Expansion and Rewards Can Lead to a Sprouts Stock Rally in 2026

Sprouts Farmers Market (NASDAQ: SFM), which operates a chain of supermarkets focused on organic and natural food, has tumbled by more than 30% this year. Challenging year-over-year comparisons and Sprouts' forecast of lower comparable store sales growth rates for Q4 have weighted on the stock.

That wiped out more than half of the roughly 800% gain in the stock during the past five years. Revenue and net income have continued to grow this year, but investors became wary of the stock's valuation when it traded at more than $180 per share earlier this year.

Although the share price decline has been far from ideal for investors, Sprouts is tapping into multiple opportunities that could get its stock back on track.

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Expansion into new markets

Sprouts operates 464 stores in 24 states and plans to have more than 1,000 stores coast to coast in the future. The company opened 24 new stores in the first three quarters of 2025, compared to 33 new store openings in 2024.

The company is about to open stores in several states with densely populated cities, such as New York, Massachusetts, and Illinois.

The company has most of its stores in the southwest and a very limited presence in the northeast. Sprouts' expansion into that region could lead to meaningful long-term revenue growth.

Sprouts told investors that it specifically targets younger consumers in wealthier areas that are less prone to economic downturns. This strategy can build brand loyalty and resembles how supermarket chain Whole Foods built its retail footprint.

Food delivery services may fuel additional growth

Sprouts' expansion also comes with a focus on food delivery. The company told investors in a presentation that Sprouts' target customers spend $290 billion per year on home food delivery. The grocery chain is prepared for this continued trend based on its store locations.

Not only does Sprouts position its stores in prosperous areas, but 80% of its stores are within 250 miles of distribution centers. These centers stock fresh food, and by getting products to Sprouts stores more quickly food stays fresher on the shelves for longer.

While any weaknesses in consumer spending could slow food delivery services, Sprouts' customers are likely to be less affected due to their higher incomes. Sprouts doesn't deliver food directly but partners with services like Uber Eats and DoorDash (NASDAQ: DASH). DoorDash reported a 21% year-over-year increase in total orders in the third quarter, indicating that the demand for food delivery services isn't going away.

Any additional growth for Sprouts can highlight its low valuation and reignite a rally. The stock only trades at a price to earnings (P/E) ratio of about 16, which is below its 10-year median P/E ratio of 18. Food delivery and additional locations can lead to long-term growth that makes the current valuation look like a bargain.

Sprouts Rewards will boost customer engagement

Despite being around since 2002 and having hundreds of stores, Sprouts Farmers Market only launched its rewards program this year. Sprouts Rewards give consumers points and discounts they can apply to their purchases, but it could figure in deeper customer loyalty that leads to increasing sales.

Only 15% of Sprouts customers are on the rewards program because it just rolled out. Those rewards customers shop at Sprouts more often and spend more money during each visit. It's a low-hanging fruit for Sprouts since it only has to persuade existing customers who already shop at the grocery chain to join the rewards program.

The company would be happy to sign up first-time customers as well, but there are customers who have been shopping at Sprouts for years without joining the rewards program. Getting those customers enrolled is critical. By doing so, Sprouts could boost customer engagement and set the stage for more store locations.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash and Sprouts Farmers Market. The Motley Fool recommends the following options: long January 2028 $75 calls on Sprouts Farmers Market and short January 2028 $85 calls on Sprouts Farmers Market. The Motley Fool has a disclosure policy.