Sprouts Farmers Market Inc. SFM and Grocery Outlet Holding Corp. GO are both well-established names in the grocery retail space, offering a strong focus on value and quality. Sprouts Farmers specializes in fresh, natural and organic offerings, positioning itself as a destination for health-conscious shoppers. Grocery Outlet, on the other hand, attracts budget-focused customers by offering name-brand products at discounted rates, often through opportunistic purchasing.
Despite their different strategies, both companies meet the growing demand for affordable grocery options without compromising on quality. As consumer habits evolve in a price-sensitive environment, the key question becomes: which of these two grocery retailers is better positioned for long-term growth, and which stock looks more compelling right now? Let’s take a closer look.
The Case for Sprouts Farmers
Sprouts Farmers has steadily grown its presence in the natural and organic grocery segment by aligning its offerings with evolving consumer trends. Its focus on fresh produce and better-for-you products continues to resonate with health-conscious shoppers seeking clean-label and sustainable options.
The company's shelves reflect a curated mix of modern dietary preferences — from plant-based and gluten-free to keto-friendly alternatives — ensuring broader consumer appeal. Sprouts Farmers' expanding private label line has been a key growth driver. Sprouts-branded products contributed 23% of total sales in the final quarter of 2024. The company also introduced more than 7,000 new products last year, including more than 300 items under its house brand, such as grass-fed meatballs, organic pasture-raised eggs and premium beauty products.
Sprouts Farmers is actively pursuing store expansion, targeting areas with high growth potential. The company opened 33 new stores in 2024, expanding into Wyoming as its 24th state. Management expects at least 35 new stores in 2025. With 110 approved new locations and 70 executed leases, Sprouts Farmers is well-positioned for long-term geographic expansion, particularly in the Midwest and Northeast.
On the digitization front, the company has invested heavily in its e-commerce infrastructure and forged partnerships with Uber Eats, DoorDash and Instacart to extend its digital reach. The fourth quarter witnessed a remarkable 37% surge in e-commerce sales, constituting 14.5% of total sales. The company's e-commerce business surpassed $1 billion in sales in 2024.
Sprouts Farmers expects strong growth in 2025, with net sales projected to rise between 10.5% and 12.5% and comparable store sales increasing between 4.5% and 6.5%.
The Case for Grocery Outlet
Grocery Outlet is enhancing its market presence through a combination of diverse product assortments, targeted marketing, in-store initiatives and e-commerce strategies. Partnerships with platforms like Instacart, DoorDash and Uber Technologies to offer same-day delivery reflect the company’s commitment to customer convenience and expanding its digital footprint. Also, GO is accelerating its private-label portfolio rollout, with around 180 items introduced by the end of 2024 and plans for an additional 150 in 2025.
As part of its disciplined approach to growth, Grocery Outlet is focusing on maximizing Return on Invested Capital by refining its store expansion strategy. Instead of pursuing rapid expansion, the company plans to open 33-35 new stores in 2025, prioritizing high-return markets and clustering locations for operational synergy. This targeted approach should help streamline costs while driving sustainable growth.
Despite these efforts, the company faces operational challenges following its August 2023 migration to an SAP enterprise system. The implementation led to disruptions in core functions like purchasing, inventory planning and real-time data visibility, which negatively impacted productivity. This contributed to margin compression, with gross margins falling 70 basis points to 29.5% in the final quarter of fiscal 2024.
However, the company remains confident in its growth trajectory, projecting comparable store sales to increase 2-3% in fiscal 2025 and total net sales to reach $4.7 billion to $4.8 billion.
SFM vs. GO: How Do Estimates Stack Up?
The Zacks Consensus Estimate for Sprouts Farmers’ earnings per share (EPS) for the current and next fiscal years has increased by 43 cents and 60 cents, reaching $4.66 and $5.29, respectively, over the past 60 days. This suggests projected year-over-year growth rates of 24.3% and 13.6%, respectively. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
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The consensus estimate for Grocery Outlet’s EPS for the current fiscal year has decreased by 23 cents to 73 cents over the past 60 days, signaling a projected year-over-year decline of 5.2%. Although the estimate for the next fiscal year has also been lowered by 24 cents to 88 cents, it still implies a healthy year-over-year growth expectation of 20.3%.
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SFM vs. GO: A Look at YTD Stock Performance
Shares of Sprouts Farmers have advanced 24.8% year to date compared with Grocery Outlet’s rise of 0.8%. Both stocks have outperformed the S&P 500, which declined 10.6%.
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SFM vs. GO: A Dive Into Stock Valuation
Sprouts Farmers is trading at a forward price-to-earnings (P/E) ratio of 32.69, above its one-year median of 30.47. Meanwhile, Grocery Outlet’s forward P/E ratio stands at 25.77, higher than its median of 22.18.
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SFM vs. GO: Which is a Better Bet Now?
Sprouts Farmers seems like the better option to consider. With a strong focus on the health-conscious consumer and a growing presence in key regions, SFM has managed to tap into the demand for natural and organic products. The company has also been quick to embrace e-commerce. Its expansion plans remain aggressive, with strong sales projections for the year.
On the other hand, Grocery Outlet has been facing some operational hurdles, particularly following its SAP system migration, which has impacted margins. While GO is still expanding and improving its digital offerings, its growth has been a bit slower, and the stock has not performed as well as Sprouts Farmers so far this year.
SFM sports a Zacks Rank #1 (Strong Buy), while GO currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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