Sprouts Farmers Market: Zacks’ Bear of the Day Play

Sprouts Farmers Market (SFMSnapshot Report) first became a Zacks #5 Rank Strong Sell on August 23 when it was trading above $23.

Last Wednesday September 7, shares plunged nearly 14% to close below $20 as the organic grocery retailer delivered a profit warning and lowered guidance for the third-quarter and full-year 2016.

The news not only impacted SFM stock, but rippled throughout the supermarket industry, sending Whole Foods Market (WFMAnalyst Report) , SuperValu (SVUAnalyst Report) and Kroger (KRAnalyst Report) shares all down between 4% and 5%.

Behind the Guidance Cut

Sprouts drastically slashed its third-quarter comparable sales (comps) guidance to come in flat with last year from the previous forecast of 3–4% growth.

The company also slashed its earnings and comps view for full-year 2016. The company now anticipates earnings per share in the range of 83–86 cents against 92–94 cents projected earlier. Further, the company’s comps growth guidance for the year was substantially lowered to 1.5–2.5% from the earlier forecast of 3.5–4.5%.

The drastic guidance cut was due to a lingering deflationary environment, increased competition and industry dynamics that have led to more promotions throughout the grocery business.

Deflation at the Grocery Store?

It’s odd for consumers to hear about “deflation” causing problems for food retailers when it seems the shopping cart bill is always getting harder to keep under control. But the day after Sprouts warned, we heard the same message from SuperValu and Kroger, including cuts in their guidance.

Sprouts may be a quality up-and-coming contender to Whole Foods in the natural/healthy grocery space.

But until the Zacks Rank turns around for it, and the industry, best to shop for other stocks.

So Where Are the Profitable Trades?

Be sure to short or avoid this Bear Stock of the Day. Now would you like to see Zacks’ recommendations that have the best profit potential? Starting today, for the next month, you can follow all our private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we’ve called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for all Zacks trades >>


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s