Sprouts rolls out Instacart pickup
By early May Sprouts Farmers Market expects to have Instacart Pickup click and collect service in all of its 340 stores. The company already had a delivery through Instacart in its major markets. Online pickup is available at 55 stores currently. Sprouts started the test with Instacart in 2018 and expanded it to 18 stores last year. The accelerated adoption is likely due to strong customer demand for contactless grocery shopping in the current environment.
Sprouts is one of the few retailers opening stores in the current environment with three openings this month. Despite postponing typical grand opening events for a new opening in Silverdale, Washington, last week, the store still had a line of a few dozen people for the opening. We feel there is good visibility in the top line being driven by accelerating SSS and new store growth, but we are trying to gain more conviction in the margin expansion potential. We recently added Sprouts to our Long Bias List.
Pet food’s stockpiling shift
A survey by Pet Food Processing of pet food manufacturers pointed to an increase in demand from stockpiling. 63% of manufacturers have seen an increase in demand, as seen in the chart below.
Unlike many other grocery categories, pet food demand is not impacted by stay at home restrictions on the supply chain. There is no pet food consumed away from home. However, there has been a change in buying patterns as shoppers consolidate their trips or order online. The largest beneficiary was the online pet food retailers. The grocery, superstore, and club store channel lagged for the manufacturers that saw an increase likely due to their limited assortment of brands.
The Fresh Market’s new CEO’s trial by fire
The Fresh Market, the ~160 store chain of higher-end grocery stores, said it expects Q1 sales to be up 9-11% YOY. The average basket is 25% higher similar to other grocery chains due to stockpiling and trip consolidation. Management also warned that the current environment could increase staffing costs and disrupt logistics, identical to Kroger’s comments. Earlier this week, the company started to require all customers to wear face coverings to entre its stores. The company remains highly levered after being taken private in 2016 and appointed a new CEO a little over a month ago. Talk about a trial by fire – almost immediately after taking the job, and he has to navigate one of the largest sales tailwinds while being challenged by labor and supply operations. At least he does not have the liquidity issues other non-food retailers have.
