Shares of Sprouts Farmers Market (NASDAQ: SFM) climbed more than 16% this past week after the natural and organic grocery chain delivered healthier-than-expected financial results in its most recent quarter.
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New stores are fueling growth
Sprouts’ net sales grew 5% year over year to $2.3 billion in its fiscal second quarter, which ended on June 28.
The retailer opened 7 new stores during the quarter, bringing its total to 490 locations across 25 states.
However, Sprouts’ comparable sales, which include revenue from stores open for at least 60 weeks, declined by 1%. Sprouts faced difficult comparisons to the prior-year quarter, when its competitors’ supply chain disruptions drove additional traffic to its stores.
Sprouts’ gross margin also declined slightly to 38.7%, due in part to higher fuel costs.
All told, the company’s earnings inched up 1% to $1.37 per share. That topped Wall Street’s estimates, which had called for per-share profits of $1.34.
Sprouts also continues to crank out cash. Operating and free cash flow checked in at $369 million and $179 million, respectively, through the first half of 2026.
A long runway for further expansion
Management expects same-store sales to turn positive in the third quarter. For the full year, the company expects net sales growth of 5.5% to 6.5%, with operating income of $675 million to $685 million and earnings per share of $5.32 to $5.40, driven by 42 net new store openings.
Looking even further ahead, Sprouts sees an opportunity to expand its store base to over 1,000 locations nationwide.
“Our pipeline remains robust with more than 110 executed leases and 155 approved new stores, giving us confidence in our ability to continue expanding access to Sprouts over the long term,” chief financial officer Curtis Valentine said during a conference call with analysts.
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