Why Sprouts Farmers Market Inc (NASDAQ: SFM) stock is under pressure

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Sprouts Farmers Market Inc (NASDAQ: SFM) stock lost over 0.8% on 30th July, 2020 (as of 12:07 pm GMT-4 ; Source: Google finance) on Cautious outlook by management despite decent second quarter of 2020 performance. comparable store sales are expected to rise over 9% in July against prior corresponding period, with ecommerce sales accounting over 11% of net sales.

During the second quarter of 2020, the e-commerce sales delivered an outstanding performance rising over 500% against the prior corresponding period. The firm delivered a net sales rise of 16% yoy to $1.6 billion while comparable store sales rose 9.1% against the prior corresponding period. Comparable sales peaked in May at 13%, driven by the grocery, meat and frozen categories. Gross profit surged 32% to $613 million while gross margin rose 450 basis points to 37.3%. The firm opened 6 new stores, leading to a total of 350 stores in 23 states as of June 28, 2020. They also launched new items like the Snow Monkey vegan paleo ice cream and frozen vegetable from – vegetables from Stahlbush Island Farms. The firm is well positioned to capture >$200 billion market.

Net income rose $67 million during the quarter from $35 million in the prior corresponding period. The diluted earnings per share rose to $0.57, from $0.30, in pcp. Cash from operations reached $393 million year-to-date through June 28, 2020 while the firm invested $48 million in capital expenditures net of landlord reimbursements, primarily for new stores.

The firm enhanced their marketing spend for owned channel, delivery.sprouts.com. The supply chain for distribution for produce distribution centers finished strong in the second quarter, rebounding from the high volumes in March and early second quarter. Service levels also improved from the low levels in March while the stores are doing well keeping the stocks shelf stocked with available products.

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