What's going on?

Sprouts Farmers Market is a relatively small chain of healthy/organic grocery stores – but on Wednesday, the move in its stock price was far from healthy. And it also affected bigger peers such as Whole Foods.

What does this mean?

Sprouts cut its prediction for its sales this year, expecting them to grow at about half the rate it had previously thought they would. It also dropped its profit forecast significantly. Sprouts blamed falling food prices, the competitive landscape and promotions from competitors. Those are related factors that essentially mean that it can�t charge customers as much for its products. Why is this so interesting? Because it�s the latest sign of trouble for the �healthy� grocery store industry that focuses on fresh, organic food.

Why should I care?

The bigger picture: The once �niche� organic market has become a major battlefield.

Stores such as Sprouts and Whole Foods have seen tremendous sales growth over the past decade or so (anecdotally, you probably noticed a big uptick in the consumption of quinoa and avocados�). Undoubtedly, Whole Foods (and others) �disrupted� the grocery store market. But existing players fought back and offered their own organic ranges at (often) lower prices.



For the stocks: Sprouts� news brought down the stock prices of competitors such as Whole Foods and Kroger.

Investors were caught off guard by the magnitude of Sprouts� cuts to its sales and profit guidance: its stock dropped more than 10%. Since it looks like it�s the general industry landscape that�s largely to blame (e.g. it�s not like Sprouts has been seriously mismanaged), investors also sold stocks of competitors Whole Foods and Kroger, which were both down 4-5%.