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Research Alert: Sfm: Q1 Beat Against A Low Bar; Results Still Challenged

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-- CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:

SFM reported Q1 2026 net sales of $2.329B (+4% Y/Y) due to new stores as comp sales declined 1.7%, though better than the -2.1% consensus. EPS of $1.71 fell 6% Y/Y but exceeded the $1.68 consensus despite margin pressures from price investments and loyalty program spending. The company opened six new stores in Q1 and maintains plans for 40+ openings in 2026, showing confidence in its unit growth strategy. Management maintained 2026 guidance for net sales growth of 4.5%-6.5%, comp sales of -1% to +1%, and EPS of $5.32-$5.48. Gross margin compressed 20 bps to 39.4%, while EBIT margin declined 90 bps to 9.2%, reflecting the challenging retail environment. The balance sheet remains strong, with $252M cash, zero debt on $600M credit facility, and $235M operating cash flow supporting $140M in share repurchases. We expect sequential improvement through 2026 as promotional and loyalty initiatives gain traction, while financial flexibility provides a buffer during this difficult period.

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