Sprouts Farmers Market: Buy This Aggressive Acceleration

Summary

• Sprouts Farmers Market has surged nearly 15% post-Q3 results, driven by strong gross margins, top-line revenue growth, and an aggressive U.S. expansion plan.
• Despite its impressive year-long gains, Sprouts' unique product curation and high single-digit same-store sales growth justify a continued buy rating.
• The company's plan to achieve 10%+ unit growth annually, focusing on the West Coast, Texas, and the Northeast, supports its long-term bullish outlook.
• By reducing new store sizes to 23k square feet, Sprouts aims to cut build costs and boost long-term operating margins without compromising sales.
• The stock is expensive at ~32x forward P/E, but gross margin tailwinds and strong growth help to justify this premium.

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Heading into the final months of the year, investors are riding buoyant optimism throughout the Q3 earnings season, with more companies turning out large earnings beats and rallies than declines. For many stocks, Q3 has helped extend aggressive

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SFM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.