PHOENIX — Characterizing its partnership with Amazon Prime Now as a “slow start and a fast ramp,” the relationship has nonetheless proven to be “very productive” for Sprouts Farmers Market, Inc. in the early going, the company’s top executive said on Aug. 3. The partnership initially launched with a 10-store test run, but now appears on track for a much larger roll-out.
|Amin Maredia, c.e.o. of Sprouts Farmers Market|
“Our partnership with Amazon Prime Now continues to grow as we will be delivering Sprouts products through the Prime Now service to over 20 locations across many of our major markets by year-end,” Amin N. Maredia, chief executive officer of Sprouts Farmers Market, said during an Aug. 3 conference call with analysts to discuss second-quarter results. “We launched the service in the Atlanta metro area just last week. As change continues in the grocery industry, we remain confident in our ability to bring the Sprouts experience to our customers, both in the store and out of the store.”
Net income at Sprouts in the second quarter ended July 2 totaled $40,968,000, equal to 30c per share on the common stock, up 10% from $37,209,000, or 25c per share, in the same period a year ago. Net sales also increased during the period, rising 15% to $1,183,975,000 from $1,031,643,000.
At a time when many grocers are looking for ways to tap into e-commerce, Mr. Maredia described Amazon as a “fantastic partner.”
“We’ve learned a lot together about the business, and it’s a great way for Sprouts to engage with our customers and bringing them fresh, healthy products to their doorsteps,” he said. “And our focus is really to be convenient for our customers and engage with them wherever they want to be. And so we’ll continue to learn. And we want to be thinking about being channel-agnostic. And to the extent that our customers want us to be in other places, we’ll look at that. So that’s really how we’re thinking about this.”
During the conference call Mr. Maredia was asked how Sprouts, which operates more than 275 stores in 15 states, is thinking about the roll-out of the Amazon Prime Now partnership over the long term. Right now, he said the company is focused on working through all the operational and efficiency kinks, particularly the customer service element of the partnership. But he added that he doesn’t necessarily want to put a cap on the program’s potential.
“Ultimately, it depends by market, of how many stores you need to serve the majority of the customers in that market,” he explained. “But we think that number could be somewhere in the one-third to 40% range, maybe to half of the stores. But the key point there is it helps us extend our trade area. That 7- to 10-minute trade, driving trade area generally thought of as specialty retailers really helps us extend that trade area in our network. … Today, we certainly don’t think we would need more than 30%, 40% of the network. Now in the future, to the extent that home delivery or click-and-collect continues to be more and more desired by customers, you might just add more stores simply for efficiency reasons. Because at that point, you would have the ability — it would actually add network efficiency. So in short, it’s probably 30%, 40% of the stores over time, and you’ll see us accelerate in 2018.”Amazon earlier this year acquired Whole Foods Market, Inc. in a deal valued at approximately $13.7 billion.