Buyers now have decrease expectations for Sprouts Farmers Markets (), however they could have lowered their expectations an excessive amount of. It now appears to be like like Sprouts will report a lot weaker ends in 2026 than it did in 2025. Shoppers are involved about excessive grocery costs, and wealthier consumers are buying at greenback shops to economize. So, Sprouts doesn’t anticipate sturdy comps within the quick time period, however it’s nonetheless planning to maintain constructing new shops.
In Q1 2026, Sprouts mentioned it opened 6 shops within the first quarter and it plans to open greater than 40 shops in 2026. The corporate had 477 shops firstly of the 12 months, so if its retailer rely rises to 517 shops by the tip of the 12 months, that’s an 8.4% annual progress price. Sprouts’ steerage requires flat comps and general income progress within the 4.5% to six.5% vary in 2026, which is decrease than that, although. And the corporate additionally posted 1.7% comps in Q1 2026.
However whereas Sprouts would possibly publish weak comps within the quick time period, its enterprise mannequin nonetheless makes it a really worthwhile grocery retailer. Sprouts can promote well being meals for comparatively excessive costs as a result of its prospects are keen to pay further to keep away from unhealthy elements. Its merchandise is extra extremely curated than the meals at conventional grocery shops, and Sprouts additionally shares merchandise from new health-food manufacturers that aren’t out there elsewhere. In consequence, Sprouts has comparatively excessive gross margins for a grocery retailer, however it’s additionally price evaluating this retailer to different shops utilizing different effectivity metrics.
Sprouts Comes Out Forward on Revenue Per Sq. Foot
It may be useful to check Sprouts to a different health-food retailer, Pure Grocers (), in addition to the standard grocery retailer Kroger (). All three of those shops have supplied their annual 10-Ok studies for 2025, so listed below are hyperlinks to the studies for Sprouts, Pure Grocers, and Kroger, respectively.
Gross sales per sq. foot is one strategy to measure a grocery retailer’s effectivity. Kroger’s whole sq. footage was 180 million on the finish of 2025, and its 2025 income was $147.6 billion, so its gross sales have been $820 per sq. foot. Pure Grocers, which is a smaller chain that operates small shops, had whole sq. footage of two.74 million in 2025 and $1.33 billion in income. So, Pure Grocers had gross sales of $2,060 per sq. foot. And Sprouts had sq. footage of 13.0 million and income of $8.81 billion in 2025, so it had gross sales of $678 per sq. foot in 2025.
So, Sprouts has decrease gross sales per sq. foot than a few of its friends. Pure Grocers is an outlier on this metric due to the way in which its enterprise mannequin works, however Sprouts additionally fell behind Kroger on this metric and that’s extra important.
However in the event you think about revenue per sq. foot as a substitute, Sprouts comes out forward. With internet revenue of $524 million in 2025, Sprouts achieved a revenue of $40 per sq. foot. Pure Grocers’ internet revenue was $46.4 million for the 12 months, so its revenue per sq. foot was $17. And Kroger’s internet revenue was $3.199 billion, so its revenue per sq. foot was $18.
Sprouts Isn’t The Chief On Money Circulation Per Retailer
It’s additionally price contemplating how a lot money circulate every Sprouts retailer generates. In 2025, Sprouts reported working money circulate of $716 million. Because it had 477 shops, the common retailer generated $1.50 million in money circulate. Kroger had 2,697 supermarkets on the finish of 2025 and reported working money circulate of $7.31 billion, so its common retailer generated $2.71 million in money circulate. And Pure Grocers reported $55.3 million in money circulate and had 169 shops on the finish of its fiscal 12 months, so its common retailer generated $327 million in money circulate.
Sprouts Comes Out Forward on Revenue Per Worker
It’s additionally price contemplating the productiveness of Sprouts’ workers. Sprouts had 36,000 workers on the finish of 2025. In its report, the shop didn’t present separate counts for full-time and part-time workers. Pure Grocers had 4,250 workers, together with part-time workers. And Kroger had 403,000 workers in whole. So, Sprouts generated income of $245,000 per worker in 2025. Pure Grocers’ income per worker was $313,000 and Kroger’s income per worker was $366,000. Sprouts didn’t rating very excessive on income per worker, both.
However the state of affairs is totally different in the event you think about revenue per worker. In fiscal 2025, Sprouts reported internet revenue of $524 million, so its revenue per worker was $14,555. Pure Grocers’ revenue that 12 months was $46.4 million, so its revenue per worker was $10,918. And Kroger reported $3.199 billion in internet revenue in 2025, which leads to a revenue per worker of $7,938.
Excessive Margins Are The Key Right here
For those who take a look at income or money circulate metrics, Sprouts isn’t performing higher than different grocery shops. But it surely appears to be like like Sprouts isn’t making an attempt to maximise income or money circulate, it’s making an attempt to maximise its revenue, and its shops are much more worthwhile than different grocery shops’ areas. In Q1 2026, Sprouts’ gross margin was 39.4%, which was down from 39.6% in Q1 2025, however that’s nonetheless very excessive in comparison with different grocery shops’ gross margins.
Sprouts is now planning to construct smaller shops which are prone to have fewer workers because it continues its enlargement, so even when these shops generate much less income, they may nonetheless be as worthwhile as its older shops. This choice might make metrics comparable to money circulate per retailer look worse, although.
Sprouts’ New Shops Are Rising Quicker Than Its Older Ones
Sprouts is at present increasing regardless that its comps are unfavourable, so it’s price contemplating whether or not the brand new shops will likely be as worthwhile as its older shops. CFO Curtis Valentine talked about this matter on the Q1 2026 earnings name. In response to the CFO, Sprouts’ final three or 4 vintages nonetheless have optimistic comps, so the brand new shops’ gross sales are nonetheless rising regardless that the older shops’ gross sales are falling. And this assertion offers proof that Sprouts’ weak current comps may be a short-term concern.
Conclusion
Sprouts’ premium seems to be primarily based on its capacity to take care of larger gross margins than different grocery shops and its continued enlargement. This firm doesn’t stand out on another effectivity metrics, however which may not be as necessary. Sprouts’ gross margin solely decreased barely in Q1 2026 and it seems like the corporate expects secure full-year margins, so it ought to stay extra worthwhile than different grocery shops. And Sprouts’ new shops have optimistic comps, so new areas received’t erode Sprouts’ margins both and its earnings ought to proceed to rise. So, in the long run, this might nonetheless be a progress inventory that’s at present buying and selling at an unusually low valuation due to weak current outcomes.
This content material was initially revealed on Gurufocus.com