Sprouts’ growth plans for 2016 include expanded delis, technology improvements

Sprouts Farmers Market reported a strong fourth quarter and success in meeting major financial projections for 2015 as it moves into an ambitious 2016.

On an earnings call Thursday, company leadership reported that sales for the 14-week fourth quarter ending Jan. 3 were $930.3 million—up 27 percent from the fourth quarter of the previous year. With 27 new stores opened in 2015, annual sales increased 21 percent to $3.59 billion.

Comparable store sales grew 7.4 percent in the fourth quarter and 5.8 percent for the year, which falls within the company’s guidance. Adjusted diluted earnings per share for the year were 86 cents. This is especially good news for Sprouts as several other major natural food and supplement outlets have recently struggled with soft sales and same-store sales growth.

CEO Amin Maredia attributed the strong quarter to several factors including a highly successful holiday season, increased store traffic and an extra week in the quarter.

For 2016, the retailer projected net sales growth of 16 percent to 19 percent, driven by 36 new stores, and comparable store sales growth of 4.5 percent to 6 percent. Maredia outlined three areas of priority:

Sales growth through increased investment in private label and expanded deli offerings. Seventy percent of new stores and more than 30 existing stores will see the addition of a salad bar, prepared foodservice case, fresh juices and specialty coffee this year.

“We will continue to evolve other parts of our deli as well, including enhancements to our whole-meal replacement offering, with even better ingredients, more selections and improved packaging,” Maredia said. “We believe these deli enhancements will increase our daytime traffic and bring more relevance to our customer shopper experience without adding a tremendous amount of capital to our new-store buildout.”

Investment in infrastructure—specifically technology. Key investments include a business intelligence function to help with promotion and pricing selections; new human resources systems; and programs to improve digital engagement with customers later in the year.

Investment in team members, with a busy training calendar focused on improving customer service and building a pipeline for future store growth. Maredia said the team is also moving proactively on wages in certain departments to improve turnover and attract and retain quality hires.

Sprouts also announced a new CFO, Brad Lukow, former CFO at Canadian drug store retailer Shoppers Drug Mart.