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Sprouts Farmers Market Inc SFM

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Morningstar’s Analysis

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Kroger Is Best Positioned for Grocery’s Future, but Sector Valuations Are Not Attractive

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

While we do not believe the respite from price competition that the U.S. grocery sector has seen during the pandemic will last, we believe that pure-play firms can carve out durable competitive advantages. We see Kroger as better positioned than Sprouts and Albertsons, resulting in a narrow-moat rating that the other two chains do not garner.

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Company Profile

Business Description

Sprouts Farmers Market is an American specialty grocer offering a health-oriented assortment that focuses on fresh and naturally derived products. Its offerings are especially focused on produce, which constituted around 22% of sales in fiscal 2020. Founded in 2002, the chain is most heavily concentrated in California, which accounted for over one third of its 362 stores as of the end of fiscal 2020. All of the company’s operations are in the United States, with its stores largely located in the southern half of the country. The firm sells roughly 20,000 products (of which nearly 25% are organic), with private-label products accounting for about 16% of sales in fiscal 2020. Perishable items accounted for 57% of fiscal 2020 sales.

5455 East High Street, Suite 111
Phoenix, AZ, 85054
T +1 480 814-8016
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings Sep 30, 2021
Fiscal Year End Jan 2, 2022
Stock Type Aggressive Growth
Employees 33,000