With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

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F500-2021-437-Sprouts Farmers Market

The supermarket chain offers a wide selection of natural and organic foods, and operates more than 340 stores in 23 states. It makes its <em>Fortune</em> 500 debut this year.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

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This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Founded in 1943, Sprouts Farmers Market is a retailer of natural and organic food products sold under the Sprouts brand. Perishable products include produce, dairy, meat, and bakery goods. The company also offers nonperishables such as frozen foods, beer and wine, vitamins, body care products, and more.

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Sprouts Farmers Market (SFM): Company Profile, Stock Price, News, Rankings

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Sprouts Farmers Market

sprouts farmers market

Day. Thank you for standing by. Welcome to the Sprouts Farmers Market first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, we'll open up for questions. To ask a question during this session, you will need to press star one one on your telephone. You'll hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Susannah Livingston. Please go ahead.

Thank you. Good afternoon, everyone. We are pleased you are joining Sprouts on our first quarter 2026 earnings call. Jack Sinclair, Chief Executive Officer, Curtis Valentine, Chief Financial Officer, and Nick Konat, President and Chief Operating Officer, are with me today. The earnings release announcing our first quarter 2026 results, the webcast of this call, and financial slides can be accessed through the investor relations section of our website at investors.sprouts.com. During this call, management may make certain forward-looking statements, including statements regarding our expectations for 2026 and beyond.

These statements involve several risks and uncertainties that could cause results to differ materially from those described in the forward-looking statements. For more information, please refer to the risk factors discussed in our SEC filings and the commentary on forward-looking statements at the end of our earnings release. Our remarks today include references to non-GAAP financial measures. Please see the tables in our earnings release for a reconciliation of our non-GAAP financial measures to the comparable GAAP figures. With that, let me hand it over to Jack.

Thanks, Susannah, good afternoon, everyone. Before I dive in, I want to start by thanking our team for their disciplined execution and continued focus throughout the quarter. The first quarter played out largely as we expected. We continued to work through tough comparisons and a cautious consumer backdrop. Our recent new store openings are performing well, and we continue to be trusted partners for innovative product launches. Progress in our self-distribution of meat has been encouraging and is nearly complete. In addition, we continue to strengthen our talent across the organization. Our purpose is clear. We help people live and eat better.

Our immediate 2026 priorities are to strengthen differentiation through foraging and innovation, to reinforce our great in-store experience, to accelerate customer engagement through loyalty and personalization, to build an advantaged supply chain, to expand access to healthy food through new store growth, and to take targeted actions to strengthen value, all supported by our investment in our talent and technology.

This quarter, we executed with discipline, balancing early loyalty investment and targeted value actions with cost control while continuing to advance the capabilities we need to support our long-term growth. I want to thank our team for their focus across the organization. With strong execution and easing comparisons, we're expecting sequential improvement in our business as we move through 2026. For now, I'll hand it to Curtis to review our first quarter financial results as well as our updated 2026 outlook. Curtis?

Thanks, Jack. Good afternoon, everyone. In the first quarter, total sales were $2.3 billion, up $93 million or 4% compared to the same period last year. This growth was driven by strong new store performance, partially offset by a 1.7% decline in comparable store sales. Innovation is a differentiator for Sprouts and continues to drive our sales. e-commerce sales grew 10% and represented approximately 16% of total quarterly sales. Sprouts brand also continued to perform well, growing faster than the rest of the business and representing more than 26% of total sales. During the quarter, we maintained discipline around margins and returns. Our first quarter gross margin was 39.4%, a decrease of 20 basis points compared to the same period last year. This primarily reflects loyalty investment consistent with our plan and unfavorable shrink performance.

These headwinds were partially offset by benefits from self-distribution, which is performing as expected. We've taken initial steps to improve affordability for our target customers. We have made selective price adjustments on the most relevant items to our customers' baskets alongside a more focused promotional plan. We believe our P&L and guidance provide flexibility to support these actions and our customers' needs. SG&A for the quarter totaled $659 million, an increase of $36 million and 42 basis points of deleverage compared to the same period last year. This was primarily driven by fixed cost deleverage from lower comparable store sales. We remain focused on cost discipline while funding key growth and customer initiatives for the near and longer term. Depreciation and amortization, excluding depreciation included in the cost of sales, was $42 million.

For the first quarter, our earnings before interest and taxes were $215 million. Interest income was approximately $129,000, and our effective tax rate was 24%. Net income was $164 million, and diluted earnings per share were $1.71, a decrease of 6% compared to the same period last year. On unit growth, we opened six new stores, ending the quarter with 483 stores across 25 states, including our entry into New York. Our strong and healthy balance sheet continues to provide flexibility. For the first quarter, we generated $235 million in operating cash flow, which enabled self-funding of our investments in capital expenditures of $98 million, net of landlord reimbursement.

We also returned $140 million to our shareholders by repurchasing $1.9 million shares and have $696 million remaining under our $1 billion share repurchase authorization. We ended the first quarter with $252 million in cash and cash equivalents and $22 million of outstanding letters of credit. Turning to our outlook, we continue to lapse on exceptional numbers from last year. We expect year-over-year comparisons to improve in the back half as trends ease. We also believe our initiatives will build as the year progresses. As a reminder, 2026 will be a 53-week year, with the extra week falling at the end of the fourth quarter.

For the full year, on a 52-week basis, we are maintaining our outlook for total sales growth between 4.5%-6.5% and comp sales between -1% to +1%. We still plan to open at least 40 new stores in 2026. Earnings before interest and taxes are expected to be between $675 million and $695 million. We expect our corporate tax rate to be approximately 25.5%, and we expect capital expenditures net of landlord reimbursements to be between $280 million and $310 million. We are increasing our earnings per share outlook to be between $5.32 and $5.48, assuming at least $300 million in share repurchases.

For the second quarter, we expect comp sales to be in the range of -2% to 0% and earnings per share to be between $1.32 and $1.36. EBIT margin pressure is expected to be approximately 75 basis points due to fixed cost deleverage from lower comp sales, annualizing our loyalty points investment, and the impact of higher fuel costs. We will continue to manage the business with a balanced approach, investing for the future where we see the best returns while remaining disciplined on execution and cost control for 2026 delivery. With that, I'll turn it back to Jack.

Thanks, Curtis. As always, we are confident in our strategy and the long-term potential of Sprouts. Our focus is to stay true to our strategy and sharpen execution across our priorities, foraging and innovation, customer experience, supply chain, and new store growth, supported by targeted investments in talent and technology. We strive to make healthy eating accessible and affordable.

As health and wellness evolves, delivering differentiated attribute-driven products remains central to how we stand out and meet our customers' expectations. We're leaning into foraging, innovation, and discovery to introduce new and distinctive items with clean ingredients. We've seen particular success with organics as they remain an important quality standard for our target customer and a meaningful growth driver for Sprouts. In the first quarter, more than 55% of produce sales were organic and over 34% of total sales came from organic products.

We've already launched 1,500 new items this year, including brands like Press Coffee, Cold Brew Protein Drink, Pendulum Probiotics for gut health, and Proda, a protein soda. Innovation remains our strength, and we continue to attract a strong and healthy pipeline of emerging health and wellness brands that view Sprouts as the preferred launch partner. Sprouts brand continues to grow, expanding our differentiation across both fresh and non-perishable categories. Several of these innovations are resonating with customers, most notably our regenerative organic certified coffee, seed oil-free hummus, and beef tallow kettle chips. As we innovate, we remain focused on maintaining the right balance of everyday wellness essentials to curated premium wellness items, ensuring relevance, value, and quality for our customers. As we go to market, you'll see us leaning more into our leadership in the health and wellness space.

This is why customers seek us and continue to shop with us. As a result, we're sharpening our marketing to more clearly express what makes Sprouts unique, highlighting differentiated brands, founder stories, and product innovation. The store experience remains another core differentiator, and our customers consistently cite it as a key driver for the love of Sprouts. That advantage starts with what we believe is the best store team in the industry. Our team members are essential to delivering our unique assortment and supporting customers with attribute-driven needs, combining expertise with authentic personal service. This year, stores are focused on simple, genuine customer connections that make shopping easy and enjoyable while elevating daily execution, improving in-stocks, freshness, and production efficiency. I want to thank our team for the work they do every day to make our customers feel welcome.

Another theme core to the DNA of Sprouts is making healthy eating accessible and affordable. It always starts with our assortment, and we're working to bring healthy delicious meal solutions such as Wellness Bowls under $10, $5 Sushi Wednesday, and our $4.99 sandwiches. We will continue to innovate in areas that highlight Sprouts' healthy attributes in everyday essentials, such as our recently launched two new yogurt parfaits with restaurant quality at a great value. We're also taking a targeted approach to price and promotion with a clear focus on returns. In the first quarter, we took initial price reductions on a small number of SKUs, such as coffee and a handful of other essential items. As well, we continue to test additional pricing opportunities.

We're reshaping our promotional plans to be more streamlined and targeted on driving greater value on the categories and items that matter most to our customers. We continue to invest in talent and technology to strengthen our operating model and build the capabilities needed to scale. This year, we're bringing new training and tools to our team to help them see opportunities in their business, to improve how we drive in stocks and better manage shrink. We believe these investments support consistent execution in stores, enhance customer experience, and position Sprouts for sustainable long-term growth.

Our loyalty program continues to scale and is a strategic lever to deepen customer engagement. We're seeing positive customer response to both broad-based and targeted offers, including loyalty multipliers. As participation grows, we're gaining richer insights into customer behavior and using these learnings to accelerate personalization.

Building on first quarter insights, we're adding resources to increase the pace of testing and learning and investing in capabilities and tools needed to turn what works into scalable programs. Vendor participation and demand have been strong, reinforcing our ability to expand these programs over time. From a supply chain standpoint, our focus is on building an advantage distribution channel that allows us to take more control of our fresh inventory.

Our plan to open our new Northern California distribution center in the second quarter is on track and will complete our initial meat self-distribution journey. In addition to our structural changes, we're making targeted enhancements that improve service levels, inventory management, and allow the organization to respond more quickly to shifts in demand. As I noted, new stores are off to a strong start, reinforcing our confidence in our long-term strategy.

Already in 2026, we've opened stores in New York, Texas, Florida and Virginia to resounding success. We're seeing a great reaction as we enter new communities, and we're sharpening site selection as we scale, expanding access to healthy foods from sea to shining sea. Looking ahead, we have nearly 150 new stores approved and more than 105 executed leases in our pipeline.

To wrap up, while the near term backdrop remains challenging, we believe we are well positioned to navigate through it. We're encouraged by what we can already see in new stores, execution, supply chain, and the team. With easing comparisons, discipline around cost management, and the initiatives we have underway, we're confident in our strategy and our ability to drive long-term value. Thank you for joining us today. We look forward to sharing more of this journey with you in the quarters to come. With that, I'd like to turn it over for questions. Operator.

Thank you. As a reminder, to ask a question, you need to press star one one on your telephone and wait for a name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. one moment for our first question. Our first question will come from line, Rupesh Parikh from Oppenheimer. Your line is open.

Good afternoon, and thanks for taking my question. Just given some of the macro concerns out there, just curious just overall what you're seeing in terms of the healthier consumer? As you look at different segments, low, middle, high, just curious if you're seeing any changes there?

Yeah, clearly there's a lot going on in the microenvironment, and we're watching it pretty closely. We're focusing in on what we can do in terms of making life as good as we can for all of our customers. Certainly, the microenvironment suggests that our loyal customers have stuck very much to us going forward. The less engaged customers are feeling a little bit more pressure, and it could well be to do with the income levels, but I think it's a kind of general pattern across our customer base.

As we look at the marketplace, it's a little bit uncertain what's gonna happen going forward, and we're focusing on doubling down on being good at what we do and, kind of encouraged by certain categories in terms of when we've done some price investments or some response to that. I'm encouraged in some of the work that we're doing in our deli departments and increasing the options for people to access healthy, cheaper food direct from Sprouts.

Great. Maybe just going deeper into just some of the price reductions. Just as you look at all your value efforts, how do you say they're progressing versus your expectations and just confidence in gaining further traction from here?

We're doing a number of different tests in different places. Some are working better than others. Some work very directly. That's what we're learning. The testing process is both a geographic test, which we're doing in certain places and specific categories. Tariffs put quite a number of. We referenced coffee in the script. Tariffs put some pressure on the top line prices of a number of categories. That's kind of eased off a little bit. We've certainly been investing a little bit in that coming back the other way. We're being very selective by category. We're doing some specific tests across different geographies.

Thank you. Our next question will come from the line of Thomas Palmer from JPMorgan. Your line is open.

Hey, thanks for the question. Maybe I could start off a little bit of a follow-up to Rupesh's question on affordability. What behavior change are you seeing, I guess, as you run these tests in terms of are you driving more new customers into the store? Is it more about seeing existing customers buying more items? How do you communicate the improved price points to customers? What have you found effective? Thanks.

Hey, Tom, it's Nick here. Just a couple of things. As Jack mentioned, it starts with the assortment work we've done. The two areas I'd call out I think that have been most successful at driving basket, and I think we're also seeing traffic into these categories, is the work we've done in the deli with our Wellness Bowls, our new parfaits, our $5 sandwich, $5 sushi. Those have been really good for us, and we're seeing both basket and traffic to those areas increase. Sprouts brand are the other area I'd call on the assortment side. If you look at, we've got tremendous organic offerings, and that's driving organic growth. As we push and market those, we're seeing increased sales and basket in those Sprouts brand items.

On the pricing side, for us, our focus is twofold. It's to try to put a few more items in the basket and also to get our core customer to come back more often because those everyday essentials are more within reach for them. That's how we're looking at the pricing activity and how we measure it.

Okay. Thanks for the detail, Nick. Then just a follow-up on the commentary about the expected EBIT margin pressure in the second quarter. Any help just on kind of the split between gross margin and SG&A that you foresee and maybe any framing of how much of this 75 basis points might be related to fuel? Thanks.

This is Curtis. A little bit of extra pressure from fuel in the second quarter. That's kinda what we've embedded for now, and we'll see how that evolves through the quarter here. The shape of it'll look pretty similar, I think, to Q1. If you, if you look at our Q1 results, some pressure in gross margin, maybe a touch higher. We've got our new NorCal DC rolling out, so there's some overlap costs there, as well as the fuel you highlighted. Then maybe just a touch better on the SG&A than what we saw in the first quarter. Generally, pretty similar shape to what was experienced here in Q1.

Thank you. Our next question comes from the line of Seth Sigman from Barclays. Your line is open.

Hey, good afternoon, everyone. I wanted to follow up on the point around affordability and, you know, you're making some price changes. I know that's not all you're doing. There's other efforts to improve affordability. Can you just remind us how you can manage that all from a margin perspective? Like, what are the offsets we should be thinking about? A related question on the loyalty program, specifically the vendor support. Where are we from that perspective? You know, I know it's still early, but I know that's a part of the equation through the year to start to see some stabilization in the margin. Help us think about sort of that opportunity. Thanks so much.

This is Curtis. I think, yeah, the opportunities we've talked about are, you know, inventory management and continuing to improve in that space. You know, specifically within shrink, a little challenging in the first half. That challenge eases, and we get some easier comparisons in the second half just 'cause of the sales volatility we've had year-over-year. We should continue to get better at shrink. We should continue to get better at markdowns and how we move product through the ecosystem. Those are the things that we've been working on that we can continue to get a little bit better at as we move forward. Certainly, the vendor funding is another piece.

That's really, as you noted, early days, but we'd expect that to ramp as the year evolves, and build as we continue to build programs around now that we've got the loyalty data and how we go to personalize off of that. That'll be a piece that kicks in and helps as well. Those are the primary drivers. Over the longer term, you know, we'll think about, you know, self-distribution and other further opportunities there. That should also be a helper down the line.

Okay, great. That's super helpful. Then just thinking about sales, you're guiding to sequential improvements through the year. Comparisons are obviously a factor, but can you talk more specifically about the signals that you're seeing in the business now that gives you confidence that perhaps trends have stabilized after the slowdown that you've seen over the last couple of quarters? I guess in that context, how are you thinking about the Q2 sales guidance? Thank you.

Yeah. You know, it's played out pretty much as expected. As you know, it's only been 60 days since last we chatted here, so it's not a lot has changed. We're seeing, you know, some slight improvement in traffic, some slight improvement in units as we get into the second quarter here. You know, it's kind of playing out as we thought. Similarly, we talked, you know, we have better visibility into the customer and a perspective on what that would look like as it relates to the improvement quarter to quarter, and that's played out as expected. You know, it's early, it's 60 days later, but so far, so good. We've seen things play out kinda how we were thinking they would.

Beyond that, if I go back to, you know, why do we have confidence, you know, from a broader perspective, it's, you know, the four-year run we had prior to, you know, the last couple of quarters where we built sequentially over time to that 3%-4% comp in the algorithm. Then a really strong, obviously, experience with some tailwinds in 2024 and 2025. Obviously the lapping's a challenge, but we believe we get to the other side of that, you know, we'll get back into our algorithm later this year.

Yeah. As Curtis says, the lapping's clearly a part of this dynamic going forward in terms of why we're feeling better about what's gonna happen in the second half. There is still continued tailwinds in terms of this health and wellness and clean ingredients. The marketplace is trending towards that. There's clearly some macroeconomic dynamics that play into it. That underlying trend that's been with us for a number of years, we think we're really well-placed to be in taking advantage of that.

To Nick's point on assortment, in terms of making sure the assortment we're bringing forward on both the Sprouts brand products and the new products we're bringing in, playing to that health and wellness and differentiated agenda, we're feeling really confident about the way that the assortment's evolving and the team and the response we're getting from the entrepreneurial spirit that's so prevalent in this space. They're bringing a lot of products to us. That's something that gives a lot of confidence going forward.

Nice progress. Thanks so much. I appreciate it.

Thank you. Our next question will come from the line of Leah Jordan from Goldman Sachs. Your line is open.

Thank you. I just wanted to ask a little bit more on the comp trends in the quarter. Just color there, cadence by month, differences by geography. More specifically, how is Q2 to date tracking? Maybe just remind us of the one-time lapse that we still need to be thinking about going forward. I know on the whole the comps get easier, but just the one time, kind of, months we should be mindful of. Thank you.

Hi, Leah. It's Curtis. Yeah, Q1, we talked a lot about the strike at a competitor in P2 that or February that drove some business our way last year, and that kind of played out as we expected. Feb was our worst month of the quarter. January and March looked pretty similar. As we've evolved into April here, we are just slightly ahead of the midpoint of the guidance for the comp for the quarter. From a year-over-year perspective within Q2, we just talked about May and June last year, being a little bit favorable on the produce season, which does look good again for us here in 2026.

Then the cyber incident that impacted the natural organic space last year being a little bit of a tailwind for us in June. Those are the moving parts. Again, things have really played out through February, March, April as we'd initially anticipated.

Okay, that's really helpful. Then just for my follow-up, I wanted to go back to the broader affordability discussion. You made some targeted price adjustments around essentials. It sounds like you're doing some more tests. Maybe in areas like coffee or other things that you've done, you know, maybe help give us some detail around where price gaps kind of were and maybe where they are today.

Are you seeing any response from peers in the marketplace after doing that? Also, I guess, you know, because some of this comp momentum is still on the come, you know, I guess, what kind of volume response are you seeing in these categories after you make those price adjustments? I mean, I guess, how are you able to measure like, "Okay, yes, we've made enough of a price investment at this point," given it's still, you know, being tested and in progress?

Well, the context of that conversation is the same today as it's been all the way through this dialogue in terms of the products that we're trying to invest in or put better prices in. They're based on what's important to our in our customer's basket, and they're not relevant to not necessarily relevant in what other people's basket is. We're not really looking at direct pricing comparisons. We do in produce, as we've talked about. In other categories, we're looking at specifically our attribute-based products and looking at elasticity. We have in some of those investments that we've talked about, when we've dropped prices, we've seen volumes go up.

That, I suppose that's intuitive. The question is: How far do we go? At the moment, we're doing tests in broader-based categories in certain locations, and we're doing specific category work. But it's all about elasticity. It's all about comparing ourselves to our customer and what they do as opposed to comparing our prices to other people. We don't think about it like a gap you might do in a traditional way of thinking about this. We think about how can we drive volume through price. Nick, maybe you wanna add to that?

No. Yeah. I think the only thing I'd add, Leah, is I think it's a combination. I don't wanna lose touch of its affordability focuses on assortment, it's our everyday pricing, it's also on some of our promotion activity. Customers told us as we, as we look at broader category level and subcategory level, category level promotions and being really targeted there, we've seen really good uptake in lift, unit lift and sales dollar lift, that we've seen good response to. It's, as Jack said, it's targeted to our unique customer, what's most important to them, we're seeing unit lifts and those things where we're moving, and we'll measure that over time and make sure that translates into bigger baskets and more traffic.

Thank you. Our next question will come from the line of Edward Kelly from Wells Fargo. Your line is open.

Hi. Good afternoon, guys. I wanted to ask, you know, maybe first, Curtis, could we start with the back half gross margin outlook and sort of how you're thinking about things? Part of that, I'm kind of curious as to, you know, what you're assuming for fuel, obviously, it's a little bit of a moving target. Our math has maybe fuel as a 20 basis point headwind quarterly if it were to continue at this rate for the rest of the year. I'm just kind of curious, is that ballpark and then what's in the guidance for that, and then how are you thinking about gross margin in the back half? Thanks.

Hey, Ed. Yeah, it's probably just a touch high, but pretty close, I would say, on the estimate there. Although, again, it's been pretty bouncy, so it depends a lot on what the price is. Right now, we just factored it into Q2, knowing that it's right in front of us and that's where the price point is. We'll see how that evolves in the second half of the year. Don't have a lot of that factored into the second half. As we think about the second half, you know, we expect margins to stabilize. Really think about that from an EBIT perspective. There'll be a little bit of pressure as the comp continues to improve and get back into the algorithm.

Once we're there, we'd expect that stable margin kind of posture that we talk about. On the growth side specifically, we do get some of those things that are challenging in the first half that do ease in the second half. The loyalty piece will be fully anniversaried as we get into Q3. We do have an easier shrink comparison, particularly in the fourth quarter. Some of those things go away. We've got our benefit from self-distribution in meat that'll be a little bit more clear once we get past the opening of the NorCal DC. Expecting margins to improve and be kind of flat to maybe slightly positive in the second half.

I'd also add that we do have, you know, for what we're testing right now, assuming that that were to go, as we're testing, you know, we've got a little bit built in for some of the pricing adjustments from an affordability perspective.

Okay. Just a follow-up. You know, taking a step back on comp to leverage and, you know, sort of where this, you know, is evolving for you guys. If you get back to sort of 3%, 4% comp here, can you leverage on that moving forward? I'm just curious as to how that leverage point has sort of changed in your thinking at all, if at all.

Yeah. We talked about feeling good from a fours perspective. I think that's coming down as we continue to. You know, we're working hard on the cost side of the business, leveraging our scale as we get bigger as a business, to improve our cost base. Working hard on how we can leverage technology to improve our cost base as well. These are the things that we've been talking about and investing in the past couple of years that are starting to help on that front. That's just work that we'll continue to do, you know, over and over again as we continue to get bigger. It should be less than four.

Then it comes down a little bit to just how much we plan to invest in the business and where we need to make investments in the business. So there'll be a bit of an ebb and flow on the investment front. We've been at that for a couple of years now at a pretty steady clip. If we find a reason and a high return opportunity, we'll invest a little more. So that'll be the other factor in that. Certainly should be less than the four we've talked about historically, and we feel pretty good, you know, late this year if we get back to that algorithm range to bring SG&A, you know, pressure in line and kind of have that moderate as well.

Thank you. One moment for our next question. Our next question comes from the line of Mark Carden from UBS. Your line is open.

Good afternoon. Thanks so much for taking the question, guys. To start on loyalty, how have loyalty program sign-ups trended relative to your expectations? Have you guys seen many shifts in sign-up trajectories or consumer behavior as you've settled on the new earn model? Has it had any more or less of an impact on margin than you originally expected?

Hey, Mark, it's Nick. You know, when we made the updates and improvements to the program in early 2026, we did a lot of work studying the customer and their response. The customer surveys and sentiment we had actually showed really well. We didn't see any decline, in fact, a slight uptick in support for the program as we were adjusting it to provide more tangible value through the point multipliers and other efforts, as well as more personalization. We feel pretty good about the customer sentiment with the program changes we made in early 2026. From a behavior standpoint, you know, I think as Jack mentioned, our core customer, our core loyalty customer, you know, we're seeing be really steady. Good spend and increased spend and happy with what we're seeing there.

Much like we noted last quarter, new members in the program are joining the program and continuing to spend and spend more. We feel good about that. You know, we have a lot of work to do in the first half to continue to invest, to demonstrate and show how we can drive behavior in this environment and continue to test, learn, and scale. We're making smart investments and accelerating that capability that help propel us in the back half and beyond.

That's great. Then just given some of the pressures on cost of living, including rising fuel prices, are you guys seeing much of a shift in purchasing behavior in categories like meat or seafood? Are you still seeing similar reductions in items per basket? Just any color there would be helpful. Thanks.

In reverse order there, Mark, on the items per basket, not a material change, still just pressure. Like we talked about on the last call, that last item in the basket is always, you know, when the, you know, there's a little bit of inflation or maybe fuel prices are up and the customer's thinking about just basket size and how much they can spend, we always see it in that last item in the basket, and that's been pretty consistent, you know, in the last couple of months since last we talked.

I mean, Mark, on the, on the mix or the categories, you know, what I'm pleased with is our health attributes where we really lean in as we talk about organic, grass-fed, protein, and so on. We're seeing really good growth in those attributes. We kind of look at the business through that lens first. We're seeing solid growth there. Where things are a little bit more commoditized, as we mentioned, that's where you might see the item out of the basket, a little bit of pressure in the value channels. We feel strong about where we lean in and where we wanna win, which is that health customer. We feel good about the categories that are winning in that space.

We take the responsibility for affordability really seriously. There's a real opportunity for us to help people live and eat better if we focus in on those areas where we can make things just a little bit better for our customers.

Thank you. Our next question will come from the line of Michael Montani from Evercore ISI. Your line is open.

Yes, hi, good afternoon. Thanks for taking the question. I just wanted to ask on the top line side, if you could talk about, you know, the traffic and ticket that you experienced in the quarter. Should we think about food at home inflation kind of low two's as like a rough proxy? Like, really what's your outlook there because we were looking at like 150-200 basis points step up potentially through the course of the year due to oil and fertilizers kind of filtering through.

Any color you have on that as well as on the traffic side, could you just talk about, you know, the loyalty program, you know, personalization, potentially some of the work in media and marketing you're doing. You know, what gives you conviction that you can basically turn, you know, the traffic side to be positive again?

Hey, Mike, I'll start. This is Curtis on the kind of shape of the comp. Yeah, from an inflation perspective, you know, similar to where we've been, you know, the last couple times. We're, you know, we're typically on a like for like SKU basis at or maybe a touch higher than CPI based on our mix. We've leaned, you know, lean a little bit premium in the assortment and the things we've brought in, that adds a little bit. We're mixing to organics and things like that. From a mix perspective, we see a little bit higher kind of AUR and inflation. Those things are still the same as they were. We're seeing, you know, a pretty steady basket when you put all things together.

A positive basket, negative traffic kind of gets us to the Q1 comp. We'll look. The sequential improvement should really come from the traffic side. We're not counting on a lot of additional inflation at this point. You know, we'll see how we manage that and handle that if and when it comes. For now we're expecting the inflation piece to be fairly steady from what we've seen, and we're expecting a sequential improvement to come in the traffic as the compares ease year-over-year.

Yeah. Nick, I'll let Nick talk a little bit about the marketing side of things. In terms of the cost and inflation and how it's playing out, feels a little bit uncertain. As Curtis said a minute ago, it's up and down. What exactly is going to happen with that, we'll have to wait and see. Fertilizer, we haven't really seen that come flowing through into our cost base yet. The good thing is, when you sell a lot of organics, you don't need as much fertilizer, so there's a lot of opportunity for us to maybe double down on organics in the world where the fertilizer costs are flowing through into food prices. I'll let Nick talk about the marketing side of things.

Yeah. Hey, Mike, real quickly, I think a couple of thoughts on the marketing. One, I'm really happy with what's going on with new stores and how the marketing is working to bring new customers into those stores. It's a proof point one of the, of the power of the brand, of our positioning in health and wellness and the power of the marketing and the work the team is doing there. That's been really strong. In addition, I think we continue to do a great job of launching new products and new items, with a lot of our vendor partners and the marketing work there has been very solid.

I think as I look at traffic in the back half, we've got a lot more data than we've ever had in how to drive customer behavior or to learn from our customer, and our customer marketing team is using that to help us think about how do we adjust our brand message and media to be more relevant to the customer right now where they're at in this space. We've got some early tests, efforts in place that have shown an ability for us to move the customer, to drive awareness and to move traffic. I'm very happy with the early work the team is doing, and I think you'll see that impact us in the back half.

All right. Thank you. One moment for our next question. Our next question will come from the line of Scott Mushkin from Jefferies. Your line is open.

Hey, good afternoon. Thanks for taking the questions. First thing I wanted to ask about, maybe you already touched on this, but could you help us understand how comps, how performance is trending just across geographies, maybe across more recent vintage stores versus more mature stores, you know, expansion versus existing markets, just any color you can provide on that would be great.

Sure. Hey, Scott. It's Curtis. On the, it's been pretty consistent from a geography perspective. As we talked about before, we're not seeing materials. It's gone up and moderated here. It's all across all geographies. Maybe just a little bit of additional pressure in the Southwest and in the Southeast, than the other category or geographies, but not material in that respect. On the vintages, I'll say it's, you know, we're pleased with the new stores as we've highlighted in the script, and that's another good proof point there is there's still positive comps in the new vintages, or the more recent three or four vintages.

That's just another encouraging piece that even though there's an underlying lapping pressure, you know, we're seeing some good results in those most recent vintages. Again, just gives us some confidence in the overall strategy and where we're headed and things bouncing back as the compares ease. I think that's really, you know, those are the kind of little bits that are a bit different as you break it down across either geography or store type.

Appreciate the thoughts there. Maybe, second one for me. It sounds like you guys had another strong quarter for e-commerce. Wondering if you can share any updates on e-commerce, you know, how you may be adapting your e-com strategy given some of the other changes you're making on affordability and everything else. Any comments you can share on that would be helpful. Thanks.

Hey, Scott. It's Nick. You know, as we mentioned, we saw, you know, double-digit sales growth in e-com, and we're now roughly about 16% penetrate. I think it starts with it speaks to the power of our assortment that people, you know, want the unique, innovative items that we have, and it lends itself well as a secondary shop to e-commerce. It starts with, I think, the proof point of people are looking for the unique things that we have and make them part of their daily life. Two, I've been really happy with the way our partners have worked with us, you know, Instacart and DoorDash in particular, on helping us break into new markets, find new customers on their platforms, and drive growth.

That's growth through, you know, targeted marketing opportunities, through targeted sponsored price investment and continue to grow the business and basket there. The last thing I'd say is, you know, the good news about e-com for us is it's an omni-channel customer. You know, when we grow that business and grow that customer base, most of those customers are shopping in store, and those are our most valuable customers. It's really healthy for us to see that growth on the e-com side.

Appreciate the thoughts. Will pass it on.

Sprouts Farmers Market (SFM) Q1 2026 Earnings Call Transcript

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