Why Sprouts Farmers Market Stock Is a No-Brainer Buy
Investing in the biggest players in the grocery market doesn't seem too appealing to me. Companies like Kroger already operate thousands of stores, and balance sheets are often loaded with debt thanks to long histories of acquisitions. Run-of-the-mill grocery stores with no real differentiation are low-margin affairs, forced to compete on price with Walmart and every other generic grocery chain.
Sprouts Farmers Market (NASDAQ: SFM) is different. The company operates just a few hundred stores, many of them much smaller and more focused than those of its competitors. Produce, and increasingly local produce, is put front and center. Beyond produce, Sprouts fills its stores with attributed-based products – organic, paleo, keto, gluten free, etc. These types of products account for 70% of what Sprouts sells.
Sprouts can grow by increasing sales at its existing stores, and it can grow by expanding its store footprint. While the pandemic provided a tailwind to grocery stores as consumers shifted spending from restaurants, Sprouts' results have held up even as that shift has unwound. Comparable sales rose 2.2% for Sprouts in 2022, and total sales jumped 5%. The company opened 16 new stores during the year, bringing its total store count to 386.
Source Fool.com
