our continued efforts around affordability, ongoing fuel surcharges and disciplined cost management. It also incorporates the expected one-time year-over-year gross margin benefit in the fourth quarter as we cycle an easier shrink comparison and the loyalty program changes we made earlier this year. We believe this outlook gives us the flexibility to continue investing in customer value while managing the business with discipline. For the third quarter, we expect comp sales to be in the range of negative 0.5% to positive 1.5%, and diluted earnings per share to be between $1.20 and $1.24. EBIT margin pressure is expected to be approximately 50 basis points due to fixed cost deleverage from lower comp sales and the impact of more new store openings when compared to the third quarter last year. And with that, I'll turn it back to Jack. Jack Sinclair: Thanks, Curtis. Against an uneven near-term backdrop, we remain focused on the areas we can control, sharpening value, strengthening forging, improving how we engage with customers and providing them a great in-store experience, advancing supply chain capabilities and executing against a strong new store pipeline. We're using data to better support our customers on their health journey. Our customers care about what they eat, and we are committed to making healthy, clean food, more affordable and accessible, which is particularly important during these challenging times. Our teams are proud to rise to this challenge. That commitment is directly connected to our top priority, serving our target customer. They continue to value the Sprouts experience, the quality of our assortment and the discovery we bring to health and wellness while also looking for practical ways to make healthy living fit their budgets. We are responding in a way that is consistent with who we are by bringing together innovation, quality and targeted value in the areas that matter most. In the second quarter, our fresh deli meals, vitamin sale and $9.99 wellness bowls were examples of how this approach resonated with customers. Our first half affordability test produced mixed results. Most actions drove better unit movement, while broader traffic response developed more gradually than expected. We're using those learnings to refine our second half approach, focusing on the items that matter most to customers and where targeted price and affordability actions can have the greatest impact on engagement. Forging and innovation remain key strengths, and they continue to outperform overall company growth. They help differentiate the assortment and focus our space, promotions and new item activity around the products customers value most. During the second quarter, we launched approximately 1,300 new items, with an emphasis on attributes that we believe matters to our customers, including organic, seed oil-free, fiber, gut health and protein solutions. These products help reinforce why customers choose Sprouts. With our exclusive partnership, Pasturebird chicken is now available nationwide at Sprouts and products like Better Than Pop and [ Better Soup Salt Shots ] are resonating with customers. Our organic offerings continue to gain traction across departments, now representing more than 30% of total sales, including more than half of sales in dairy and produce. Loyalty and personalization remain important long-term enablers for the business as consumer behavior evolves against this uneven macroeconomic backdrop, we continue to see progress. Our acceleration efforts have identified new tactics to drive sales that should benefit us in the second half. And the data we are building is increasingly useful across the business with more in-depth customer behavior and preferences. Building our first-party data capability will continue to support our long-term strategy by unlocking value for our customers and Sprouts across the enterprise. Marketing is one area where our new data can help us more effectively engage customers in the second half of the year and beyond. We're using these insights to better target media across both existing and new customers while also refreshing our creative to more clearly communicate Sprouts' unique position and bring the brand to life. We'll continue to tailor our messaging to highlight health, discovery, the unique products that distinguish Sprouts and compelling value on the healthy essentials our customers need. Our supply chain work is also advancing. Our Northern California distribution center is open and operating smoothly, and nearly 85% of our stores are now supported with fresh meat through Sprouts distribution centers. This gives us greater control over our freshness, service levels and shrink, and the financial benefits from this transition will continue to support our efforts on affordability. We also are continuing to advance our self-distribution journey with targeted investments in our existing space, beginning with select Sprouts brand SKUs as we look beyond produce and meat to the next phase of this work. New stores remain one of the clearest proof points of the strength of our model. Performance continues to be strong, and our teams are selecting great sites, opening stores efficiently and bringing Sprouts to more communities. We are pleased with the progress across both high-volume existing markets and newer markets that are continuing to build awareness and momentum. Our construction team have done a great job improving our processes and shortening our time to build stores. Given these improvements, along with our strong pipeline, we will be opening 42 net new stores this year, slightly ahead of our original guidance. We will open at least 15 stores in the third quarter, which represents our largest quarterly opening cadence to date. Lastly, the Sprouts team remains the heart of the organization. Our team members bring the Sprouts experience to life every day from the quality and freshness in our stores to the service and education they provide our customers. Their commitment to our purpose, our team and our customers remains a key advantage for our business. In summary, we are operating with discipline against a dynamic near-term backdrop while staying focused on the actions that strengthen engagement, reinforce the Sprouts value proposition and position the business for sustainable growth. We appreciate your continued interest in Sprouts and look forward to keeping you updated on our progress in the quarters to come. And with that, I'd like to turn over for questions. Operator? Operator: Our first question comes from the line of Ed Kelly with Wells Fargo. Edward Kelly: Could we maybe just start with comp cadence? And I'm specifically interested in July. You talked about July being in line. Could you provide a little bit more color around the month versus the Q3 guide? The Q3 guide leaves the possibility of a negative component. I'm not sure if you saw that in July? And was there any impact from Cyclospora? And then just remind us of the compares by month moving forward now. Curtis Valentine: Sure. Yes. Ed, this is Curtis. Lots in that. So comp cadence sequentially improved through May, as we said in the script, June was a tough month. That was really the end of kind of the challenging LY compares last year in June, really strong produce season, disruption to the natural and organic supply chain that sent customers our way. And so those are behind us now. As far as the second half of the year, there were no major disruptions or benefits last year that we're up against. So the comp will sequentially get easier from a comparison perspective month-to-month as we go forward. Within July, we're within our guidance range, just slightly negative for July is where we landed. And then on Cyclospora, it's really live right now. It's been really the last 2 weeks where we've seen a bit of impact on the business. And so we're really just kind of deal with that real time. I mean, first and foremost, food safety is our #1 priority. The team really does a great job with that. They're watching all the news and the regulatory updates closely. And we haven't had any product recall impact in our stores to date. But it's impacting the customers and how they shop. It's really isolated to kind of lettuce, salads and salad-related items is where we've seen a bit of an impact. So it's a shift in from fresh to frozen. Jack Sinclair: So we're watching this pretty closely, just to see where it's going to go, the customer reaction to this. It's difficult to know exactly how this is going to play out, but we're focused on food safety. Edward Kelly: Okay. And maybe just a quick follow-up, Jack. You mentioned affordability results of the effort kind of being mixed and maybe some adjustments that you're making. Could you talk a bit more about that? And are those adjustments meaning like intensifying pricing effort? Is it just sort of like how you're spending the dollars? Jack Sinclair: We're being very focused on trying to look after our customers on those items that matter most. And the tests that we've done, as we said, have been mixed and different departments have done -- different items have performed differently. And the challenge for us is making sure that everything we're doing fits in within the model that we're working on. So I'll maybe let Nick. Nick and his team have been doing a lot of work analyzing the specific detail of what we're investing in. And I think we've got a pretty good handle on what it's going to cost and what we're going to do going forward. Nicholas Konat: Yes. Ed, kind of three-pillar approach to the affordability work we outlined. The one that I think is showing the most growth and really happy with what the team is doing is in our assortment efforts. So we see really strong momentum in our healthy meal solutions, and we're continuing to increase that offering with the health-driven attribute-driven meals. We talked about our new $29.99 family meals. We now have all of our fresh-made salads in store under $9. So that's been really strong for us. The second lever of that assortment has been in Sprouts brand with innovation in the healthy essentials. So I'll give you a couple of examples. We're launching seed oil-free frozen potatoes that are now a top seller in the category. We're just about to launch a $4 -- actually we did just launch a $4 fresh baked organic sourdough bread. So you see us investing in the areas that's important for our customer and the assortment. On the price and promotion piece, as Jack mentioned, it's been a little tougher to move the customer in this environment. We are seeing good basket and unit velocities from some of the price and promotion efforts we're doing, but we're continuing to test and learn both how we price and also how we message. And we're going to continue to be prudent about how we do that as we learn how to move the customer. And then the third pillar of that work is in personal and loyalty and our personalization efforts and the acceleration of the learnings we've had in the first half of the year and the third quarter to help continue to move our existing customer. Operator: Our next question comes from the line of Leah Jordan with Goldman Sachs. Leah Jordan: I just wanted to follow up on Ed's first question around the comp. So in the prepared remarks, you talked about July improved in line with your expectation, but you still narrowed the comp guidance for the year. So I'm just trying to get a sense of what's making you maybe less optimistic in terms of getting to that top end now. Is it really around the macro increasing competition? Or is it simply just, hey, we've had a softer start to July and maybe some of this is tied to the lettuce concern that you talked about. Any color there? And then just ultimately, maybe frame your confidence on getting back on to algo by the fourth quarter. Jack Sinclair: I think the questions are with regarding to getting back to algorithm, we're feeling pretty confident about our guidance going forward in terms of what we're projecting. In terms of the specifics, there's a macro environment that's kind of difficult to really put your handle on. Clearly, grocery prices are going up. Gas prices have gone up and down, and they're clearly putting pressure on. And we can see it in the units, and it's not -- across grocery units are not as strong as they were because of the inflation. So we're trying to second guess exactly where this is going to play out. But our guidance is something that we feel pretty confident about. And certainly, if the comparisons that we've got going forward play out the way we expect them to do, we should be back on our algorithm in due course. Leah Jordan: Okay. That's helpful. Maybe just a quick follow-up on that. We'll stick with the comp here. I mean just maybe more color on the drivers, how you're thinking about traffic versus units versus AUR kind of as we move through the back half. It sounded like traffic and units were getting better in July. Just trying to think about the underlying drivers for your comp outlook as we go through the fourth quarter. Curtis Valentine: Yes. I think we expect sequential improvement in traffic for sure. Yes, units and traffic should get better. It's not going to come from AUR. Traffic was the thing that went up really well when we were doing well and has been moderated and been the driver as we've softened here. So I think we'd expect that to continue to get better as the compares get easier, and then units should get a little bit better as we continue to work on the affordability piece. Operator: Our next question comes from the line of Tom Palmer with JPMorgan. Thomas Palmer: Maybe I could just first clarify on the guidance revision. So comps were narrowed around the midpoint. The second quarter earnings came in a little bit ahead of, I think, what you'd guided for. So I just wanted to understand maybe some of the narrowing to kind of the bottom half when we look at that EBIT outlook, if there are maybe incremental investments that are contemplated. I know there was the reference to some deleverage. And so maybe the extra couple of stores is the difference, but anything else on top of that? Curtis Valentine: Tom, it's Curtis. I mean, really, the EBIT midpoint to midpoint, $5 million change is really fuel. We're just looking -- as we spoke about last time, we covered it off in Q2. But we said we didn't have it covered in the second half, and we weren't -- we're going to wait and see how that played out. Obviously, it remains elevated and it has been pretty volatile. And so we're embedding $2.5 million a quarter in the second half for fuel. Thomas Palmer: Great. And I also wanted to ask on some of the, I guess, vendor participation that was noted and then in one of the earlier answers, you noted focus on accelerating personalization. With the loyalty rollout, are you starting to drive increased support? I think that's one of the goals and the belief was it might take a little bit of time working with vendors. But I am curious if we're hitting a point where that's becoming more of a factor, just given the call-outs earlier. Nicholas Konat: Tom, it's Nick. I would say we're still early stages in that. I mean we just started opening up vendor participation in the program at the beginning of this year. And so we're nascent in that. And the idea is always, hey, you have these really unique vendors with unique customers, with unique needs, and how do you tie them all together to help them find their audience in their market because we have the health enthusiasts that a lot of these new brands want. And so I think -- I feel really good about that strategy. We're starting to see more and more vendors participate and see benefit from participating in the program. So we're certainly ramping, but it's early stages. And I think we've got certainly -- as we build out the capability, as we continue to invest in technology, that will be something we continue to push over the next number of years. Operator: Our next question comes from the line of Kelly Bania with BMO Capital Markets. Kelly Bania: I wanted to just double-click on the comment about kind of all customers are managing units per basket. As we look at your sales across the two categories between perishables and nonperishables, it looks relatively stable. So just wondering what is really happening underneath the hood there with units per basket. I thought that was a little bit more isolated to produce, but maybe you can just help us understand if anything has changed on the units per basket and what the plan is there to address that. It sounded like the focus is on traffic for now. But just as you look out further on the units per basket, what is the remedy for that? Curtis Valentine: Kelly, it's Curtis. I think units in the basket, produce is always a lead because it's one of the larger -- it's the largest unit count in our average basket. But we -- in these times, we saw it back in '22 and '23. And again, here, when the prices are up or there's an inflationary environment or the customer is under pressure, for us, they tend to manage that last item in the basket. And so it's a little bit of an impact across the entire business and then produce usually has a little bit larger impact just simply because there's more produce units in our basket, say, than the average conventional. And so as far as what we're doing, I mean, I think the things that we are doing from a loyalty and personalization perspective, certainly, that should help on the unit front. And from an affordability perspective, that will help on the unit front. And we're seeing some good progress on units in the tests that we're doing, as we alluded to earlier, we'd like to see a little bit of a broader impact from a traffic perspective, but the unit piece has been positive so far. Kelly Bania: Okay. And Curtis, when you talk about kind of thinking about the items that matter most to your customers, some of the examples, I think, sounded like they were in fresh. Maybe correct me if I'm wrong, but are you -- how do you think about kind of balancing the fresh kind of price investments or affordability versus kind of the new innovation and the new items, which seems so critical to the Sprouts merchandising strategy? How do you balance that? Or are you trying to figure out where to put more or less investment between those categories? Nicholas Konat: Kelly, I'll take that. It's Nick. We start with our customer and less -- think about it less around fresh and nonperishables and more around what's in the customer's basket and what's most important for them. And for us, I think you've heard me talk about the healthy essentials. It's organic cheese, it's organic bread, it's organic meat and it's obviously organic produce. So it's across the board on these nonperishable and perishable that we're focused on, and then looking at what's most important to them and where can we help make some of these things more accessible to them. And that's where you see us both innovating with assortment and especially in Sprouts brand and then making the selective investments to ensure that they're more accessible. So we look at it from a total customer standpoint, and we've seen good success in fresh right now because I think that's a good driver for the customer around meals and meal solutions, but look at it holistically across the store. Operator: Our next question comes from the line of John Heinbockel with Guggenheim. John Heinbockel: Can you guys address cohort performance demographically, right? I'm thinking -- you've talked in the past about the emerging health enthusiast, right, perhaps having more affordability issues. How is that group performing? And then when you distinguish between, right, so you had some waves of shelf price reductions and then you've also done some stuff with the loyalty program in 3x, 5x points. When you think about what's working, what's not working from a pricing standpoint, how would you assess that? Nicholas Konat: John, it's Nick. I think the broader headline -- the two headlines for me on the question of working and not, I think one is the macro is tough, and it's tough. The customer is proving tougher to move overall. So efforts are not quite the same as they may have been in a more stable market. We don't have the level of inflation that we're seeing in the market. So that has an impact overall. And I think the second thing is we're seeing, as we mentioned before, our less engaged, lower income customer is the one that's been harder for us to move. Some of that's a lapping story, John. We're obviously still lapping some of that. But if you look at our cohorts and our loyalty customers, it's those that are a little less engaged, lower income where it's been tougher to drive that trip and that extra item in the basket. John Heinbockel: Maybe as a follow-up to that, I know the other opportunity, right, because of the sheer amount of product introductions, is to reach out to folks, right, that are attribute oriented to let them know the 1,300 items came in and maybe that's the opportunity is bigger with higher income customers. But to what degree are you doing that now? Or is that still to come, right, where there's these prompts calls to action about these items? Nicholas Konat: Yes. We're definitely doing that. We're seeing it in the numbers. Our innovation, the products that we are -- the new products we've launched in the last year are significantly outperforming the overall box. We're seeing the innovation continue to be strong and the customer continue to be willing to buy the new items, the unique items they see with us. So I think that's a combination of the forging work that we continue to do, the strong pipeline and innovation that our merchants and forging team has built. And then we are continuing to introduce it to our customers, not just through loyalty, which has been personalization, but also through social media and our marketing. And so I'm actually very happy with how our newness continues to perform. We certainly have aspiration to continue to drive it even further, but that's been good for us. Operator: Our next question comes from the line of Krisztina Katai with Deutsche Bank. Krisztina Katai: So I wanted to follow up on the affordability test. You've noted that you're seeing improving unit movement, but it's generating a slower-than-expected traffic response. So can you help us quantify the gap there? And you call these tests having mixed results. What have you learned about elasticity and this overall customer response that is shaping your second half investments? Curtis Valentine: Krisztina, it's Curtis. I don't -- I won't -- and Nick or Jack may jump in as well, but I don't think I'll get too specific on quantifying the exact expectations there or what's -- where we've been. I'll just say, I think the one thing -- again, go back to it's challenging to move the customer in this environment. And the longer we've gone with the elevated fuel and the challenging macro, it's just a little bit harder. Things that worked last year aren't working as well this year, things that we think should work that we try don't work quite as well. And so there's been a lot of learning and kind of readjusting to the current environment for how we go to market. And that's really kind of how it's playing out as we think about the tests, whether it's in personalization or whether it's in price and promotion. Jack Sinclair: And I think one of the -- the macro challenge is one of the biggest things that I think is affecting the ability for us to move traffic. And the comparison to last year is pretty significant on some of the things that happened last year. And those lower engaged customers that came to us last year in some unique circumstances, that's the one -- that's the group that we're seeing the biggest challenge on growing the traffic. But when that lapping rolls off, we're feeling pretty confident about that linking to all the work that Nick's team are doing in terms of how do you give value to the customer and how do you give value on those items that matter most to the customer. We're seeing some progress on that. I think the traffic will take a little bit longer. Krisztina Katai: That's helpful. And if I could just follow up on that. Obviously, you called out the lower engaged customer remains the largest opportunity. So if you could just sort of give us any framework around how to think about that? Just how much of the comp pressure today is coming from these shoppers? What percentage of your customer base would you characterize as lower engaged today? And if you could just maybe tie that in terms of what behavioral changes are you seeing as the loyalty and personalization efforts gain traction? Nicholas Konat: Krisztina, it's Nick. I probably won't quantify it, but I would tell you that where we're seeing the biggest challenges, as I mentioned in John's question, was with the lower engaged customer. It's certainly a smaller portion of our spend and a smaller portion of our customer base. So it's not our core customer, but we certainly see that. And the behavior your question was about is we're just seeing them spread the trips out a bit more. We're not seeing them take the same low frequency maybe as they have in the past. I think that's what's driven by in the macro, right, and that people are managing their wallet right now and what they can spend. So that's kind of what we're seeing from the less engaged cohort. And the good news is our core customer has remained pretty resilient. I think part of what we're seeing in some of the price activity, it's been good for units in the basket, a little bit tougher on traffic, but we're seeing the customer respond to a great assortment that's at a great value and some of the newness and things that we've launched. I think that kind of highlights the type of customer we have and who we really stay focused on as we continue to work in the second half. Operator: Our next question comes from the line of Rupesh Parikh with Oppenheimer & Company. Rupesh Parikh: Just given a number of players highlighting price investments out there, just curious how you guys feel about your price gaps and just overall, what you're seeing on the competitive promotional front? Jack Sinclair: Specifics in terms of price gap, we talked fairly consistently, Rupesh, about that in terms of the important pricing and the way we've got direct comparisons with other guys is in our produce. So we continue to pay a lot of attention on our produce. We're very pleased with where we are on our organic produce, and it's a fairly volatile market as you -- as we alluded to earlier. So produce pricing, we feel we're in a pretty good place in terms of relative to the competition in that space. And with regard to other activities that are going on in the marketplace, and clearly, a lot of people are talking about things that are going on in the marketplace. We are pretty confident that the assortment and products we're putting together are differentiated enough, that we have to focus on the value of those items that matter most to our customers, and our customers being that health enthusiast customer. And as Nick alluded to earlier, just picking the right items at the right price is something we can do because our products are differentiated, and we do that in the context of making sure we've got the right value for the customer going forward. And that's been our pricing model for a long time now. Rupesh Parikh: Great. And then my follow-up question, just on new stores. Commentary suggests that they're still performing really well. But just curious, just given the more difficult backdrop, have you guys seen any challenges in how these stores ramp or anything else to highlight just given the weaker backdrop? Curtis Valentine: Rupesh, it's Curtis. No, actually, that's one of the things we're really pleased about and kind of continues to give us confidence in the go-forward and in the strategy overall, is the new stores continue to open well. And it's really across the country. We've opened them in New York and in Florida and across the California. And so new stores open everywhere. They're all generally performing the way we'd like them to. We see the typical nuances of new markets versus more established markets, but all of them kind of performing ahead of our expectations and in line with the last couple of years of performance. And then the other encouraging proof point is the recent vintages are comping positive. So as the core is a bit challenged, those last four vintages are all positive. And again, just continues to point to this is an offer, this is a format, this is a model that the customer is looking for. So I've been really pleased with the new stores. Operator: Our next question comes from the line of Mark Carden with UBS. Mark Carden: So this one -- this builds on the last one a bit. It sounds like you're seeing good momentum on your new stores. As you look to your stores in newer markets, is your customer mix mirroring what you see across the broader footprint? Is it any tougher to bring in customers that are closer to the lower end of income spectrum in markets where you're still building up your name recognition? Does the excitement of the new concept offset this? Just what are you seeing on that front? Curtis Valentine: Yes. Mark, this is Curtis. I think it's -- in newer markets, it's just challenging generally because the awareness isn't there. And that's really the big difference. I don't think it's any materially different from a cohort perspective. We watch mix and what they shop from a department perspective. There's no dramatic differences there. I just think it takes a minute for people to figure out who we are, figure out that we're different and how they can incorporate us into their share of wallet from a grocery perspective. And so those stores, as we talked about over the years, tend to build a little bit slower -- or sorry, build a little faster. They start a little bit lower and then they build a little bit faster as customers figure us out. Jack Sinclair: And it's definitely clear, when you go to Long Island, we're not as well known as when we open stores in Los Angeles. So we see that very specifically in our numbers. But the mix of our customer base, I don't think it's significantly different from where we are everywhere. Mark Carden: Great. That makes sense. And then you guys alluded to some other opportunities from a self-distribution perspective. How would you think about timing as to when it's right to in-source additional categories? Does your experience with meat and seafood pull up the time line at all there? Nicholas Konat: Mark, it's Nick. We're really happy with the work the supply chain teams have done and the merchants have done in completing the meat rollout that we wrapped up with our NorCal DC in Q2. They've done a phenomenal job across the board. And I think what it's proven to us is, hey, there's potential for us to continue to learn and look for more ways to control the key products that are really important to us and our customer. And as Jack mentioned, we're starting to dip our toe in the water a little bit there with some -- a couple of Sprouts brand items that we're bringing in, using the capacity we have in our existing distribution centers to, again, take ownership and try to improve service levels and profitability in the business. We're going to continue to take it one step at a time, learn, see how that's working and assess, but we're going to continue to look for ways we can take more control where it makes sense for us, but we're taking a measured approach over the next couple of years, and we'll look at that as we look at our long-term plan on our network as well. Jack Sinclair: And we're investing appropriately in supply chain. We've built, I think it's four distribution centers in the last few years, and we've got more to come going forward in terms of building capacity to support our store base as we grow into different marketplaces. So it's been a strong evolution of our supply chain over the last few years, and this idea of getting more control over things like Sprouts brand and some of the core categories is going to be really important to us, and we're investing in it appropriately. Operator: Our next question comes from the line of Scott Marks with Jefferies. Scott Marks: I wanted to just hit on a comment you made in the prepared remarks about EBIT margin pressure being about 50 bps in Q3. I think you called out a few different components of that with more new store openings, fixed cost deleverage, lower comp sales. You called out some of the fuel headwinds. So just wondering if you can kind of help us bucket each of those components in terms of contribution from each as it relates to that expected pressure. Curtis Valentine: Scott, it's Curtis. I think probably the easiest way to say it is it will be pretty similar to what we experienced in Q2. So if you go up and down the P&L in Q2, the shape of it is going to look pretty similar. So slightly negative gross margins, slightly negative SG&A, a little bit of pressure in D&A, and then the new stores piece really kind of folds into that SG&A pressure. Scott Marks: Okay. Clear on that. And then previously, you had also called out a cannibalization factor in existing markets where you're rolling out new stores. Wondering if you can just give us an update on that and what you're seeing now relative to what you had been seeing previously? And that's all. Curtis Valentine: Scott, Curtis again. Yes, I think we talked about 100 to 150 is kind of the range we typically expect to see, and that will depend on mix of new versus existing markets and et cetera, et cetera. Right now, we're towards the lower end of the range. One piece is we've -- a fewer store openings in the first half, and we'll ramp that up here in the second half. But through Q2, it's kind of towards the low end of that range, and that's slightly better than what it was last year, but we've been pretty consistently in that range. Jack Sinclair: I think one of the things that's encouraging for us is that the calculations on cannibalization, the model, the guys are doing a really good job at predicting exactly what that cannibalization is so we can really understand it. We've got much better at that over the last few years. Operator: Our next question comes from the line of Scott Mushkin with R5 Capital. Scott Mushkin: So I wanted to go back to the pricing thing for a second because we've seen some interesting pricing at you guys -- with you guys. And the example I would give is where we see FAGE yogurt priced very well, but then we see Rao's tomato sauce priced way above the market. And I guess I was just curious like how deep do you guys get in understanding where the market is on different items to make sure you're priced right, or maybe there's times you can actually come up a little bit. Jack Sinclair: We will dig into the specifics of those points, Scott, which we'll dig into understanding exactly where they are. We are looking on brands like that to where other people are pricing at. And it's a combination of are we -- what's happening in the category? Are we evolving the category or not, which is how important is that category for us. And I think we'll get better at that approach going forward. Maybe you want to say something. Nicholas Konat: No, I think Jack said it. The only thing I would add, Scott, you know us. I think as we look at it, our intent is to try to continue to bring in brands that don't have the level of competition in a couple of those categories. We have a lot of new innovation coming in there, too, that we're trying to introduce people to and get into that space. But for the most part, again, the goal is to continue to try to not carry the same things. And when we do, be everyday competitive. And there's certainly opportunities for us to tighten execution, but that's the way we're looking at the business, and that's the way we're executing. Scott Mushkin: And that goes right into -- execution goes right into my second question, is that you guys are opening a lot of stores now. How are you thinking about -- I remember Whole Foods back in the day when they were opening so many stores, one of the bigger challenges was just getting the right store manager in there, making sure the execution was consistent across the fleet. And again, one of the things they ran into is when they poached people out of stores, the execution at the older stores could fall down a little bit. So how are you guys thinking about this as growth has really accelerated? Jack Sinclair: I'll let Nick go through a bit of detail on that. It's a really good question, and we're thinking very hard as we grow our store base, how do we develop this. And the whole process of promoting internally has been an important part of our exercise, and we're really pleased with the assistant manager programs that we're making progress on. Going forward, as we get to 40, 50 stores going forward in the years ahead, this is an important and a really important part of our proposition to the customer. And we call ourselves Sprouties, and making sure we create and grow Sprouties is a key part. And our HR team are doing a terrific job working with the ops team. Nick, I don't know whether you want to build. It's such an important point. Nicholas Konat: Yes. I'll just give a little more color to Jack's comments, Scott. I think this has been something we've been talking about for a while, super important to build our pipeline. It starts with making sure our culture and values are really well ingrained across the business. That's what drives the experience that's unique for us in the stores and done a lot of great work there. We've put a lot of time into actually recruiting and bringing people internally before we place them in stores and letting them work side-by-side with assistant managers and managers to increase the pipeline of people who are ready. And we're continuing to invest in putting more ASMs and store managers in the stores early to help us get people ready to take on a new store. And to your point, make sure that the existing stores maintain. I think we're really happy with what we're seeing in the new stores. The teams have been great. And overall, I've been impressed with what I've seen in the existing, but it's certainly something we'll continue to invest in that pipeline as we continue to grow the number of stores. Operator: Our next question comes from the line of Robert Ohmes with Bank of America. Robert Ohmes: A couple of quick follow-ups for you. The first is just I'd love to get your sense of like-for-like inflation and maybe the trends that you saw in the first half. And as we go into the back half, what does inflation look like? Is it accelerating into the back half? And is it coming through from suppliers and things like that? Curtis Valentine: Robert, it's Curtis. The first half is -- second quarter was pretty consistent with the first quarter. We're seeing on like-for-like SKUs, inflation in line with CPI. And then for us, we always have a little bit of a mix uptick in some of our newer products and maybe more premium innovation driving the AUR up a bit. But on a like-for-like basis, we're still fairly in line with CPI. And then you've got just a handful of categories like coffee and beef that are elevated. Robert Ohmes: That's helpful. And then there's been some commentary out there and maybe some data, I don't have it, but about, I guess, the West Coast being much weaker, at least for the traditional grocers than, say, the middle of the country in the East Coast. Can you remind us your exposure to the West Coast? And have you seen significant differences in West Coast versus other regions? Jack Sinclair: We've got a lot of stores in the West Coast. And quite honestly, Robert, we're not seeing any difference in our performance in the West as we see in the rest of the country. But we've clearly heard that from others. Robert Ohmes: That's great. And just I'm going to slip in one last one. When you go to Long Island and when you think about opening up Hartsdale and Boston and places like that, do you -- are these higher average store volume markets in general for you? Or you would not expect that? Curtis Valentine: Robert, it's Curtis. I think we have high hopes and aspirations for those markets. I think they're going to be strong markets for us. I would think, though, that early days, what we typically see when we open a new market, is the volume is a little bit lower. Again, it takes a minute for people to figure us out. We don't have great density. That's challenging for marketing, just scale of the business. And so early days, we expect them to be a little bit lighter than our average opening, and then we expect them to ramp pretty quickly over time. And certainly, one of the big changes we've made as we think ahead to Chicago and even greater New York is getting to that density even quicker. And so I think in Chicago, you'll see us start in 2027. And then our expectation is 12 to 18 months later, we'll have 10 stores in Chicago, and there'll be a good presence of Sprouts in Chicago. And then we're putting our foundation teams and our marketing teams on the ground early in those markets to really build community and let folks know we're coming. So we're trying to get ahead of that in those newer markets. But that said, I think we'll still expect them to start a little bit slower. Jack Sinclair: And they are denser markets. So ultimately, they'll be great stores once you get the awareness where it needs to be. Operator: Our next question comes from the line of Michael Montani with Evercore ISI. Michael Montani: Just wanted to ask, first off, on the lettuce impact. We were thinking about an 80 to 120 bp range impact currently that might moderate to like 30 to 50 bps for the quarter. I'm wondering if you could give any commentary around if that's consistent with what you're seeing in your expectation set. And then the follow-up I had was around initiatives that you've got in place that give you confidence that you can drive comp units and stabilize traffic. Curtis Valentine: Mike, it's Curtis. On the first one, again, that -- it's really live, right? It's been the last 2 weeks where we've seen the impact there. And so we're really watching it closely. As far as what's going to happen, I mean, I don't think we've got a great handle on that. We'll have to just watch it, monitor it closely and see how it plays out. So it's been a small impact thus far over the last 2 weeks, and we'll be watching it closely. Nicholas Konat: Mike, it's Nick. I'll answer the second part of your question. I think some of that I talked about, if you think about how do we continue to drive the comps in the second half with the assortment work around meals and healthy essentials and the innovation there. I think we're still -- it's still a lot of testing and learning in price and promo. And then obviously, personal and loyalty, I think we've got some good green shoots in that space that leads to momentum in the second half. And then the other thing I hadn't mentioned, I've been really happy with what I'm seeing from Mandy, our new Chief Customer Officer, and her team on the marketing front as we look at new ways to harness her capabilities and insights on media, on using our first-party data, that we're now acquiring in an even stronger way outside of our ecosystem. And also, you're going to see us, I think, get even better about our messaging and communication on how we balance health, innovation, quality and value. So I like the work I'm seeing from the team that the customers will start to see in the back half of the year. Curtis Valentine: Mike, it's Curtis again. I'll just clarify that as far as the quarter-to-date piece of it or what's behind us, the number you quoted was just a little bit high versus what we're seeing. I won't speculate about what will be going forward, but it's not quite as high as you had it for the last couple of weeks that we've seen. Operator: Our next question comes from the line of Seth Sigman with Barclays. Seth Sigman: I wanted to focus on e-commerce. Growth accelerated this quarter. It was actually a big driver, I think, of the overall comp improvement despite that channel seemingly becoming more competitive. So just with the new data that you have on customers, is there anything more you can share about what you're learning about that customer? Where are they coming from? How do they shop across channels? How valuable are they? Nicholas Konat: Seth, it's Nick. Yes, I'll share a couple of things. And it's pretty similar to what we've seen. But you're right, we saw very good e-commerce growth, and it's been a really good partnership with our partners, Instacart, DoorDash and Uber Eats. I think what -- the reason we continue to see it even in a bit of a challenged macro, is we have a lot of things that customers really want and need that they can't find anywhere else. And even now, right, when maybe they might not be making -- getting the car to make that trip, they can get something ordered online or just have it picked up in front of our store, and we're seeing both our delivery and pickup businesses perform well. The e-commerce customer for us is an omni customer. For the most part, the vast majority of those customers shop both channels, and they're our highest value customers. So the more we grow that customer in business, that's a very good thing for us. And as we mentioned in the past, I think what we're seeing is the basket for e-com and the mix look pretty similar to what you see in brick-and-mortar, high amount of produce, a lot of fresh. I think the customer trusts our fresh business, and that's why you see it coming through in e-commerce. So a pretty consistent dynamic to what you'd see from a mix standpoint in brick-and-mortar. Curtis Valentine: And Seth, I'd just add, this is Curtis. It's another really good proof point for the model at large. I mean we've talked about new stores and innovation and those continuing to perform. This is another area that's continued to perform in a macro environment where you'd expect to be some pressure on it. And so again, it just highlights that the assortment is something the customer is looking for and when we can -- we want to be wherever they need us to be to service them, and e-com is a great channel for us, and we expect it to continue to grow going forward. Seth Sigman: Okay. That's super helpful. And then I just want to follow up on the margins. So the expectation that gross margin will be down slightly in Q3. I think the hope was that second half would see gross margins flat to up slightly. I think that was the original expectation. So is the delta there just higher fuel? And if you could just clarify if there's any assumption that price would help offset that? Like how are you thinking about that? Curtis Valentine: I think really, yes, the slight difference from the prior commentary is the fuel piece, which does land in gross, and that's a challenge. And I think the answer to the second part of the question is like that's not the right time for us to be pushing through price where the customer is and where the macro is and with the work we're doing on affordability. And so the fuel piece is an incremental pressure we didn't have contemplated when the year began, and we're dealing with it accordingly. I think within Q3, specifically, there'll be just a little bit of an impact from the Cyclospora piece as well, and that's probably the Q3 story, a little bit of fuel, a little bit of Cyclospora. And then in the fourth quarter, we've got fuel embedded in where we're going. And then we do expect the fourth quarter margin to be up slightly. Again, the onetime changes in the loyalty program. So we'll be -- the $2 going to $1 started in January. So the fourth quarter will be a full run rate last year at the $2 level versus the $1 this year. So there'll be a little bit of a onetime benefit there. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Jack Sinclair for closing remarks. Jack Sinclair: Well, thanks again for your attention. We appreciate you taking the time to listen to our quarter call, and we look forward to updating you in the future. Take care, everyone. Thank you. Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect. Before you buy stock in Sprouts Farmers Market, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sprouts Farmers Market wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* Now, it’s worth noting Stock Advisor’s total average return is 953% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Sprouts Farmers Market. The Motley Fool recommends the following options: long January 2028 $75 calls on Sprouts Farmers Market and short January 2028 $85 calls on Sprouts Farmers Market. The Motley Fool has a disclosure policy. Sprouts Farmers Market (SFM) Q2 2026 Earnings Call was originally published by The Motley Fool

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. 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-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote 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 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. 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. 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. 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%. 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. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report Vita Coco Company, Inc. (COCO) : Free Stock Analysis Report United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report US Foods Holding Corp. (USFD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Sprouts Farmers Market, Inc.? Here are five stocks we like better. Q2 sales increased 5% to $2.3 billion, with seven new stores helping offset a 1% decline in comparable-store sales. Net income reached $129 million, while diluted EPS rose 1% to $1.37. Management cited cautious consumer spending and weaker June trends, but highlighted growth in e-commerce, Sprouts-brand products and new stores. E-commerce sales rose more than 12%, and the company plans 42 net new stores in 2026. Sprouts maintained its 2026 outlook for 5.5%–6.5% sales growth, comparable-store sales ranging from a 0.5% decline to 0.5% growth, EBIT of $675 million–$685 million and diluted EPS of $5.32–$5.40. 3 Stocks at 52-Week Lows With Way More Upside Than Downside Sprouts Farmers Market (NASDAQ:SFM) reported second-quarter 2026 results that management said were in line with its expectations, as strong new-store performance offset a decline in comparable-store sales amid a challenging consumer environment. Total sales rose 5% year over year to $2.3 billion, driven by new store openings, while comparable-store sales declined 1%. Net income was $129 million, and diluted earnings per share increased 1% to $1.37. The company opened seven stores during the quarter, ending the period with 490 stores across 25 states. → This Tiny AI Supplier Could Be More Important Than the Chipmakers Why Wall Street Is Backing These 3 Comeback Stocks Chief Executive Officer Jack Sinclair said customers remain deliberate in their healthy-grocery spending and are managing their budgets carefully. He said Sprouts is responding by refining its value proposition, investing in affordability and personalization, expanding its differentiated assortment, and advancing supply-chain capabilities. Chief Financial Officer Curtis Valentine said comparable-sales trends improved sequentially through May before weakening in June, when Sprouts faced difficult prior-year comparisons related to strong produce performance and disruption in the natural and organic supply chain that had brought additional shoppers into its stores last year. July comparable sales were “slightly negative” but within the company’s guidance range, he said. → Refiner Stocks Are Near Record Highs—Can Iran-Driven Margins Keep Them There? 3 Reasons to Buy Sprouts Farmers Market Ahead of Earnings Management said the business has seen modest improvement in both traffic and units per basket. However, Valentine said customers continue to manage the number of items they buy, particularly during periods of inflation or broader financial pressure. Produce has a larger effect on the company’s unit trends because it accounts for a significant share of the average basket. Sprouts said it has seen an impact over the past two weeks from consumer concern related to Cyclospora, which management said has been concentrated in lettuces, salads, and related products. Valentine said the company had not experienced a product recall in its stores and described the effect on the business to date as small. The company has observed some customers shifting purchases from fresh products to frozen alternatives. → Innovative ETF Strategies That Are Paying Off This Summer Management characterized the lower-engaged and lower-income shopper as its largest near-term opportunity. President and Chief Operating Officer Nick Konat said those customers have been taking trips less frequently and spreading out purchases, while the company’s core customer has remained relatively resilient. Sprouts said its first-half affordability tests produced mixed results. Sinclair said many actions increased unit movement, but broader traffic gains have developed more gradually than expected. The company plans to focus second-half investments on the items most important to customers and on targeted pricing and affordability actions intended to improve engagement. Konat said the company’s affordability strategy includes meal solutions, Sprouts-brand products, pricing and promotions, and personalized loyalty offers. During the quarter, Sprouts highlighted fresh deli meals, a vitamin sale and $9.99 wellness bowls. Konat also cited new $29.99 family meals, fresh-made salads priced below $9, seed oil-free frozen potatoes, and a $4 fresh-baked organic sourdough bread offering. The retailer introduced about 1,300 new items in the second quarter, including products positioned around organic, seed oil-free, fiber, gut-health and protein attributes. Organic products now account for more than 30% of total sales, including more than half of dairy and produce sales, according to Sinclair. Sprouts-brand products represented 26% of quarterly sales and outperformed the broader business. E-commerce sales increased more than 12% and represented approximately 16% of total quarterly sales. Konat said the company’s e-commerce customers generally shop both online and in stores and are among its highest-value customers. The online basket and category mix are similar to the company’s brick-and-mortar business, with a significant contribution from fresh products and produce. Second-quarter gross margin declined 12 basis points year over year to 38.7%, reflecting loyalty investments and elevated fuel costs. Those pressures were partially offset by benefits from self-distribution and vendor participation supporting customer value. SG&A expense increased $38 million to $683 million and deleveraged by 30 basis points, largely due to fixed-cost deleverage from lower comparable sales and investments in the business. For the third quarter, Sprouts expects approximately 50 basis points of EBIT margin pressure, citing lower comparable sales, fixed-cost deleverage and a higher number of new-store openings than in the prior-year period. Valentine said the company also expects fuel costs and a modest Cyclospora-related effect to pressure third-quarter gross margin. The company’s Northern California distribution center is now operating, and nearly 85% of Sprouts stores are supplied with fresh meat through its distribution centers. Management said the shift provides greater control over freshness, service levels and shrink. Sprouts is also beginning to bring select Sprouts-brand products into its existing distribution network as it evaluates additional self-distribution opportunities. New stores continue to perform strongly across both established and newer markets, management said. Sprouts has more than 110 executed leases and 155 approved new stores. It expects to open 42 net new stores in 2026, consisting of 43 openings and one closure of an underperforming location with an expiring lease. At least 15 openings are planned for the third quarter, which would represent the company’s largest quarterly opening cadence to date. Total sales growth on a 52-week basis of 5.5% to 6.5%. Comparable-store sales between a 0.5% decline and 0.5% growth. EBIT of $675 million to $685 million. Diluted EPS of $5.32 to $5.40, assuming at least $300 million of share repurchases. Third-quarter comparable sales between a 0.5% decline and 1.5% growth, with diluted EPS of $1.20 to $1.24. Year to date, Sprouts generated $369 million in operating cash flow and spent $186 million in capital expenditures, net of landlord reimbursements. It also repurchased 2.8 million shares for $210 million through the second quarter, with $626 million remaining under its $1 billion authorization. Sprouts Farmers Market, Inc (NASDAQ: SFM) is a specialty grocery retailer focused on fresh, natural and organic foods. Headquartered in Phoenix, Arizona, the company operates stores designed to offer an open-market shopping experience, emphasizing quality produce sourced from regional farmers alongside organic pantry staples, dairy, meat and seafood. Sprouts' product assortment also includes bulk foods, vitamins and supplements, a deli and prepared foods, reflecting its commitment to wellness and affordable healthy living. Founded in 2002 by members of the Boney family, Sprouts began as a single farmers market in Chandler, Arizona. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Sprouts Farmers Market Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

PHOENIX, July 29, 2026--(BUSINESS WIRE)--Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week second quarter ended June 28, 2026. "Our second-quarter results were in line with our expectations," said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "As we continue to navigate a cautious consumer environment, we are encouraged by the strong performance of our new stores and the continued success of our foraging and innovation efforts. We are focused on driving deeper customer engagement, and we are confident in our long-term growth trajectory. I want to thank the team for their continued dedication, strong execution and commitment to serving our customers every day." Second Quarter Highlights: Net sales totaled $2.3 billion; a 5% increase from the same period in 2025 Comparable store sales of (1.0)% Diluted earnings per share of $1.37; compared to diluted earnings per share of $1.35 in the same period in 2025 Opened 7 new stores, resulting in 490 stores in 25 states as of June 28, 2026 Leverage and Liquidity in Second Quarter 2026 Ended the quarter with $224 million in cash and cash equivalents and zero balance on our $600 million revolving credit facility Repurchased 0.9 million shares of common stock for a total investment of $70 million, excluding excise tax Generated cash from operations of $369 million and invested $186 million in capital expenditures, net of landlord reimbursement, year-to-date through June 28, 2026 Third Quarter and Full-Year 2026 Outlook The following provides information on our third quarter 2026 outlook: Comparable store sales: (0.5)% to 1.5% Diluted earnings per share: $1.20 to $1.24 The Company notes that fiscal year 2026 will be a 53-week year, with the extra week falling in the fourth quarter. We estimate the impact from the 53rd week to be approximately $200 million in sales, $28 million in income before interest and taxes, and $0.21 in diluted earnings per share. The following provides information on our full year 2026 outlook (on a 52-week basis): Net sales growth: 5.5% to 6.5% Comparable store sales: (0.5)% to 0.5% EBIT: $675 million to $685 million Diluted earnings per share: $5.32 to $5.40 Unit growth: 42 net new stores Capital expenditures (net of landlord reimbursements): ~$310 million Second Quarter 2026 Conference Call Sprouts will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, July 29, 2026, during which Sprouts executives will further discuss second quarter 2026 financial results. A webcast of the conference call will be available through Sprouts’ investor relations webpage, accessible via the following link. Participants should register on the website approximately ten minutes prior to the start of the webcast. A webcast replay will be available at approximately 8:00 p.m. Eastern Time on July 29, 2026. This can be accessed with the following link. Important Information Regarding Outlook There is no guarantee that Sprouts will achieve its projected financial expectations, which are based on management estimates, currently available information and assumptions that management believes to be reasonable. These expectations are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. See "Forward-Looking Statements" below. Forward-Looking Statements Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact (including, but not limited to, statements to the effect that Sprouts Farmers Market or its management "anticipates," "plans," "estimates," "expects," "will," "believes," or "projects," or the negative of these terms and other similar expressions) should be considered forward-looking statements, including, without limitation, statements regarding the company’s outlook, growth, opportunities and long-term strategy. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this release. These risks and uncertainties include, without limitation, the company’s ability to execute on its long-term strategy; the company’s ability to successfully compete in its competitive industry; the company’s ability to successfully open new stores; the company’s ability to manage its growth; the company’s ability to maintain or improve its operating margins; the company’s ability to identify and react to trends in consumer preferences in a timely manner; product supply disruptions; equipment supply disruptions; general economic conditions that impact consumer spending or result in competitive responses; accounting standard changes; potential inflationary and/or deflationary trends; tariffs; and other factors as set forth from time to time in the company’s Securities and Exchange Commission filings, including, without limitation, the company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available, except as required by law. Corporate Profile Sprouts Farmers Market is one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States. Sprouts helps people live and eat better with fresh produce at the heart of the store and delicious discoveries for every dietary lifestyle. Always foraging for what’s fresh and innovative, Sprouts offers a carefully curated assortment of products that inspire wellness naturally, including organic, gluten-free, plant-based and non-GMO favorites. Headquartered in Phoenix, AZ, Sprouts employs more than 36,000 team members and operates more than 480 stores in 25 states nationwide. To learn more about Sprouts and the role it plays in its communities, visit sprouts.com/about/. Non-GAAP Financial Measures In addition to reporting financial results in accordance with accounting principles generally accepted in the United States ("GAAP"), the company presents EBITDA and EBIT. These measures are not in accordance with, and are not intended as alternatives to, GAAP. The company's management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the company, and certain of these measures may be used as components of incentive compensation. The company defines EBITDA as net income before interest (income) expense, net, provision for income tax, and depreciation, amortization and accretion. The company defines EBIT as net income before interest (income) expense, net and provision for income tax. Non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, non-GAAP measures should not be considered as a measure of discretionary cash available to use to reinvest in the growth of the company’s business, or as a measure of cash that will be available to meet the company’s obligations. Each non-GAAP measure has its limitations as an analytical tool, and they should not be considered in isolation or as a substitute for analysis of the company’s results as reported under GAAP. The following table shows a reconciliation of EBIT and EBITDA to net income for the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025: View source version on businesswire.com: https://www.businesswire.com/news/home/20260729824108/en/ Contacts Investor Contact: Susannah Livingston(602) [email protected] Media Contact: [email protected]

Sprouts Farmers (SFM) came out with quarterly earnings of $1.37 per share, beating the Zacks Consensus Estimate of $1.35 per share. This compares to earnings of $1.35 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +1.48%. A quarter ago, it was expected that this natural and organic food retailer would post earnings of $1.67 per share when it actually produced earnings of $1.71, delivering a surprise of +2.4%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Sprouts Farmers, which belongs to the Zacks Food - Natural Foods Products industry, posted revenues of $2.33 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.12%. This compares to year-ago revenues of $2.22 billion. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Sprouts Farmers shares have lost about 2.4% since the beginning of the year versus the S&P 500's gain of 8.5%. While Sprouts Farmers has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Sprouts Farmers was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.28 on $2.34 billion in revenues for the coming quarter and $5.55 on $9.5 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Food - Natural Foods Products is currently in the top 40% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Performance Food Group (PFGC), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 12. This food distributor is expected to post quarterly earnings of $1.62 per share in its upcoming report, which represents a year-over-year change of +4.5%. The consensus EPS estimate for the quarter has been revised 0.8% lower over the last 30 days to the current level. Performance Food Group's revenues are expected to be $18.21 billion, up 7.5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report Performance Food Group Company (PFGC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research