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Sprouts Farmers Market Likely to Post Relatively Inline Q2 Results, RBC Capital Markets Says

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Sprouts Farmers Market (SFM) is likely to post relatively inline Q2 results, which could be a good delivery at current valuations if management guides to Q3 comp growth of at least 1% and does not lower H2 margin forecasts, RBC Capital Markets said in a Tuesday research report.

The brokerage said it modeled Q2 comp sales of minus 1% as accelerating sales in May slowed down in June and July. Comps were tougher in May and June due to a robust produce season and natural organic disruption. The company is due to report Q2 results on July 29.

RBC stated its modeled Q2 gross margin to decline 25 basis points from a year earlier to 38.5%, driven by loyalty, higher fuel costs, and price investment, partly offset by improvements on the shrink front.

Higher fuel costs were not contemplated in H2, which could slow down progress if escalating Middle East tensions drive up oil prices again, analysts wrote.

The brokerage kept its outperform rating on the stock and price target of $114 per share.

Price: $72.45, Change: $-2.16, Percent Change: -2.90%

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