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SFM – Market expectations are for Uniform ROA to decline, but management is confident about new stores, gross profit, and their distribution centers

April 16, 2021

  • Sprouts Farmers Market (SFM:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 17.2x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, but management is confident about new store costs, gross profit growth, and distribution center openings

  • Specifically, management is confident the innovation center is an important feature of their new stores, two new distribution centers will be opened in 2021, and that new stores are 20% less expensive to operate. Moreover, they are confident gross profit increased by 315bps in 2020 and that they can offer incentives for new customers to try them out as needed