SFM earnings analysis
What we found in SFM's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Sprouts delivered Q2 revenue of $2.326 billion, up 5% year over year but modestly below the prior quarter's $2.33 billion, while diluted EPS of $1.37 rose 1% year over year but fell from $1.71 in Q1. Gross margin declined to 38.7% from 38.8% a year ago and operating income fell $5.2 million to $174.2 million as comparable sales declined 1.0% and investment costs increased. Liquidity remains sound with $369.0 million of first-half operating cash flow, no long-term debt and $226.5 million of cash, though heavier $189.9 million first-half capex and working-capital outflows reduced cash conversion.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- New stores lifted sales 5%
- Q2 net sales increased $105.2 million, or 5%, year over year to $2.326 billion, driven by stores opened in the past 12 months. The store base reached 490 at June 28, 2026, up from 455 a year earlier after 7 Q2 openings.
- Buybacks supported EPS growth
- Diluted EPS rose $0.02 year over year to $1.37 despite net income declining $4.5 million to $129.2 million, as diluted shares fell by 4.4 million to 94.4 million following repurchases.
- Debt-free balance sheet and solid cash flow
- The company generated $369.0 million of operating cash flow in the first 26 weeks and had no long-term debt outstanding at June 28, 2026. It retained $226.5 million of cash, cash equivalents and restricted cash.
- Investment supports store expansion
- Capital investment accelerated to $189.9 million in the first 26 weeks, versus $120.3 million a year earlier, supporting new stores, remodels, maintenance and corporate investments. Management expects approximately $310 million of fiscal-2026 capex.
- Supply-chain scale is advancing
- Self-distribution and vendor participation partially offset margin pressure, and approximately 80% of stores were within 250 miles of a distribution center as of June 28, 2026.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Comparable sales remain negative
- Comparable-store sales declined 1.0% in Q2, versus growth of 10.2% in the prior-year quarter; comparable stores represented approximately 93% of total Q2 sales. The 5% sales increase was therefore dependent on new-store contribution.
- Margins compressed on costs and investment
- Q2 gross margin declined 10 basis points year over year to 38.7%, while operating margin was approximately 7.5% on $174.2 million of operating income, down from $179.4 million. Management cited loyalty-program effects and elevated fuel costs.
- Working capital reduced cash conversion
- First-half operating cash flow fell $41.3 million to $369.0 million as working-capital cash flow swung to a $56.9 million use from a $15.6 million source. Drivers included a $59.5 million accounts-payable/accrual change and a $14.9 million receivables change.
- No risk-factor updates; pricing risk persists
- There were no material changes to risk factors from the 2025 Form 10-K. However, management notes that food inflation or deflation, competitive pricing and promotional activity could pressure sales, gross margin and comparable-store sales; Q2 comparable sales were already down 1.0%.
- First-half earnings declined
- First-half net income declined $20.8 million, or 7%, to $292.9 million and diluted EPS declined $0.08 to $3.08. Higher SG&A, up $73.1 million or 6%, and lower comparable sales outweighed 4% sales growth.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $1.37
- Gross margin
- 38.7%
- Operating margin
- 7.5%
What they said about what is next.
The 10-Q does not provide revenue or EPS guidance. MD&A states expected fiscal 2026 capital expenditures of approximately $310 million, including spending to date, funded by cash on hand and operating cash flow.
The filing reads about the same as the one before it.
What came before.
- 10-Q · April 29, 2026
- Sprouts Farmers Market (SFM) reported a Q1 2026 revenue of $2.33 billion, representing a 4% increase year-over-year. Although diluted EPS decreased to $1.71 from $1.81 due to lower net income, management remains focused…
- 10-K · February 19, 2026
- Sprouts (SFM) shows multi-year top-line and margin improvement driven by store growth, product innovation and supply‑chain initiatives. Fiscal 2025 benefitted from opening 112 new stores (2021–2025), Sprouts Brand…
- 10-Q · October 29, 2025
- Sprouts reported a year-over-year revenue increase to $2,200,430 (thousands) and diluted EPS of $1.22 for the thirteen weeks ended September 28, 2025, with gross profit of $851,051 and operating income of $157,398.…
- 10-Q · May 1, 2024
- Sprouts reported quarterly net sales of $1,883,808,000 (up $150,498,000 or ~8.7% vs $1,733,310,000 a year ago) with diluted EPS of $1.12 (vs $0.73 prior year). Gross margin expanded to 38.36% and operating income rose…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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