Retail Watchers

I am shocked they are opening one in Hayward, California since they closed one in nearby Fremont. Fremont was one of the safest cities in the area. Hayward is one of the most crime ridden and dangerous cities in the area. My friend says it is worse than Stockton, California.

One Sprouts is opening in San Jose, which can swing either way... either lots of homeless or a reasonably safe neighborhood.

https://chainstoreage.com/news-briefs/2 ... eres-where

Alpha8472 wrote: ↑August 27th, 2024, 4:15 pm I am shocked they are opening one in Hayward, California since they closed one in nearby Fremont. Fremont was one of the safest cities in the area. Hayward is one of the most crime ridden and dangerous cities in the area. My friend says it is worse than Stockton, California.

One Sprouts is opening in San Jose, which can swing either way... either lots of homeless or a reasonably safe neighborhood.

https://chainstoreage.com/news-briefs/2 ... eres-where

Sprouts is making terrible decisions. We saw the path after their CEO left his previous company, 99 Cents Only.

I am very irritated with Sprouts because they are jumping in head first and leasing sites in every single new build shopping center proposed in my area so that they can have an exclusive on grocery sales. Meanwhile they have one good store, one marginal store, and one horror show in the area.

They have managed to sign leases for at least three additional stores in my area, one of which wound up excluding Whole Foods Market from entering our city. Although that is partially the landlords fault, they had a LOI for WFM but Sprouts would execute the lease immediately and they couldn't get any other retailers to cement their deals as they all were waiting for someone else to sign first. So instead of a 60,000 Sq ft WFM we are getting the 2nd Sprouts on the same street.

They announce these sites and centers then take forever to build them as well. They are going to wind up with three stores in the north end of our town where the one "horror show" store is that they fail dismally at.

I think they are mimicking Costco's NorCal expansion program (Costco is desperate to stop Sam's from reentering the market, so they're leasing every possible site even if they cannibalize their own stores).

I expect Sprouts will hit very hard times if there is a major recession because they have pivoted so hard away from attracting mainstream customers, and hundreds of store closures will result.

That Long Beach store is going to be a bonanza though. It was a very busy Staples but the landlord didn't renew their lease. Prior to Staples it was grocery related going all the way back to the era of my Grandparents. That is the kind of site they need more of (underserved, established markets) instead of trying to just blindly dominate new territories. Only parking will hold that site back.

Stock price is at an all time high. 100+ new stores in the pipeline.

What I see looking at this from an investment perspective with stock market data only, and what I see in the stores, are two very radically different things.

They are definitely taking some strange locations. But according to what is being told to investors those new stores are all doing fantastic.

Fresh Thyme appears to have mostly stopped with new stores, I used to think it was the superior format. At this point I am disappointed with both chains.

storewanderer wrote: ↑August 28th, 2024, 12:49 am Stock price is at an all time high. 100+ new stores in the pipeline.

What I see looking at this from an investment perspective with stock market data only, and what I see in the stores, are two very radically different things.

They are definitely taking some strange locations. But according to what is being told to investors those new stores are all doing fantastic.

Fresh Thyme appears to have mostly stopped with new stores, I used to think it was the superior format. At this point I am disappointed with both chains.

For every grand slam like that upcoming Long Beach store, they seem to have these fill-in sites in existing markets where they're already underperforming.

There is noise that gets added to the results when you have a lot of fill-in sites. You establish a radius around the new store where you exclude existing store sales results from comp figures. By opening a bunch of stores all in a relatively short period of time, you can create a lot of white noise that can mislead investors. The explanation is usually buried in the fine print of the earnings reports and not always discussed in detail with investors. There could be a couple hundred or more stores excluded from comp results because they are new or being cannibalized, meaning the picture of the actual results is unclear.

I think this is the kind of growth that befell 99 Only. Eventually you run out of capital and stop growing, then you have to report on what you have and the picture changes quickly. The old existing "good stores" prop up new stores that aren't delivering to their sales potential yet. Eventually that is thrown out of balance and profitability takes a tumble.

The only good thing I've seen is that the extremely limited prototype has seemingly been halted as a growth vehicle. I'm not in the area of that store often but I wonder if it has been remodeled out of that format which was alleged to be the future growth vehicle. It was utterly bizarre, a "farmers market" that had about 60% less produce than the normal stores and other problems. It was almost like a Trader Joe's in that the perimeter fresh foods were less than the frozen sections. That prototype was supposed to be the pet project of the ex 99 CEO and obviously it didn't deliver results otherwise it would be rolling out everywhere. They do seem to be filming commercials there or at a store which received the same decor, which was from a design firm that Whole Foods works with hence the extreme similarities.

ClownLoach wrote: ↑August 27th, 2024, 4:25 pm

Alpha8472 wrote: ↑August 27th, 2024, 4:15 pm I am shocked they are opening one in Hayward, California since they closed one in nearby Fremont. Fremont was one of the safest cities in the area. Hayward is one of the most crime ridden and dangerous cities in the area. My friend says it is worse than Stockton, California.

One Sprouts is opening in San Jose, which can swing either way... either lots of homeless or a reasonably safe neighborhood.

https://chainstoreage.com/news-briefs/2 ... eres-where

Sprouts is making terrible decisions. We saw the path after their CEO left his previous company, 99 Cents Only.

I am very irritated with Sprouts because they are jumping in head first and leasing sites in every single new build shopping center proposed in my area so that they can have an exclusive on grocery sales. Meanwhile they have one good store, one marginal store, and one horror show in the area.

They have managed to sign leases for at least three additional stores in my area, one of which wound up excluding Whole Foods Market from entering our city. Although that is partially the landlords fault, they had a LOI for WFM but Sprouts would execute the lease immediately and they couldn't get any other retailers to cement their deals as they all were waiting for someone else to sign first. So instead of a 60,000 Sq ft WFM we are getting the 2nd Sprouts on the same street.

They announce these sites and centers then take forever to build them as well. They are going to wind up with three stores in the north end of our town where the one "horror show" store is that they fail dismally at.

I think they are mimicking Costco's NorCal expansion program (Costco is desperate to stop Sam's from reentering the market, so they're leasing every possible site even if they cannibalize their own stores).

I expect Sprouts will hit very hard times if there is a major recession because they have pivoted so hard away from attracting mainstream customers, and hundreds of store closures will result.

That Long Beach store is going to be a bonanza though. It was a very busy Staples but the landlord didn't renew their lease. Prior to Staples it was grocery related going all the way back to the era of my Grandparents. That is the kind of site they need more of (underserved, established markets) instead of trying to just blindly dominate new territories. Only parking will hold that site back.

I wouldn't necessarily say that Sprouts is making terrible decisions, I think it's more so that their growth strategy targets underserved communities that most likely will never see a Whole Foods, hence why we see a store opening in a community such as Hayward. It's the same thing with their further expansion into Bakersfield with a second store. I also might mention, I have seen much worse communities than Hayward, and I wouldn't be too quick to say it's a bad place to set up shop. Now yes, I do see that it makes completely no sense having three stores concentrated in one area, but I do admire Sprouts for opening stores in spaces Albertsons/Safeway and Ralphs most likely would never touch, and being willing to spend money on drainage and refrigeration units to make the space usable for a grocery store. From what I see, Sprouts is opening many new stores in CA every year, while in many parts of the state, it's been since 2011 that a new Albertsons opened up, and 2007 is when to my knowledge the last new-build Ralphs opened up, although I'll at least give Safeway credit for opening new stores. With that being said, I think Sprouts knows perfectly well what they are doing.

Sprouts keeps opening stores. Their promotions also keep getting less and less generous and their regular pricing gets worse and worse.

They have more and more case ready meat.

I keep getting issued basket or category coupons on the rare occasion I actually buy something there. The latest was $10 off $25 some specific category. I forget what. Maybe bulk foods.

We will see how things are in a few years. I certainly have my prediction.

But they could try a Hail Mary "what you liked is back" campaign when things come crumbling down and bring back the hot prices on meat and produce, get quality back on their perimeter, quit charging bag fees chainwide, and teach some customer service guidelines to the employees in stores with self checkout because they're very surly in those stores. Service is actually about the only positive thing in my local Sprouts (no self checkouts) in recent years, they're really friendly and turnover is much less than a few years ago.

Sprouts once did very well in the San Francisco Bay Area when they first opened. The parking lots were packed and prices were good.

Now the parking lots are empty. You might see a few cars in the evening, but most of the customers have been pushed away by the high prices. You can find cheaper prices at Safeway and Whole Foods.

Sprouts is really awful now. The Bakery is constantly out of stock of breads. I haven't seen any cake slices in months. The muffins are nasty mushy hunks of dough. Everything has gone down hill.

Curious shoppers will go to the new Hayward store, and then head right back to Safeway. The large organic variety is mostly gone now. You have a big overpriced vitamin section, but no one ever shops there.

Sprouts is beyond out of touch with its customers.

Alpha8472 wrote: ↑August 29th, 2024, 9:27 pm Sprouts once did very well in the San Francisco Bay Area when they first opened. The parking lots were packed and prices were good.

Now the parking lots are empty. You might see a few cars in the evening, but most of the customers have been pushed away by the high prices. You can find cheaper prices at Safeway and Whole Foods.

Sprouts is really awful now. The Bakery is constantly out of stock of breads. I haven't seen any cake slices in months. The muffins are nasty mushy hunks of dough. Everything has gone down hill.

Curious shoppers will go to the new Hayward store, and then head right back to Safeway. The large organic variety is mostly gone now. You have a big overpriced vitamin section, but no one ever shops there.

Sprouts is beyond out of touch with its customers.

This is what I keep seeing. Maybe they're performing better in other states? Maybe they're cheaper? I just cannot process the alleged great sales and profit figures, other than the concept I explained where they can exclude the comparison figures from existing sites that have been impacted by new stores. Enough new stores and you can make terrible comparisons look good as long as the enterprise isn't losing money.

ClownLoach wrote: ↑August 30th, 2024, 12:02 am

Alpha8472 wrote: ↑August 29th, 2024, 9:27 pm Sprouts once did very well in the San Francisco Bay Area when they first opened. The parking lots were packed and prices were good.

Now the parking lots are empty. You might see a few cars in the evening, but most of the customers have been pushed away by the high prices. You can find cheaper prices at Safeway and Whole Foods.

Sprouts is really awful now. The Bakery is constantly out of stock of breads. I haven't seen any cake slices in months. The muffins are nasty mushy hunks of dough. Everything has gone down hill.

Curious shoppers will go to the new Hayward store, and then head right back to Safeway. The large organic variety is mostly gone now. You have a big overpriced vitamin section, but no one ever shops there.

Sprouts is beyond out of touch with its customers.

This is what I keep seeing. Maybe they're performing better in other states? Maybe they're cheaper? I just cannot process the alleged great sales and profit figures, other than the concept I explained where they can exclude the comparison figures from existing sites that have been impacted by new stores. Enough new stores and you can make terrible comparisons look good as long as the enterprise isn't losing money.

I decided to do a quick search because frankly I'm baffled by this chain. Here is the situation in a nutshell. All their sales growth is being generated by additional stores. Comp increases are averaging 2.5% per year, which is actually really bad considering the incredible inflation the food industry is seeing plus what I mentioned (cannibalized stores aren't calculated in comp otherwise the chain would be negative comp for sure). And we know their price increases outpace even Safeway and other high priced grocers. The earnings are being driven by aggressive cost cutting, removal of services (I noticed no in store made bakery anymore, now all thaw and serve or thaw and bake), self checkout, and price hikes. The only good thing, and this is huge, is that they are only $8M from being a debt free company. They've paid down a few hundred million.

But Wall Street loves price hikes. They love slashing payrolls. They love self checkout. They love cost cutting. And I only like these things when they're used to pay off long term debts. So they're a Wall Street darling because they're expecting further giant increases in earnings as the retirement of debt is finished.

The stock price isn't driven up at all by anything good happening in the stores. It's only being driven by what's happening in the finance department.

And the dead feeling stores? That seems pretty legitimate because they average $16M annually per store, which means $300K average per week per store. And I'm sure there are many stores that do over that which make up for those that pull in much less per week. Assume the slow stores are maybe pulling in only $150K per week, if they weren't such a small format they'd lose money and have to close as no supermarket could profit on such little volume. I'm sure original stores were pulling $500K to $750K a week but then were cannibalized by four or five other stores in the same area.

ClownLoach wrote: ↑August 30th, 2024, 12:02 am

Alpha8472 wrote: ↑August 29th, 2024, 9:27 pm Sprouts once did very well in the San Francisco Bay Area when they first opened. The parking lots were packed and prices were good.

Now the parking lots are empty. You might see a few cars in the evening, but most of the customers have been pushed away by the high prices. You can find cheaper prices at Safeway and Whole Foods.

Sprouts is really awful now. The Bakery is constantly out of stock of breads. I haven't seen any cake slices in months. The muffins are nasty mushy hunks of dough. Everything has gone down hill.

Curious shoppers will go to the new Hayward store, and then head right back to Safeway. The large organic variety is mostly gone now. You have a big overpriced vitamin section, but no one ever shops there.

Sprouts is beyond out of touch with its customers.

This is what I keep seeing. Maybe they're performing better in other states? Maybe they're cheaper? I just cannot process the alleged great sales and profit figures, other than the concept I explained where they can exclude the comparison figures from existing sites that have been impacted by new stores. Enough new stores and you can make terrible comparisons look good as long as the enterprise isn't losing money.

This is what I see the majority of the time too. I make it a point to visit Sprouts when I travel. I've seen a couple better looking stores in SoCal but that is it lately.

Sprouts thinks it is very much in touch with its customers. Maybe they are- the few customers who shop there at this point. Nothing like they used to be back when they had hot prices on meat and produce and very high traffic stores.

Sprouts has made a calculated decision to get rid of the "low profit" customer and keep these "high profit" customers coming in who seem to not care about the prices (which keep going up up and up) and are what I call "picky eater" customer. Sprouts has completely stopped competing on price and they make no secret about that.

Yet Sprouts keeps having a complicated promotional pricing scheme where it feels like most of the items they sell are on sale price at any given time but the sale prices are very little discount so I don't even know what the point of it is. It makes the shelves (which they seem to no longer face/front) look messy and cluttered due to so many hanging tags with 'sale' deals that are prices that are simply too high.

This is the other issue I see- Sprouts center store is cluttered and over-SKUed. Their private label program used to seem well curated and great quality but more recently I've had multiple private label refrigerated or center store items I've bought that were so bad I made it a point to go get a refund on them (took the items back to the store) on some of their newer private label goods in the past couple years, this was after I had some others I bought that I didn't like but didn't want to bother with getting a refund and just cut my losses. But at this point I've had so many items I did not like there in the past year, that all further issues with Sprouts will resolve with me going back over there with the partially used product for a refund.

I've been looking at Sprouts sales for years and I think $325k a week sales volume is what I determined their chain average was after they did the merge in of Sunflower and Henry's (both of which were far superior operations to Sprouts).