Grocery retailers have remained resilient amid economic challenges, with consumers prioritizing food purchases even as discretionary spending tightens. In this space, Sprouts Farmers Market Inc. SFM, with a market capitalization of around $16.1 billion, and The Kroger Co. KR, valued at roughly $45.9 billion, have captured investor attention due to solid fundamentals and ongoing strategic initiatives. As both stocks navigate industry dynamics such as shifting consumer habits and cost pressures, investors are wondering: Which grocery stock stands out as the better bet today?
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. Reflecting this strong positioning, the company delivered an exceptional start to fiscal 2025, reporting a 19% year-over-year increase in total sales to $2.2 billion and an impressive 11.7% rise in comparable store sales.
The company’s target market is now estimated at $290 billion of the $1.6 trillion spent on food at home. The company’s specialty, attribute-driven offerings, such as grass-fed meats and products free from seed oils, are gaining market share. Its private-label brand continues to perform well, contributing 24% of total sales in the first quarter.
Sprouts Farmers has also made significant progress in expanding its digital and omnichannel capabilities. Its e-commerce platform is experiencing robust growth, bolstered by third-party partnerships and improved customer engagement. E-commerce sales increased 28% year over year in the quarter and now constitute 15% of total revenues. Sprouts Farmers is actively pursuing store expansion, targeting areas with high growth potential. For 2025, the company plans to open at least 35 new stores and has 120 approved stores in the pipeline, with more than 85 leases signed.
In terms of financial aspects, SFM has shown strong cash flow management. The company generated $299 million in operating cash flow during the first quarter. This allowed the company to spend $49 million in capital expenditures and return $219 million to shareholders through buybacks, repurchasing 1.6 million shares. With $232 million still available under its current authorization, Sprouts ended the quarter with $286 million in cash and cash equivalents.
Management has guided total sales growth of 12-14% and comparable store sales of 5.5-7.5% for 2025. Earnings per share are expected to be $4.94–$5.10, indicating growth from $3.75 per share reported in 2024. For the second quarter, SFM expects comparable store sales growth between 6.5% and 8.5%. It envisions adjusted earnings in the band of $1.19-$1.23 per share compared with 94 cents reported in the year-ago period.
The Case for Kroger
KR continues to firm its position in the industry through a customer-centric strategy, high-quality fresh food offerings, and a growing private-label portfolio under its "Our Brands" banner. In 2024, above 90% of households purchased “Our Brands” products, and the company launched more than 900 items, including 370 fresh items, reinforcing its innovation pipeline. For fiscal 2025, management has guided identical sales without fuel to grow by 2–3%.
Digital transformation remains a cornerstone of Kroger's strategy. Initiatives such as the Boost membership program, Delivery Now, and the expansion of customer fulfillment centers have driven digital engagement, with digital sales surpassing $13 billion in fiscal 2024. Additionally, investments in automation and AI-based inventory management have improved operational efficiency, reduced waste, and supported margin expansion.
Kroger's alternative profit businesses also delivered strong results, generating $1.35 billion in operating profit in fiscal 2024. This growth was supported by a 17% increase in media revenues, underscoring the success of KR's digital engagement strategies. These high-margin revenue streams serve as critical components of Kroger's business model, offering a diversified income source.
However, external headwinds such as stiff competition amid a backdrop of shifting consumer behavior continue to weigh on KR’s growth prospects. The company’s fuel operations, a key loyalty driver via fuel rewards, were a drag on both the fourth quarter and fiscal 2024 results. The company experienced lower gallons sold and lower cents-per-gallon margins, with sales impacted by a decline in average retail prices.
Adding to the pressure, the termination of the Albertsons merger left Kroger with $5.8 billion in new debt, following $10.5 billion in total new issuance. As a result, net interest expenses are projected to rise sharply to $650–$675 million in fiscal 2025, posing a potential drag on earnings and cash flow.
SFM vs. KR: 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 42 cents and 40 cents, reaching $5.08 and $5.69, respectively, over the past 60 days. This suggests year-over-year growth rates of 35.5% and 12%, respectively. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Zacks Investment Research
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Kroger’s EPS for the current and next fiscal years has been stable at $4.74 and $5.15 over the past 30 days, suggesting year-over-year growth rates of 6% and 8.5%, respectively.
Zacks Investment Research
Image Source: Zacks Investment Research
SFM vs. KR: A Look at YTD Stock Performance
Shares of Sprouts Farmers have advanced 29.6% year to date compared with Kroger’s growth of 12.7%. Both stocks have outperformed the S&P 500, which declined 0.2%.
Zacks Investment Research
Image Source: Zacks Investment Research
SFM vs. KR: A Dive Into Stock Valuation
Sprouts Farmers is trading at a forward 12-month price-to-earnings (P/E) ratio of 30.98, above its one-year median of 30.96. Meanwhile, Kroger’s forward P/E ratio stands at 14.16, higher than its median of 12.50.
Zacks Investment Research
Image Source: Zacks Investment Research
SFM vs. KR: Which is a Better Bet Now?
When compared with Kroger, Sprouts Farmers emerges as the stronger bet in the current landscape. While Kroger continues to innovate through digital transformation and alternative profit streams, it faces pressure from increased debt obligations. In contrast, Sprouts Farmers is demonstrating strong momentum through targeted store expansion, rising digital sales and alignment with health-conscious consumer preferences. Its strategic focus and operational efficiency position it well for sustained growth, making it a more compelling choice for investors. SFM sports a Zacks Rank #1 (Strong Buy) at present, while KR currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
