Stock in Sprouts Farmers Market plunged 22.3% in premarket trading after the specialty grocer reported disappointing quarterly results and warned of worsening sales, underscoring broader challenges facing the supermarket industry.
Third-quarter revenue rose 5% from a year earlier to $2.30 billion, missing Wall Street’s $2.33 billion estimate, according to Factset. Earnings fell to $1.21 a share from $1.22 a year ago, also below analysts’ expectations of $1.23.
Consumers appeared to be visiting grocery stores less often. Sprouts’ comparable-store sales declined 0.9%, compared with 5.9% growth a year earlier. While customers spent 2.5% more per visit on average, they made 3.3% fewer shopping trips compared with a year ago.
A nationwide Cyclospora outbreak linked to contaminated lettuce also discouraged shoppers from buying fresh produce. The outbreak, first publicly identified in July, reduced Sprouts’ quarterly comparable sales by an estimated 0.6 percentage points, according to the company.
More troubling, management expects comparable sales to fall 2% to 4% in the fourth quarter. The company lowered its full-year earnings forecast to approximately $4.80 a share, excluding an extra fiscal week, from $5.32 to $5.40 previously.
Sprouts shares are down 22% year to date as of Wednesday’s close.
Sprouts isn’t alone. Kroger reported just 0.2% comparable-sales growth last quarter, down from 3.4% a year earlier. The supermarket operator—one of the largest in the nation—also blamed the Cyclospora outbreak, estimating a 0.35-percentage-point hit to sales.
Albertsons reported a 0.8% decline in comparable sales earlier this month and withdrew its annual financial forecasts as it launched a broader turnaround effort.
Natural Grocers, another health-focused supermarket chain, reported a 1.8% decline in customer transactions in the quarter ended June—before the Cyclospora outbreak became widely publicized—although higher spending per visit helped lift comparable sales by 1.2%.
Consumers aren’t abandoning grocery spending, but they are becoming more selective about where they shop.
Walmart reported 2.6% U.S. comparable-sales growth in its latest quarter, supported by higher transactions and e-commerce growth. Costco’s U.S. comparable sales jumped 8% in September, excluding gasoline-price fluctuations, as customer traffic increased 4.3%.
Sprouts and other supermarkets are working hard to win back shoppers, and investors will be watching closely.