Markets for the most part have held up. There are a couple of weak areas. The NQ has lagged both the...
Sprouts: Organic Growth
05/20/2016 8:00 am EST
Sales of organic food and non-food products in the United States totaled an impressive $44 billion in 2015, up 11% from the previous year. Organic sales now equal some 5% of the total food market, explains Todd Shaver, editor of BullMarket.com.
The first Sprouts Farmers Market (SFM) was opened in Phoenix in 2002 and since has grown to 245 stores in 13 states. A majority of the stores are concentrated in California and four other western states.
While both Whole Foods Markets (WFM) and Sprouts specialize in organics, healthy lifestyles and great service, this is about where the comparison ends.
The average Sprouts is 30,000 square feet, far smaller than Whole Foods or for that matter, the average Kroger store.
Sprouts’ focus is more limited, concentrating on fresh foods, produce, meat and seafood, grocery, vitamins and body care. The emphasis is on products where inventory turnover is high.
Sprouts stores are well located, merchandised like an open-air farmer’s market, and offer middle of the road pricing on organic products.
Sales of bulk items also add to the value perception. With a value-oriented pricing structure, stores are jammed with a growing legion of repeat customers purchasing everyday items.
Things are happening at Sprouts. Over the past three years, revenues have grown an average of 21% annually while per share profits increased from $0.37 to $0.83.
With 70 new stores being added, a gain to the base of nearly 50%, this has driven this impressive performance.
But there is more to the story. Same store sales increased an average of 9% showing the world that the Sprouts formula is creating loads of repeat business and lots of raves on social media.
In parts of the United States it may not be easy to find a Sprouts Farmers Market, but Wall Street is rapidly getting acquainted.
The consensus of 18 followers is for the company to grow an average of 15% a year over the next five years.
Now in only 13 states with a proven formula for success, there is no limit to the future that realistically includes three times the number of stores in twice the number of states.
We love to find companies with great long-term growth potential and Sprouts fits the bill.
By Todd Shaver, Editor of BullMarket.com
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