Dive Brief:
- Sprouts Farmers Market recorded a 2.7% increase in same-store store sales during the fourth quarter of 2021 compared with the same period in 2019, reversing two quarters of decline for the key financial metric, the retailer reported on Thursday
- The produced-focused grocer also announced the appointment of Nicholas Konat, former director of food merchandise planning at Target, as president and chief operating officer, effective March 21.
- In addition, Sprouts disclosed in a regulatory filing that it has reassigned Gil Phipps, who joined the company as chief marketing officer in April 2020, to the position of senior marketing advisor and intends to evaluate his employment status at the end of May.
Dive Insight:
Sprouts has long sought to distinguish itself from conventional grocery chains by highlighting its strong focus on wellness-oriented consumers, and the company emphasized that distinction in discussing its latest financial results during its latest earnings call.
Sprouts brought in $1.49 billion in net sales in the fourth quarter, a 7% year-over-year decrease that the retailer attributed mainly to the fact that the final quarter of 2020 encompassed an extra week. Net sales for 2021 were down 6% on a year-over-year basis, to $6.1 billion.
More than 70% of Sprouts' assortment was "attribute-driven" as of the end of 2021, with organic products accounting for 24% of the retailer's 2021 sales, CEO Jack Sinclair said during the call.
The specialty grocer added more than 5,700 products to its mix in 2021, a figure that included 400 private label items, Sinclair said. The retailer saw particular strength in its bakery department, with "keto bread" outselling conventional bread, he said, adding that deli and vitamin sales were also robust.
Private label products currently account for 16% of Sprouts' assortment, according to Sinclair. "It doesn't need to be a particular number. The important thing for us is that it's bringing that differentiation to our customer and we're bringing innovative products into the space. And that's something that I'm very excited about going forward," he said.
Sprouts expects to open 15 to 20 new stores in 2022, below its previous estimate of 25 to 30, owing to supply chain and permitting bottlenecks, Chief Financial Officer Chip Molloy said during the call. In addition, some stores set to open this December are being pushed back to 2023, when Sprouts believes the pace of new development will increase, Molloy said.
All but seven of the stores Sprouts plans to debut in 2022 will be based on the smaller, more efficient format the company has been rolling out as it looks to build profitability, according to Sinclair.
Sinclair said he believes Sprouts has been less affected than other food sellers by supply chain issues in recent weeks. "The reality of the CPG world over the last two months or so is you've had all the conventional grocers battling with Walmart and battling with Target for product," Sinclair said. "I think we're in a better place than most of the other guys, although by no means [are we] where we want to be."
Sinclair added that Sprouts' decision to hire Konat reflects an effort to sharpen its operations going forward "and bring a lot of discipline to our merchandising, marketing and operations side of things."
Konat joined Petco, where he most recently served as chief merchandising officer, after spending more than nine years in the food and fashion departments at Target. Earlier in his career, he worked for Accenture.
Phipps, who according to Sprouts' latest Form 8-K transitioned out of his role as senior vice president and chief marketing officer on Feb. 18, previously served as vice president of branding, marketing and “Our Brands” at Kroger. Prior to working at Kroger, Phipps spent 11 years at H-E-B.
When it announced that it had hired Phipps, Sprouts highlighted his experience as key to helping the retailer build brand awareness, drive customer loyalty and define its private label business.
