Sprouts Farmers Market (NASDAQ:SFM) reported second-quarter 2026 results that management said were in line with its expectations, as strong new-store performance offset a decline in comparable-store sales amid a challenging consumer environment.
Total sales rose 5% year over year to $2.3 billion, driven by new store openings, while comparable-store sales declined 1%. Net income was $129 million, and diluted earnings per share increased 1% to $1.37. The company opened seven stores during the quarter, ending the period with 490 stores across 25 states.
Sales trends and customer behavior
Chief Financial Officer Curtis Valentine said comparable-sales trends improved sequentially through May before weakening in June, when Sprouts faced difficult prior-year comparisons related to strong produce performance and disruption in the natural and organic supply chain that had brought additional shoppers into its stores last year. July comparable sales were “slightly negative” but within the company’s guidance range, he said.
Management said the business has seen modest improvement in both traffic and units per basket. However, Valentine said customers continue to manage the number of items they buy, particularly during periods of inflation or broader financial pressure. Produce has a larger effect on the company’s unit trends because it accounts for a significant share of the average basket.
Sprouts said it has seen an impact over the past two weeks from consumer concern related to Cyclospora, which management said has been concentrated in lettuces, salads, and related products. Valentine said the company had not experienced a product recall in its stores and described the effect on the business to date as small. The company has observed some customers shifting purchases from fresh products to frozen alternatives.
Management characterized the lower-engaged and lower-income shopper as its largest near-term opportunity. President and Chief Operating Officer Nick Konat said those customers have been taking trips less frequently and spreading out purchases, while the company’s core customer has remained relatively resilient.
Affordability, assortment and digital growth
Sprouts said its first-half affordability tests produced mixed results. Sinclair said many actions increased unit movement, but broader traffic gains have developed more gradually than expected. The company plans to focus second-half investments on the items most important to customers and on targeted pricing and affordability actions intended to improve engagement.
Konat said the company’s affordability strategy includes meal solutions, Sprouts-brand products, pricing and promotions, and personalized loyalty offers. During the quarter, Sprouts highlighted fresh deli meals, a vitamin sale and $9.99 wellness bowls. Konat also cited new $29.99 family meals, fresh-made salads priced below $9, seed oil-free frozen potatoes, and a $4 fresh-baked organic sourdough bread offering.
The retailer introduced about 1,300 new items in the second quarter, including products positioned around organic, seed oil-free, fiber, gut-health and protein attributes. Organic products now account for more than 30% of total sales, including more than half of dairy and produce sales, according to Sinclair. Sprouts-brand products represented 26% of quarterly sales and outperformed the broader business.
E-commerce sales increased more than 12% and represented approximately 16% of total quarterly sales. Konat said the company’s e-commerce customers generally shop both online and in stores and are among its highest-value customers. The online basket and category mix are similar to the company’s brick-and-mortar business, with a significant contribution from fresh products and produce.
Margins, supply chain and store expansion
Second-quarter gross margin declined 12 basis points year over year to 38.7%, reflecting loyalty investments and elevated fuel costs. Those pressures were partially offset by benefits from self-distribution and vendor participation supporting customer value. SG&A expense increased $38 million to $683 million and deleveraged by 30 basis points, largely due to fixed-cost deleverage from lower comparable sales and investments in the business.
For the third quarter, Sprouts expects approximately 50 basis points of EBIT margin pressure, citing lower comparable sales, fixed-cost deleverage and a higher number of new-store openings than in the prior-year period. Valentine said the company also expects fuel costs and a modest Cyclospora-related effect to pressure third-quarter gross margin.
The company’s Northern California distribution center is now operating, and nearly 85% of Sprouts stores are supplied with fresh meat through its distribution centers. Management said the shift provides greater control over freshness, service levels and shrink. Sprouts is also beginning to bring select Sprouts-brand products into its existing distribution network as it evaluates additional self-distribution opportunities.
New stores continue to perform strongly across both established and newer markets, management said. Sprouts has more than 110 executed leases and 155 approved new stores. It expects to open 42 net new stores in 2026, consisting of 43 openings and one closure of an underperforming location with an expiring lease. At least 15 openings are planned for the third quarter, which would represent the company’s largest quarterly opening cadence to date.
Updated 2026 outlook
- Total sales growth on a 52-week basis of 5.5% to 6.5%.
- Comparable-store sales between a 0.5% decline and 0.5% growth.
- EBIT of $675 million to $685 million.
- Diluted EPS of $5.32 to $5.40, assuming at least $300 million of share repurchases.
- Third-quarter comparable sales between a 0.5% decline and 1.5% growth, with diluted EPS of $1.20 to $1.24.
Year to date, Sprouts generated $369 million in operating cash flow and spent $186 million in capital expenditures, net of landlord reimbursements. It also repurchased 2.8 million shares for $210 million through the second quarter, with $626 million remaining under its $1 billion authorization.
About Sprouts Farmers Market (NASDAQ:SFM)
Sprouts Farmers Market, Inc (NASDAQ: SFM) is a specialty grocery retailer focused on fresh, natural and organic foods. Headquartered in Phoenix, Arizona, the company operates stores designed to offer an open-market shopping experience, emphasizing quality produce sourced from regional farmers alongside organic pantry staples, dairy, meat and seafood. Sprouts’ product assortment also includes bulk foods, vitamins and supplements, a deli and prepared foods, reflecting its commitment to wellness and affordable healthy living.
Founded in 2002 by members of the Boney family, Sprouts began as a single farmers market in Chandler, Arizona.
