Sprouts: Q1 Growth Is ‘Direct Result’ of Consumer Engagement, Product Differentiation

On its earnings call this week, Sprouts Farmers Market credited its Q1 sales growth as a “direct result” of its customer engagement efforts, which have helped grow basket size as well as increase trip count among its loyal shoppers.

“Those are our most important customers and we’re trying to get more of them. And it’s about getting them to spend more in the basket,” CEO Jack Sinclair told investors. “We are getting better and better [at] identifying […] exactly what people want.”

For the quarter ending April 2, the grocery chain saw comparable store sales grow 3.1% and total sales grow 6% to $1.7 billion, attributed to improving traffic trends and newer stores exceeding expectations.

The Phoenix, Arizona-based company opened eight new stores, closed one store and acquired two previously licensed stores during the quarter, resulting in 395 stores across 23 states. In March, Sprouts announced its plans to shutter 11 underperforming stores and open 30 new locations in California, Florida, Nevada and Maryland by year’s end.

With the grocer’s highest-frequency customers already accounting for 60% of sales, Sinclair said, the company’s primary goal is “to drive our current core customers to show up more often [and] to encourage trial from new customers who are also within our target audience.”

Sprouts’ multi-pronged approach includes plans to up its sampling program – particularly private label offerings – increase speed at checkout, proactively help consumers navigate the store by highlighting different dietary needs, and improve its omnichannel presence. The store currently offers shopping via its website, Instacart and Doordash.

According to Sinclair, the flexibility of click-and-collect or delivery is a “much desired option for our core audience.” During the quarter, ecommerce outpaced the grocer’s overall growth, accounting for 12.2% of total sales.

The company’s primary demographic, according to executives, is health enthusiasts. So far, 18% of Sprouts’ high-frequency shoppers have shared information about themselves that will allow the grocer to further cater to its core demographic’s needs.

“Clearly, if you can get a lifetime value of these customers, that’s going to be a big part of our personalization efforts going forward,” said Sinclair. “It’s linked to being a very tight specialist retailer, as opposed to a broad mass retailer.”

Separately, the grocery chain announced today that it will leverage Instacart’s Carrot Ads program for its Instacart storefront. The partnership offers brands a new way to reach their target shoppers online, while driving more customers to Sprouts for specific promotions. At launch, four brands – Califia Farms, General Mills, Primal Kitchen and Siete Family Foods – have signed on for the new offering.

“At Sprouts, we are committed to serving our health-enthusiast customers, and are excited to offer new ways to connect with them with our innovative and distinctive brand partners,” said Sprouts president and COO Nick Konat in a press release. “By leveraging Instacart’s ad technology, we are enabling this connection – and giving our brand partners even more ways to grow with us and our customers.”

Looking ahead, by employing its multi-pronged consumer engagement effort, the company expects full-year sales growth 5% to 6% and comparable store sales growth of 2% to 3%.

“It’s kind of encouraging that those people are beginning to spend a little bit more with us. And we think they’re operating in a very omnichannel way with us, which allows us to understand [them] a little better than before” said Sinclair. “And we’ll get better at that going forward. But you’re certainly identifying an important group of people.”