Sprouts Farmers Market Inc

Previous wording

Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. Headquartered in Phoenix with 419 stores in 23 statesas of June 30, 2024, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.

Current wording

Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. Headquartered in Phoenix with 428 stores in 23 statesas of September 29, 2024, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.

Previous wording

•Update Format and Expand in Select Markets. We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through June 30, 2024, we opened 54 new stores and remodeled one store featuring our new format. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth.

Current wording

•Update Format and Expand in Select Markets. We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through September 29, 2024, we opened 63 new stores and remodeled one store featuring our new format. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth.

Previous wording

Net sales during the thirteen weeks ended June 30, 2024 totaled $1.9 billion, an increase of $201.3 million or 12%, compared to the thirteen weeks ended July 2, 2023. The sales increase was driven by sales from new stores opened in the last twelve months and a 6.7% increase in comparable store sales. Comparable stores contributed approximately 94% of total sales for the thirteen weeks ended June 30, 2024 and approximately 96% of total sales for the thirteen weeks ended July 2, 2023.

Current wording

Net sales during the thirteen weeks ended September 29, 2024 totaled $1.9 billion, an increase of $232.5 million or 14%, compared to the thirteen weeks ended October 1, 2023. The sales increase was driven by sales from new stores opened in the last twelve months and a 8.4% increase in comparable store sales. Comparable stores contributed approximately 94% of total sales for the thirteen weeks ended September 29, 2024 and approximately 95% of total sales for the thirteen weeks ended October 1, 2023.

Previous wording

Gross profit totaled $718.4 million during the thirteen weeks ended June 30, 2024, an increase of $92.4 million or 15%, compared to the thirteen weeks ended July 2, 2023, driven by increased sales volume. Gross margin increased by 0.9% to 37.9% for the thirteen weeks ended June 30, 2024, compared to 37.0% for the thirteen weeks ended July 2, 2023, primarily driven by improved inventory management and continued promotional optimization as well as positive leverage on our supply chain from the increase in sales.

Current wording

Gross profit totaled $740.9 million during the thirteen weeks ended September 29, 2024, an increase of $115.5 million or 18%, compared to the thirteen weeks ended October 1, 2023, driven by increased sales volume. Gross margin increased by 1.6% to 38.1% for the thirteen weeks ended September 29, 2024, compared to 36.5% for the thirteen weeks ended October 1, 2023, primarily driven by improved inventory management and robust sales.

Previous wording

Selling, general and administrative expenses increased $58.4 million or 12%, compared to the thirteen weeks ended July 2, 2023. The increase was primarily due to the increase in new stores opened since the comparable period last year. As a percentage of net sales, selling, general and administrative expenses remained relatively flat as a result of sales leverage, which was partially offset by higher incentive compensation costs and ecommerce fees due to strong sales performance and higher professional fees and other costs incurred related to strategic initiatives.

Current wording

Selling, general and administrative expenses increased $77.5 million or 15%, compared to the thirteen weeks ended October 1, 2023. The increase was primarily due to the increase in new stores opened since the comparable period last year. As a percentage of net sales, selling, general and administrative expenses increased slightly as a result of higher incentive compensation costs and ecommerce fees due to strong sales performance and higher professional fees and other costs incurred related to strategic initiatives.

Previous wording

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $31.5 million for the thirteen weeks ended June 30, 2024, compared to $34.0 million for the thirteen weeks ended July 2, 2023. Depreciation and amortization expense primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores. Depreciation and amortization for the thirteen weeks ended July 2, 2023 was inclusive of $1.9 million in accelerated depreciation in connection with the decision to close certain underperforming stores during 2023. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Current wording

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $34.4 million for the thirteen weeks ended September 29, 2024, compared to $31.8 million for the thirteen weeks ended October 1, 2023. Depreciation and amortization expense primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores.

Previous wording

Store closure and other costs, net for the thirteen weeks ended June 30, 2024 of $3.2 million and for the thirteen weeks ended July 2, 2023 of $2.4 million was primarily related to ongoing occupancy costs associated with our closed store locations. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Current wording

Store closure and other costs, net for the thirteen weeks ended September 29, 2024 of $3.7 million and for the thirteen weeks ended October 1, 2023 of $3.2 million was primarily related to ongoing occupancy costs associated with our closed store locations. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Previous wording

The effective tax rate increased to 25.2% for the thirteen weeks ended June 30, 2024 from 24.7% for the thirteen weeks ended July 2, 2023. The increase in the effective tax rate was primarily due to a prior period refund of interest from amended returns, partially offset by a tempered impact to the effective tax rate for executive compensation due to increased pre-tax income.

Current wording

The effective tax rate increased to 25.8% for the thirteen weeks ended September 29, 2024 from 24.0% for the thirteen weeks ended October 1, 2023. The increase in the effective tax rate was primarily due to an increase in non-deductible executive compensation, an unfavorable current year return-to-provision true-up compared to the favorable prior year period true-up, and the increase in pre-tax income outpacing the increase to the benefit from enhanced inventory donations deductions.

Previous wording

Net income increased $28.0 million primarily due to higher gross profit, partially offset by higher selling, general and administrative expenses for the reasons discussed above.

Current wording

Net income increased $26.3 million primarily due to higher gross profit, partially offset by higher selling, general and administrative expenses for the reasons discussed above.

Previous wording

The increase in diluted earnings per share of $0.29 was driven by higher net income and fewer diluted shares outstanding compared to the prior year, due primarily to the share repurchase program.

Current wording

The increase in diluted earnings per share of $0.27 was driven by higher net income and fewer diluted shares outstanding compared to the prior year, due primarily to the share repurchase program.

Previous wording

Net sales during the twenty-six weeks ended June 30, 2024 totaled $3.8 billion, an increase of $351.8 million, or 10%, over the same period of the prior fiscal year. The sales increase was primarily due to new stores opened in the last twelve months and a 5.4% increase in comparable store sales. Comparable stores contributed approximately 94% of total sales for the twenty-six weeks ended June 30, 2024 and approximately 96% of total sales for the twenty-six weeks ended July 2, 2023.

Current wording

Net sales during the thirty-nine weeks ended September 29, 2024 totaled $5.7 billion, an increase of $584.2 million, or 11%, over the same period of the prior fiscal year. The sales increase was primarily due to new stores opened in the last twelve months and a 6.4% increase in comparable store sales. Comparable stores contributed approximately 94% of total sales for the thirty-nine weeks ended September 29, 2024 and approximately 96% of total sales for the thirty-nine weeks ended October 1, 2023.

Previous wording

Gross profit totaled $1.4 billion during the twenty-six weeks ended June 30, 2024, an increase of $164.6 million, or 13%, compared to the twenty-six weeks ended July 2, 2023, driven by increased sales volume. Gross margin increased to 38.1% for the twenty-six weeks ended June 30, 2024, compared to 37.3% for the twenty-six weeks ended July 2, 2023, due to improved inventory management and continued promotional optimization efforts as well as leverage on our supply chain from higher sales.

Current wording

Gross profit totaled $2.2 billion during the thirty-nine weeks ended September 29, 2024, an increase of $280.1 million, or 15%, compared to the thirty-nine weeks ended October 1, 2023, driven by increased sales volume. Gross margin increased to 38.1% for the thirty-nine weeks ended September 29, 2024, compared to 37.0% for the thirty-nine weeks ended October 1, 2023, due to improved inventory management and continued promotional optimization efforts as well as leverage on our supply chain from higher sales.

Previous wording

Selling, general and administrative expenses increased by $112.0 million, or 11%, compared to the twenty-six weeks ended July 2, 2023. The increase was primarily driven by the increase in new stores opened since the prior year period. As a percentage of net sales, selling, general and administrative expenses increased due to higher incentive compensation costs and ecommerce fees driven by strong sales performance and higher professional fees and other costs incurred related to strategic initiatives.

Current wording

Selling, general and administrative expenses increased by $189.5 million, or 13%, compared to the thirty-nine weeks ended October 1, 2023. The increase was primarily driven by the increase in new stores opened since the prior year period. As a percentage of net sales, selling, general and administrative expenses increased due to higher incentive compensation costs and ecommerce fees driven by strong sales performance and higher professional fees and other costs incurred related to strategic initiatives.

Previous wording

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $63.7 million for the twenty-six weeks ended June 30, 2024, compared to $68.0 million for the twenty-six weeks ended July 2, 2023. Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment. Depreciation and amortization for the twenty-six weeks ended July 2, 2023 was inclusive of $5.9 million in accelerated depreciation in connection with the closing of certain underperforming stores during 2023. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Current wording

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $98.1 million for the thirty-nine weeks ended September 29, 2024, compared to $99.8 million for the thirty-nine weeks ended October 1, 2023. Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment. Depreciation and amortization for the thirty-nine weeks ended October 1, 2023 was inclusive of $5.9 million in accelerated depreciation in connection with the closing of certain underperforming stores during 2023. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Previous wording

Store closure and other costs, net decreased $25.5 million to $5.2 million, compared to $30.7 million for the twenty-six weeks ended July 2, 2023. Store closure and other costs, net during the twenty-six weeks ended June 30, 2024 was primarily related to ongoing occupancy costs associated with our closed store locations. Store closure and other costs, net during the twenty-six weeks ended July 2, 2023 primarily consisted of $27.8 million of impairment losses related to the write-down of leasehold improvements and right-of-use assets as well as other costs incurred in association with the closing of 11 underperforming stores during 2023. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Current wording

Store closure and other costs, net decreased $24.9 million to $9.0 million, compared to $33.9 million for the thirty-nine weeks ended October 1, 2023. Store closure and other costs, net during the thirty-nine weeks ended September 29, 2024 was primarily related to ongoing occupancy costs associated with our closed store locations. Store closure and other costs, net during the thirty-nine weeks ended October 1, 2023 primarily consisted of $27.8 million of impairment losses related to the write-down of leasehold improvements and right-of-use assets as well as other costs incurred in association with the closing of 11 underperforming stores during 2023. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Previous wording

Interest (income) expense, net decreased to $0.7 million for the twenty-six weeks ended June 30, 2024, compared to $4.4 million for the twenty-six weeks ended July 2, 2023 primarily due to lower average debt outstanding and higher interest income earned as a result of higher interest rates. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.

Current wording

Interest (income) expense, net decreased to $0.4 million for the thirty-nine weeks ended September 29, 2024, compared to $6.1 million for the thirty-nine weeks ended October 1, 2023 primarily due to lower average debt outstanding and higher interest income earned as a result of higher interest rates. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.

Previous wording

The effective tax rate decreased to 23.8% for the twenty-six weeks ended June 30, 2024 from 24.0% in the same period last year. The decrease in the effective tax rate was primarily due to an increase in excess tax benefits associated with share-based payment awards and a tempered impact to the effective tax rate for executive compensation due to increased pre-tax income, partially offset by a prior period refund of interest from amended returns.

Current wording

The effective tax rate increased to 24.5% for the thirty-nine weeks ended September 29, 2024 from 24.0% for the thirty-nine weeks ended October 1, 2023. The increase in the effective tax rate was primarily due to an unfavorable current year return-to-provision true-up compared to the favorable prior year period true-up, a prior period refund of interest from amended returns, and the increase in pre-tax income outpacing the increase to the benefit from enhanced inventory donations deductions, partially offset by an increase in excess tax benefits associated with share-based payment awards.

Previous wording

Net income increased $65.9 million primarily due to higher gross profit and lower store closure and other costs, partially offset by higher selling, general and administrative expenses for the reasons discussed above.

Current wording

Net income increased $92.2 million primarily due to higher gross profit and lower store closure and other costs, partially offset by higher selling, general and administrative expenses for the reasons discussed above.

Previous wording

The increase in diluted earnings per share of $0.68 was driven by higher net income and fewer diluted shares outstanding compared to the prior year due primarily to the share repurchase program.

Current wording

The increase in diluted earnings per share of $0.96 was driven by higher net income and fewer diluted shares outstanding compared to the prior year due primarily to the share repurchase program.

Previous wording

Cash flows from operating activities increased $16.5 million to $311.3 million for the twenty-six weeks ended June 30, 2024 compared to $294.8 million for the twenty-six weeks ended July 2, 2023. The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $50.2 million, partially offset by a decrease in cash flows provided by operating activities from changes in working capital of $16.8 million and higher payments on our operating lease liabilities of $15.0 million due to growth.

Current wording

Cash flows from operating activities increased $111.4 million to $520.4 million for the thirty-nine weeks ended September 29, 2024 compared to $409.0 million for the thirty-nine weeks ended October 1, 2023. The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $91.6 million and favorable changes in working capital of $43.4 million, partially offset by higher payments on our operating lease liabilities of $18.9 million due to growth.

Previous wording

Cash flows provided by operating activities from changes in working capital were $36.4 million in the twenty-six weeks ended June 30, 2024 compared to $53.2 million in the twenty-six weeks ended July 2, 2023. This $16.8 million decrease in cash flow from changes in working capital was primarily attributable to a $33.9 million change in accounts payable and accrued liabilities, primarily due to timing differences of payments for goods and services, partially offset by a $10.4 million change in accounts receivable driven by the timing of collections. Certain other immaterial items combined to result in an additional $6.7 million net increase in cash flows from changes in working capital.

Current wording

Cash flows provided by operating activities from changes in working capital were $114.2 million in the thirty-nine weeks ended September 29, 2024 compared to $70.8 million in the thirty-nine weeks ended October 1, 2023. This $43.4 million increase in cash flows from changes in working capital was primarily attributable to a $20.2 million change in accounts receivable driven by the timing of collections as well as $17.0 million change in accounts payable and accrued liabilities, primarily due to timing differences of payments for goods and services. Certain other immaterial items combined to result in an additional $6.2 million net increase in cash flows from changes in working capital.

Previous wording

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $108.9 million and $111.7 million, for the twenty-six weeks ended June 30, 2024 and twenty-six weeks ended July 2, 2023, respectively. Cash flows used in investing activities during the twenty-six weeks ended July 2, 2023 included our acquisition of Ronald Cohn, Inc. See Note 13, "Business Combination" of our unaudited consolidated financial statements.

Current wording

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $161.7 million and $178.0 million, for the thirty-nine weeks ended September 29, 2024 and thirty-nine weeks ended October 1, 2023, respectively. Cash flows used in investing activities during the thirty-nine weeks ended October 1, 2023 included our acquisition of Ronald Cohn, Inc. See Note 13, "Business Combination" of our unaudited consolidated financial statements.

Previous wording

We expect capital expenditures to be in the range of $225 - 245 million in 2024, including expenditures incurred to date, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.

Current wording

We expect capital expenditures to be in the range of $205 - 215 million in 2024, including expenditures incurred to date, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.

Previous wording

Cash flows used in financing activities were $226.8 million for the twenty-six weeks ended June 30, 2024 compared to $216.6 million for the twenty-six weeks ended July 2, 2023. During the twenty-six weeks ended June 30, 2024, cash flows used in financing activities primarily consisted of $125.0 million in payments on our Credit Agreement and $104.5 million for stock repurchases, partially offset by $3.3 million in proceeds from the exercise of stock options.

Current wording

Cash flows used in financing activities were $250.8 million for the thirty-nine weeks ended September 29, 2024 compared to $272.3 million for the thirty-nine weeks ended October 1, 2023. During the thirty-nine weeks ended September 29, 2024, cash flows used in financing activities primarily consisted of $125.0 million in payments on our Credit Agreement and $129.7 million for stock repurchases, partially offset by $4.7 million in proceeds from the exercise of stock options.

Previous wording

During the twenty-six weeks ended July 2, 2023, cash flows used in financing activities primarily consisted of $148.3 million for stock repurchases and $75.0 million in payments on our Credit Agreement, partially offset by $7.2 million in proceeds from the exercise of stock options.

Current wording

During the thirty-nine weeks ended October 1, 2023, cash flows used in financing activities primarily consisted of $180.4 million for stock repurchases and $100.0 million in payments on our Credit Agreement, partially offset by $8.8 million in proceeds from the exercise of stock options.

Previous wording

Subsequent to June 30, 2024 and through the date of this filing, we repurchased an additional 0.1 million shares of common stock for $7.4 million, excluding excise tax.

Current wording

Subsequent to September 29, 2024 and through the date of this filing, we repurchased an additional 0.1 million shares of common stock for $5.6 million, excluding excise tax.

Previous wording

There have been no substantial changes to these estimates, or the policies related to them during the thirteen and twenty-six weeks ended June 30, 2024. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

There have been no substantial changes to these estimates, or the policies related to them during the thirteen and thirty-nine weeks ended September 29, 2024. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.