Sprouts Farmers Market said its board of directors had authorized a new $600 million stock buyback program, which replaces a share repurchase authorization that had almost $120 million remaining.
The buyback reflects the company’s strong cash flow and the board’s confidence in the company’s strategy and potential, Sprouts said. Earlier this month Sprouts reported a 50% gain in net income in the first quarter, to $114.1 million, on a 9% gain in sales, to nearly $1.9 billion. The company also said it expected sales growth of 7% to 8% for the full year and 35 new store openings.
Sprouts’ action also follows a surge in stock buybacks in the first quarter amid growing confidence that the economy will not slide into a recession, according to a recent report in the Wall Street Journal. Stock buybacks were down 14% in 2023, the Journal reported. In addition to uncertainty about the economy in 2023, share repurchasing plans may have also been impacted by a new 1% tax on stock buybacks that went into effect last year.
So far this year, 443 companies have announced a stock buyback plan, up from 378 a year earlier, the Journal said, citing data from money management and research firm Birinyi Associates.
Share buybacks are a mechanism companies use to reduce the number of shares on the market and increase the price of the remaining shares in order to provide value for shareholders.
Among other publicly traded food retailers, Kroger last year said it had paused its stock buyback program to prioritize paying down debt in anticipation of its proposed merger with Albertsons. More recently, Kroger also said it remains committed to rewarding shareholders in the long term by offering dividends and repurchasing shares.
Walmart, meanwhile, recently implemented a three-for-one stock split — its first stock split in more than 20 years — which it said would make its shares more affordable for its employees. The split followed the company’s announcement that it was raising its stock dividend by 9%, the largest increase in more than 10 years.