Dive Brief:

• Sprouts Farmers Market on Monday reported comparable-store sales growth of 3.1% during the first quarter of 2023 — the specialty grocer’s best quarterly performance by that measure since 2020.
• Net sales came in at $1.7 billion, up 6% compared with the same period last year, while adjusted diluted earnings per share rose 24% year-over-year, to 98 cents.
• Sprouts’ robust Q1 results cheered investors, who bid up the company’s share price by over 8% Tuesday morning to above $38 — its highest level since 2015.

Dive Insight:

Sprouts executives attributed the retailer’s strong showing during its latest quarter to a range of factors, including foot traffic that exceeded expectations, supply chain improvements and deeper engagement with customers through advertising.

The company’s comparable store sales for Q1 came in at the highest level since the chain saw the metric hit 3.7% during the fourth quarter of 2020.

Sprouts has also been benefiting from the smaller store format it has been rolling out in an effort to use its real estate more efficiently, CEO Jack Sinclair said Monday during an earnings call. The new stores, which at about 23,000 square feet each are significantly smaller than the company’s legacy locations, have been performing better than anticipated, Sinclair said.

Sprouts opened eight new stores during Q1 and is proceeding toward a goal of debuting at least 30 locations in 2023, all of which will be based on the new design, CFO Chip Molloy said during the call.

The grocer has 90 approved new stores in its pipeline and 60 signed leases, which Molloy said are helping the company as it looks to achieve its goal of expanding its fleet at a 10% annual clip by 2024.

Sinclair added that Sprouts has been working to drive sales in its stores through initiatives like increasing sampling, boosting checkout speeds and helping shoppers find products. The retailer has also recently stepped up its focus on heath-focused and plant-based meals, and recorded improving bulk sales, Sinclair said.

Sprouts also saw strong online engagement with shoppers in Q1. Digital sales grew 12.2% during the period, due in part to its addition late last year of DoorDash as an e-commerce partner, Sinclair said during the call.

“We are very pleased with the work we do with both Instacart and DoorDash, and customers can choose how best to access e-comm,” Sinclair said. “At the same time, our pickup business has grown as well over the period of time and our in-store traffic is going up a little bit. So we are getting a nice balance across the three, but our e-commerce business has been very strong over the course of the last year and we are encouraged by it.”