Sprouts Farmers Market CEO Sinclair Unveils Growth Targets

Mike Troy
Editorial Director
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Sprouts farmers market
Sprouts Farmers Market will be shrinking its prototype size as part of a broad slate of growth strategies unveiled on May 5.

Sprouts Farmers Market has unveiled a multi-faceted strategic growth initiative that involves smaller stores, an improved supply chain and a new philosophy toward merchandising and marketing.

The broad slate of strategic initiatives were announced in conjunction with the release of first quarter results and come nearly a year after former 99 Cents Only CEO and Walmart executive Jack Sinclair was named president and CEO of Sprouts. Although Sinclair had telegraphed many of the changes since last year, through comments and personnel appointments such as naming former top Kroger own brands executive Gilliam Phipps as chief marketing officer, it wasn’t until this week that concrete details were provided.

Components of the company’s go forward strategy include:

  • Refocusing on target customers where there is ample opportunity to gain share by leveraging existing strengths in a unique assortment of better-for-you, quality products and by expanding e-commerce capabilities to allow customers easy access to differentiated products through delivery or pickup.
  • Updating the store format and expanding in select markets with smaller stores that are expected to produce stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for.
  • Expanding the existing base of 340 stores at a rate of 10% annually.
  • Creating a more efficient supply chain of fresh distribution centers, ideally located no further than 250 miles from any store.
  • Refining the brand and marketing approach to elevate national brand recognition and positioning by telling a unique product innovation and differentiation story.

The success of the strategy will be determined by new financial targets and store economics such as reducing store construction costs by 20%, achieving cash returns of 40% on new stores, producing low single digit comps and low double-digit earnings growth, according to targets shared by the company.

“While the current environment affects the precise timing of when these strategies will impact our results, I am confident all these initiatives will improve our store performance, drive efficiencies, establish a tremendous unit growth trajectory and accelerate our future earnings,” Sinclair said.

Keeping tabs on the company’s financial performance will be Sprouts relatively new CFO Denise Paulonis. She joined the company in February after serving as CFO of The Michaels Cos., and begins her career as a food finance executive by sharing a message of uncertain outcomes with investors.

“The COVID-19 crisis has created a lack of visibility for the remainder of 2020, with many unknowns,” said Paulonis. “While April sales trended higher than average, we are making significant investments in pay, benefits and safety measures, as the health of our team members and customers is our number one priority. We remain uncertain as to when consumer behavior will return to normal or what may emerge as the ‘new normal.’ This environment is making it difficult to predict specific outcomes.”