Sprouts shakes up leadership, lowers guidance

By Elizabeth Crawford

- Last updated on GMT

Sprouts shakes up leadership, lowers guidance

Related tags Revenue

Natural retail chain Sprouts Farmers Market shook up its long-established leadership at the same time it announced during its second quarter earnings call Aug. 6 that it is lowering its full year guidance. 

The news sent the chain’s stock tumbling Thursday night despite executives' reassurances that the chain is seeing its largest baskets in two years, is on track to meet store growth and experienced a 21% year-over-year revenue increase to $900.96 million in the quarter.

CEO Doug Sanders, who has been with the company since its inception in 2002, announced that he will hand the company reigns to current Chief Financial Officer Amin Maredia and step into the role of executive chairman of the board. In addition, Jim Nielsen, the current chief operating officer, will assume the position of president and COO.

“Sprouts has been part of my life for 13 years during which I’ve had the privilege of seeing the company grow from a single store into one of the largest and fastest growing natural food retailers in the country,”​ Sanders said. He added the company will remain “on solid ground”​ and continue its “exceptional growth trajectory” ​under the new management team.

The announcement comes a few weeks after Shawn Gensch joined the company as the chief marketing officer and Dan Sander as executive VP of store operations.

Maredia said the company, under the new leadership, “will continue to be nimble, innovative and customer focused to deliver a mission of healthy living for less.”

Outlook lowered

The leadership is not the only change the company announced during its quarterly report. It also announced notable downward changes to its fiscal guidance.

Due to increased competition, the firm is lowering its projected net sales growth to 19-21%, its comparative sales growth to 4-5% from 6-7% and earnings per share to 80-82 cents from 84-87 cents.

Nielsen explained the competition is coming from added assortment and increased availability of organic at other retailers, as well as pricing pressure from produce earlier in the year.

But, he stressed, “we cannot connect this to any negative sales impact. In fact, the non-perishable side of the business continues to see uptick in sales throughout the year,”​ thanks partly to promotions, pricing and new products.

Nielsen also said the chain’s average basket now includes the highest number of items in the last two years. He noted the number has been slowly and consistently rising with no sudden spikes.

Sprouts continues to add new stores

New store productivity also continues to be strong, which will position the company well for long-term growth, Sanders said.

He noted SFM opened eight new stores in Tennessee in the quarter, bringing the year-to-date total to 22 new stores in 11 states. It also plans to open five more in the back half of 2015, “keeping us well on track to meet our 14% unit growth target,”​ Sanders added.

While cannibalization of existing stores is an issues, Maredia says it is only temporary and will smooth out in the back half of 2015.

He added that SFM is not seeing anything to suggest that the new stores are coming at such a high pace as to hurt the overall natural market channel. Rather, he said, traditional grocers are the ones struggling. 

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