Sprouts Farmers Market (SFM) shoppers are coming in less often, and because of that, the stock is down roughly 40% so far in 2026. SFM now trades well below its 52-week high of about $107, and its third-quarter results, reported on October 28, did not impress Wall Street.
Due to weak results and concerns about the store’s customer traffic, Bank of America analyst Robert F. Ohmes downgraded SFM from Buy to Underperform. He also reduced his price target on the stock from $100 to $47.
After the downgrade, SFM shares fell about 22% on October 29, closing near $48. That is just a bit above the price target BofA downgraded to.
Why fewer shopper visits are the real worry for Sprouts
Sprouts sells fresh produce, organic foods, vitamins, and healthy snacks. It runs 504 stores across 25 states, and its shoppers are usually people who care more about wellness and are willing to pay higher prices for better options. However, Sprouts now seems to be losing those shoppers.
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In its third quarter, the company’s transactions fell 3.3%, and Ohmes said the reduced transactions that started with casual shoppers have now reached loyal ones. “Softness in the less engaged customer cohort has now spread to core customers,” he wrote. That’s a big worry for investors because these loyal shoppers are the grocers’ steadiest source of sales.
The effects of fewer shoppers showed up in Sprouts ‘ third-quarter results. The company earned only $1.21 per share, below Wall Street’s $1.23 estimate. Its same-store sales also dropped 0.9%, even though a recent Cyclospora outbreak that wasn’t related to Sprouts trimmed 0.6% off same-store sales.
Price cuts come as Walmart and Costco gain more grocery share
Sprouts plans to start cutting some prices starting in January, mostly on basic items like regular produce and meat. The grocer is making this move because many shoppers now see places like Walmart (WMT) and Costco (COST) as cheaper options for buying organic food.
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Costco recently passed Kroger to become the second-largest U.S. grocer by spending share. Walmart still leads the group with more than 20% of U.S. market share, according to Numerator. So Sprouts is feeling the pressure from these businesses. CEO Jack Sinclair acknowledged the pressure in the company’s earnings release, saying, “We are increasing investments to enhance affordability and deepen customer engagement, while building on the differentiated assortment and experience that define Sprouts.”
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However, it is not certain that the January price cuts alone will fix the problem, and Ohmes shares that doubt. He wrote that the upcoming price cuts “lack depth and breadth to improve transactions meaningfully.” He also warned that the company could feel more margin pressure in 2027 due to the price cuts.
What investors should consider before adding or selling SFM
Sprouts opened 15 new stores in the third quarter of 2026, and its newer locations are beating expectations. The business also has a healthy cash flow, so its management can fund the price cuts without taking on more debt. That could be a signal for current shareholders not to panic about the downgrade.
For investors considering buying the stock while the price is low, I suggest waiting for proof that the January price cuts can bring shoppers back before buying in.
