Sprouts Farmers Market announced Monday it has purchased two independently owned stores in Chula Vista, California, operating under its name.
One of the stores is at 878 Eastlake Pkwy. while the other is 690 3rd Ave. The amount of the transaction was not disclosed.
The two stores were using the Sprouts Farmers Market trademark under a legacy trademark license agreement, the announcement noted. Sprouts licensed its trademark “many years ago” to a third-party operator in what the grocer called a “one-of-a-kind operating structure.”
In a filing with the Securities and Exchange Commission, Sprouts said it was generating licensing fees from agreements related to two former Henry’s stores. The licensing agreement with the stores dates back to the ‘90s.
Sprouts merged with Henry’s, which was established by the same family, in 2011 after Henry’s private equity owner, Apollo Management, bought Sprouts and decided to combine the two grocers.
Sprouts did not respond by press time to an inquiry about how the licensing agreement originated.
With the acquisition, the Phoenix-based chain, which operates roughly 380 stores across 23 states, said it now controls all of the stores bearing its name, giving it complete control of its brand. No other licensed Sprouts stores exist.
“We are pleased to bring these two high-volume stores into the Sprouts fold, allowing us to serve more customers in the San Diego market,” Chip Molloy, chief financial officer of Sprouts Farmers Market, said in the announcement.
Sprouts said the purchase of the two locations was not factored into its financial outlook released earlier this month. That 2023 guidance predicts net sales growth between 4% and 6% and same-store sales growth in the “low single digits.”
During its fourth-quarter earnings call at the start of this month, Molloy said that Sprouts plans to open at least 30 new stores this year, with all of them based on the grocer’s smaller design, and close 11 stores bearing the company’s older design as it rethinks larger footprints. By comparison, Sprouts opened 16 new stores in 2022, bringing its store tally to 386 as of Jan. 1, 2023.
Sprouts reported net sales of $1.6 billion during its Q4, a 6% year-over-year increase, and a same-store sales increase of 2.9%. For all of 2022, those same metrics rose 6.4% and 2.2%, respectively.