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Why Sprouts Farmers Market Stock Was Climbing Today

Source The Motley Fool

Shares of Sprouts Farmers Market (NASDAQ: SFM) were moving higher today after the natural-foods-focused supermarket chain posted strong results in its third-quarter earnings report and raised its guidance for the full year.

As of 10:34 a.m. ET, the stock was up 8.7% on the news.

Image source: Getty Images.

Sprouts stock keeps sprouting

Sprouts has differentiated itself from the supermarket industry by offering both specialty products like those you'd find at Whole Foods and the product range of a traditional supermarket. It's also known for competitive prices. In an era when so many Americans are adopting restrictive diets like gluten-free, that approach is paying off.

In the third quarter, same-store sales jumped 8.4%, driving overall revenue up 14% to $1.95 billion, beating estimates at $1.88 billion.

The company continued its expansion, adding nine stores to reach 428 locations across 23 states.

That comparable sales growth fueled gross margin expansion and operating income jumped 40% to $122.5 million. Earnings per share was up from $0.64 to $0.91, which easily beat estimates at $0.77.

CEO Jack Sinclair said:

The third quarter was another exceptional performance by our Sprouts team. We are driving robust traffic growth and continue to execute at a very high level. We remain confident in our long-term growth potential.

What's next for Sprouts

Sprouts stock is now up more than 500% over the last five years as it's put up strong growth for years.

Guidance for the fourth quarter and full year showed that momentum will continue as the company expects comparable sales of 8% to 10% and adjusted earnings per share of $0.67 to $0.71.

If the company can continue to deliver high-single-digit comparable sales growth, the stock should keep moving higher as it has plenty of white space to expand.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Sprouts Farmers Market. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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