Financial Data and Key Metrics Changes - Total sales for Q4 2023 were $1.7 billion, an increase of $122 million or 8% from the same period last year, driven by comparable store sales growth of 3.3% and the addition of new stores [62][73] - Gross margin for Q4 was 36.5%, an increase of nearly 20 basis points from the same period last year, with favorable merchandise margins partially offset by pressure from new distribution centers [72][55] - For fiscal year 2023, total sales increased 7% to $6.8 billion, with adjusted diluted earnings per share rising 19% to $2.84 [73][82] Business Line Data and Key Metrics Changes - The Sprouts brand accounted for 21% of total sales in Q4, with strong performance in attribute-driven categories such as organic, grass-fed, vegan, and keto products [71][55] - E-commerce sales grew approximately 17% in Q4, representing 12.4% of total sales, supported by partnerships with Uber Eats, Instacart, and DoorDash [71][62] Market Data and Key Metrics Changes - The company opened 30 new stores in 2023, all in a new smaller format, and plans to open approximately 35 new stores in 2024 [75][22] - The company experienced positive traffic both in-store and online throughout Q4, with average unit retails and units per basket stabilizing [62][71] Company Strategy and Development Direction - The company aims to establish itself as a leading specialty retailer with a differentiated better-for-you offering, focusing on health-driven categories [23][79] - The company is investing approximately $15 million in 2024 to build out its loyalty program and improve technology and data foundations [77][135] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying drivers of growth despite a less constructive inflation outlook, with expectations for total sales growth of 5.5% to 7.5% in 2024 [3][77] - The company anticipates continued pressure on SG&A expenses due to strategic investments and wage inflation, but expects to manage costs effectively [74][103] Other Important Information - The company generated $465 million in operating cash flow in 2023, allowing for significant capital expenditures and share repurchases [75][57] - The company has a robust pipeline of over 100 approved stores and nearly 70 executed leases, indicating strong future growth potential [22][50] Q&A Session Summary Question: Can you discuss the confidence behind the comp guidance? - Management noted that the guidance of 2.5% growth at the midpoint is in line with last year's expectations, despite inflation concerns, and highlighted elasticity benefits [3] Question: Are you seeing pressure from mainstream players in the organic offerings? - Management indicated that while competitors are adding organic items, their differentiated assortment allows them to maintain relevance with target customers [10][12] Question: How did comp trends perform month to month? - Comp trends were stable throughout Q4, with solid performance and no major fluctuations [13] Question: What are the expectations for private brand growth? - Management expressed optimism about the Sprouts brand's evolution and its focus on attributes that resonate with target customers [18] Question: Can you clarify the $15 million OpEx investment? - Management confirmed that the $15 million is primarily for the loyalty program and technology investments, not expected to continue at that level beyond 2024 [135][112]

Financial Performance - Net sales for fiscal 2023 totaled $6.8 billion, a 7% increase compared to fiscal 2022, driven by a 3.4% increase in comparable store sales and new store openings[233] - Comparable store sales growth was 3.4% in fiscal 2023, up from 2.2% in fiscal 2022, contributing approximately 95% of total sales[233] - Gross profit increased by $173.3 million to $2.5 billion in fiscal 2023, with gross margin rising to 36.9% from 36.7% in fiscal 2022[234] - Net income decreased slightly by $2.3 million to $258.9 million in 2023, a 1% decline from 2022, despite higher net sales and favorable margins[240] - Diluted earnings per share increased by $0.11 to $2.50 in 2023, a 5% rise from 2022, due to share repurchases reducing diluted shares outstanding by 5.7 million[241] - ROIC improved to 12.9% in 2023 from 12.4% in 2022, driven by higher net operating profit after tax (NOPAT) of $375.1 million[246] - Net sales for the year ended December 31, 2023, were $6,837,384 thousand, a 6.8% increase from $6,404,223 thousand in 2022[317] - Gross profit for 2023 was $2,521,841 thousand, up 7.4% from $2,348,564 thousand in 2022[317] - Net income for 2023 was $258,856 thousand, a slight decrease from $261,164 thousand in 2022[317] - Diluted net income per share for 2023 was $2.50, compared to $2.39 in 2022[317] Store Operations and Expansion - The company opened 30 new stores and closed 11 stores in fiscal 2023, ending the year with 407 stores across 23 states[230] - Approximately 80% of stores were within 250 miles of a distribution center as of December 31, 2023, following the opening of two fresh distribution centers in fiscal 2021 and other supply chain optimizations[219] - The company's total square footage at the end of fiscal 2023 was 11,322,798, with an average of 27,820 square feet per store[230] - The company operated 407 stores in 23 states as of December 31, 2023[328] - The company's long-term growth strategy includes targeting 'health enthusiasts' and 'selective shoppers', with a focus on omnichannel offerings and product innovation[219] - The company aims for approximately 10% annual unit growth through geographic expansion and new store placement in markets with growth potential[219] - The company's fresh distribution network is expected to drive efficiencies and support growth plans, with a goal of positioning fresh distribution centers within a 250-mile radius of stores[219] Expenses and Costs - Selling, general and administrative expenses increased by $144.8 million, or 8%, to $2.0 billion in fiscal 2023, primarily due to new store openings and higher payroll costs[235] - Depreciation and amortization expense increased by $8.4 million to $131.9 million in 2023, a 7% increase from 2022, including $5.9 million in accelerated depreciation due to store closures[236] - Store closure and other costs, net surged by $28.3 million to $39.3 million in 2023, a 256% increase from 2022, primarily due to $30.5 million in impairment losses from closing 11 underperforming stores[237] - Depreciation expense increased to $136.6 million in 2023 from $125.7 million in 2022[385] - Impairment expense significantly rose to $30.5 million in 2023 from $8.1 million in 2022[386] - Total net lease cost increased to $303.988 million in 2023 from $271.523 million in 2022[387] - Advertising expense, net of rebates, was $45.8 million in 2023, down from $49.2 million in 2022[370] Cash Flow and Capital Expenditures - Cash from operating activities increased by $93.7 million to $465.1 million in 2023, primarily due to higher net income and favorable working capital changes[250] - Cash used in investing activities rose by $114.3 million to $238.3 million in 2023, driven by increased store construction and equipment upgrades[253] - Capital expenditures are projected to be $225-$245 million in 2024, primarily for new stores, remodels, and maintenance[254] - Cash used in financing activities increased by $118.9 million to $318.0 million in 2023, mainly due to $203.5 million in share repurchases and $125.0 million in debt payments[255] - Cash flows from operating activities in 2023 were $465,068 thousand, a 25.2% increase from $371,329 thousand in 2022[326] - Cash and cash equivalents decreased from $293.2 million in January 1, 2023, to $201.8 million by December 31, 2023[315] - Cash and cash equivalents increased to $85,116 thousand as of December 31, 2023, compared to $77,665 thousand as of January 1, 2023[334] Debt and Financing - Net interest expense decreased by $2.6 million to $6.5 million in 2023, a 28% decline from 2022, driven by higher interest income and lower credit facility fees[238] - Long-term debt outstanding decreased from $250.0 million as of January 1, 2023, to $125.0 million as of December 31, 2023[256] - The company's share repurchase program authorized $600,000, with $391,619 already repurchased and $208,381 remaining as of December 31, 2023[257] - In 2023, the company repurchased 5,864,246 common shares at an average price of $35.00 per share, totaling $205,262[258] - The company can borrow up to $700.0 million under its Credit Agreement, with interest rates tied to net leverage ratio and sustainability metrics[259] - The Credit Agreement requires a maximum total net leverage ratio of 3.75 to 1.00 and a minimum interest coverage ratio of 3.00 to 1.00[262] - Estimated interest payments through March 25, 2027, are approximately $22.4 million, with $8.3 million expected in 2024 and $14.1 million thereafter[265] - Long-term debt under the $700 million Credit Agreement decreased to $125 million as of December 31, 2023, from $250 million in 2022[397] - The Company's total net leverage ratio must not exceed 3.75 to 1.00, and the minimum interest coverage ratio must not be less than 3.00 to 1.00, as per the Credit Agreement[410] - The Company was in compliance with all applicable covenants under the Credit Agreement as of December 31, 2023[411] Leases and Real Estate - Real estate obligations for leases executed but not yet commenced totaled $584.1 million as of December 31, 2023, with $4.8 million due in 2024[266] - The company's lease assets and liabilities are recognized based on the estimated present value of lease payments over the lease term, net of landlord allowances[352] - Variable lease payments, such as those for common area maintenance, property taxes, and insurance, are expensed as incurred and not included in the measurement of lease liabilities or assets[353] - The company uses an estimated incremental borrowing rate, derived from third-party information, to determine the present value of lease payments[354] - Most leases include renewal options that can extend the lease term from one to twenty years or more, with the exercise of these options at the company's discretion[355] - The company subleases certain real estate to third parties, with all subleases classified as operating leases and sublease income recognized on a straight-line basis[356] - Operating lease assets grew to $1.322 billion as of December 31, 2023, up from $1.106 billion at the start of the year[389] - Total lease liabilities stood at $1.535 billion as of December 31, 2023, compared to $1.290 billion at the beginning of the year[389] - Weighted average remaining lease term for operating leases increased to 10.0 years in 2023 from 9.4 years in 2022[389] - Weighted average discount rate for operating leases rose to 7.2% in 2023 from 7.1% in 2022[389] - Total lease liabilities as of December 31, 2023, amounted to $1.54 billion, with $1.53 billion for operating leases and $9.7 million for finance leases[390] Assets and Liabilities - Total assets increased from $3.07 billion in January 1, 2023, to $3.33 billion by December 31, 2023[315] - Long-term debt and finance lease liabilities decreased from $258.9 million in January 1, 2023, to $133.7 million by December 31, 2023[315] - Retained earnings increased from $320.0 million in January 1, 2023, to $373.6 million by December 31, 2023[315] - Operating lease assets increased from $1.11 billion in January 1, 2023, to $1.32 billion by December 31, 2023[315] - Accounts receivable increased from $16.1 million in January 1, 2023, to $30.3 million by December 31, 2023[315] - Total stockholders' equity at December 31, 2023, was $1,148,547 thousand, up from $1,046,462 thousand at the beginning of the year[323] - Restricted cash for defined benefit plan forfeitures and healthcare, general liability, and workers' compensation plan benefits was $2.1 million as of December 31, 2023, and $2.0 million as of January 1, 2023[335] - Goodwill and indefinite-lived intangible assets totaled $381.7 million and $208.1 million, respectively, with no impairment recorded in fiscal 2023[289] - Intangible assets increased by $23.1 million in 2023, primarily due to the addition of indefinite-lived reacquired rights, bringing the total to $208.1 million[391] - Goodwill increased by $12.9 million in 2023, reaching $381.7 million, driven by the acquisition of Ronald Cohn, Inc.[392] - Accrued liabilities totaled $164.9 million as of December 31, 2023, up from $151.3 million in 2022, with self-insurance reserves and other accrued liabilities being the primary contributors[394] - Accrued salaries and benefits rose to $74.8 million in 2023, compared to $61.6 million in 2022, with bonuses and payroll being the largest components[395] Impairment and Reserves - The company recorded an impairment loss of $30.5 million in 2023, including $27.8 million related to the closure of underperforming stores and $2.7 million related to the write-down of right-of-use assets and leasehold improvements[348] - Impairment losses in 2022 and 2021 were $8.1 million and $4.8 million, respectively, primarily related to the write-down of right-of-use assets and leasehold improvements[348] - The company's consolidated self-insurance reserve balance was $47.8 million as of December 31, 2023, primarily for workers' compensation and general liability[284] - The company's general liability and workers' compensation self-insurance reserves totaled $47.8 million as of December 31, 2023[309] Product Sales and Categories - Perishable products accounted for 57.3% of sales in 2023, down from 58.0% in 2022[331] - Non-perishable products made up 42.7% of sales in 2023, up from 42.0% in 2022[331] Share Repurchases and Equity - The company repurchased and retired 5,864,246 shares of common stock in 2023, including excise tax[323] - The company's share repurchase program authorized $600,000, with $391,619 already repurchased and $208,381 remaining as of December 31, 2023[257] - In 2023, the company repurchased 5,864,246 common shares at an average price of $35.00 per share, totaling $205,262[258] Supplier and Purchase Commitments - The company's largest supplier accounted for 47% of total purchases in 2023, up from 45% in 2022[368] - Purchase commitments under noncancelable contracts totaled $28.6 million as of December 31, 2023, with $12.1 million due in 2024[267] Other Financial Metrics - The company's deferred tax assets realization depends on future earnings, and a valuation allowance may be required if future taxable income is insufficient[293] - A $125.0 million principal under the Credit Agreement as of December 31, 2023, results in a $1.25 million annual interest expense change per 100 basis point SOFR fluctuation[294] - The Company issued letters of credit totaling $21.5 million under the Letter of Credit Sub-Facility as of December 31, 2023, primarily to support insurance programs[400] - Gift card liability ending balance was $10.566 million as of December 31, 2023, compared to $10.906 million at the beginning of the year[365] - The company had no active derivative financial instruments as of December 31, 2023, or January 1, 2023[362]

Exhibit 99.1 • Net sales totaled $1.7 billion; an 8% increase from the same period in 2022 • Comparable store sales growth of 3.3% • Diluted earnings per share of $0.49; compared to diluted earnings per share of $0.42 in the same period in 2022 • Opened 6 new stores Investor Contact: Media Contact: Susannah Livingston media@sprouts.com (602) 682-1584 susannahlivingston@sprouts.com Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 2023 Results PHOENIX, Ariz. – (Business Wire) – February 22, 2 ...

Financial Data and Key Metrics - Total sales for Q3 2023 were $1.7 billion, up 8% YoY, driven by a 3.9% comp store sales growth and new store openings [25] - Adjusted EPS grew 7% YoY to $0.65, with adjusted EBIT of $90 million and adjusted net income of $67 million [102] - Gross margin was 36.5%, down 10 bps YoY due to pressure from new and expanded warehouses in California and Texas [122] - SG&A increased by $41 million YoY, driven by new store openings, wage increases, and labor investments in the Store Sampling program [122] - E-commerce sales grew 16% YoY, representing 12.1% of total sales, up from 2% in 2019 [138][11] Business Line Performance - Sprouts brand sales grew 14% YoY, representing 20.5% of total sales, driven by new meals, snacks, beverages, and seasonal items [121][104] - Produce distribution centers in Arizona, Texas, and California improved sales and margins in avocados and bananas [26] - The company is one of the fastest-growing retailers of grass-fed beef, with over 50% of beef sales coming from this category [10] - Frozen category expanded with new product releases, and sampling initiatives drove customer engagement [10] Market Performance - Traffic trends remained positive across both brick-and-mortar and e-commerce channels, with consistent growth across established and less established markets [53][150] - The company saw strong performance in categories like meat, grocery, dairy, and frozen, with particular strength in attribute-based products such as plant-based, grass-fed, and gluten-free items [121][78] - Inflation in Q3 was on the high end of the low to mid-single-digit range, but it has been coming down [2][75] Strategic Direction and Industry Competition - The company is focused on assortment differentiation, customer service, and creating an exciting in-store environment [13] - Sprouts is leveraging its unique product mix, including bulk items, vitamins, supplements, and a high proportion of produce, to differentiate itself from traditional grocers [3] - The company is investing in digital communication and personalization to engage target customers more effectively [63][127] - Sprouts is expanding its omni-channel strategy, with a focus on integrating e-commerce and in-store experiences [60][165] Management Commentary on Operating Environment and Future Outlook - Management expects wage pressures to continue into next year but is focused on finding efficiencies to deliver meaningful results [1] - The company is confident in its ability to manage gross margins around flat levels, despite some near-term pressure from distribution center expansions [21][18] - For Q4 2023, the company expects comp sales growth of approximately 3% and adjusted EPS between $0.42 and $0.46 [125] - The company plans to open approximately 35 new stores in 2024, with a strong pipeline of approved sites and executed leases [103][146] Other Important Information - The company is developing a loyalty program, with a pilot expected to launch in summer 2024, aimed at increasing customer engagement and personalization [106][172] - Sprouts has invested nearly $400 million in team members since 2019, resulting in improved retention and enhanced store experiences [106] - The company is closing its Georgia distribution center and optimizing its Florida DC network to improve scale and freshness [26] Q&A Session Summary Question: How is the competitive environment in produce, and are competitors discounting irrationally? - The company has not seen any irrational discounting in the produce category, and the market remains stable [131] Question: What is the outlook for gross margins in Q4 and 2024? - Gross margins are expected to be flattish in Q4, with some pressure from distribution center expansions, but the company is confident in managing margins around flat levels in 2024 [18][21] Question: How is the company managing wage pressures and SG&A growth? - Wage pressures are expected to continue, but the company is focused on finding efficiencies to offset these costs [1][45] Question: What is the impact of the DoorDash and Instacart partnerships on digital growth? - The partnerships have added value in understanding customer behavior and driving e-commerce growth, which now represents 12% of total sales [9][60] Question: What is the company's strategy for new store productivity and growth? - New stores are performing in line with proformas, and the company is confident in its ability to deliver shareholder value through its store growth strategy [19][35] Question: How is the company addressing inflation and unit trends? - Inflation is stabilizing, and unit trends are improving, particularly in produce, dairy, and frozen categories [75][147] Question: What is the company's approach to market share and margin prioritization? - The company focuses on growing share of wallet with its target customers rather than competing on price or promotions [39][80]

Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 1, 2023 or UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36029 Sprouts Farmers Market, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation o ...

Financial Data and Key Metrics Changes - For Q2 2023, total sales reached $1.7 billion, an increase of $97 million or 6% from the same period in 2022, driven by new store openings and comparable store sales growth of 3.2% [181][182] - Adjusted earnings before interest and taxes were $100 million, with adjusted net income at $73 million, and adjusted diluted earnings per share increased by 25% to $0.71 compared to the previous year [61][62] - Gross margin for Q2 was 37%, with an adjusted gross margin of 37.1%, reflecting a 70 basis point increase year-over-year [13][61] Business Line Data and Key Metrics Changes - The Sprouts brand sales grew by 12%, representing 20% of total sales, indicating strong performance in differentiated product categories [60][37] - E-commerce sales increased by 16%, accounting for 12.1% of total sales, showcasing growth in online channels [27][38] Market Data and Key Metrics Changes - The company opened six new stores in Q2, with plans to open at least 30 stores for the full year, focusing on expanding in existing markets [26][64] - New distribution centers in Southern California and Texas were established to enhance product freshness and support growth [26][182] Company Strategy and Development Direction - The company aims for 10% unit growth per year starting in 2024, with a focus on enhancing brand awareness and customer engagement in newer markets [64][47] - The strategy emphasizes differentiation in product offerings, particularly in health-oriented categories, to attract health-conscious consumers [30][60] Management's Comments on Operating Environment and Future Outlook - Management noted a slight tapering of year-over-year price inflation and unit declines as the year progresses, indicating a stabilizing environment [27][51] - The company expects sales growth in the range of 5% to 6% for the full year, with comparable sales growth of 2% to 3% [183][61] Other Important Information - The company has been investing in technology and processes to improve operational efficiency and customer experience, including new labor management systems and self-checkouts [175][34] - Cash and cash equivalents at the end of Q2 were $250 million, with $175 million outstanding on a $700 million revolver [35][61] Q&A Session Summary Question: How do you see the competitive environment for the rest of the year? - Management indicated that the competitive dynamic remains rational, with no significant concerns regarding pricing strategies [40][68] Question: Can you provide insights on volume improvements? - Management noted that while volumes are improving, they are still in decline, with specific categories like meat showing a slowdown in inflation rates [41][70] Question: What are the expectations for gross margin and SG&A in the second half? - Management expects gross margins to remain stable, while SG&A may experience slight deleverage due to new store growth and rising labor costs [183][110] Question: How is the company managing inflation and pricing? - The company is closely monitoring produce pricing and believes it is in a good position to manage costs effectively [68][82] Question: What is the outlook for the Sprouts brand and private label merchandise? - The Sprouts brand is expected to continue its growth trajectory, with a focus on differentiated products appealing to health-conscious consumers [130][60]

Financial Performance - For the thirteen weeks ended July 2, 2023, the Company reported net sales of $1,692.2 million, a 6.1% increase from $1,595.5 million for the same period in 2022[93]. - The Company’s net income for the thirteen weeks ended July 2, 2023, was $67.3 million, compared to $62.0 million for the same period in 2022, resulting in a basic net income per share of $0.65, up from $0.57[81]. - Net sales for the twenty-six weeks ended July 2, 2023, totaled $3.4 billion, an increase of $188.9 million, or 6%, compared to the same period last year[143]. - Comparable store sales growth was 3.2% for the thirteen weeks ended July 2, 2023, compared to 2.0% for the same period in 2022[130]. - Gross profit increased by $45,615 or 8% to $625,972 for the thirteen weeks ended July 2, 2023, with a gross margin of 37.0%, up from 36.4% in the prior year[131]. - Net income decreased by $6.8 million, or 5%, to $143.5 million, with a net income margin of 4.2%[151]. Debt and Financing - The Company reported a long-term debt of $175 million as of July 2, 2023, down from $250 million as of January 1, 2023, reflecting a principal payment of $75 million during the period[57]. - The Company has a maximum total net leverage ratio requirement of 3.75 to 1.00 under its Credit Agreement, which it was in compliance with as of July 2, 2023[62][63]. - The Company issued letters of credit totaling $21.5 million under its Credit Agreement as of July 2, 2023, primarily to support its insurance programs[50]. - The Company made no additional borrowings during the thirteen weeks ended July 2, 2023, maintaining total outstanding debt under the Credit Agreement at $175 million[57]. - Interest payments on the Credit Agreement are estimated to be approximately $35.4 million, with $11.0 million payable within the next 12 months[173]. - A 100 basis point change in SOFR would result in a change in interest expense of $1.8 million annually based on the $175.0 million principal outstanding[183]. Share Repurchase and Stock Performance - The Company repurchased 1,437,932 shares of common stock for a total cost of $50.5 million during the thirteen weeks ended July 2, 2023, at an average price of $35.10 per share[78]. - The total cost of common shares acquired during the twenty-six weeks ended July 2, 2023, was $149.6 million, compared to $111.1 million for the same period in 2022[78]. - The Company has a new $600 million share repurchase program authorized on March 2, 2022, replacing the previous $300 million program[74]. - The share repurchase program authorized $600 million, with $336.5 million spent as of July 2, 2023, leaving $263.5 million available for future repurchases[169]. - During the twenty-six weeks ended July 2, 2023, the company repurchased 4,476,343 shares at an average price of $33.43, totaling $149.6 million[170]. Tax and Benefits - The effective tax rate decreased to 24.7% for the thirteen weeks ended July 2, 2023, compared to 26.1% for the same period in 2022, primarily due to increased excess tax benefits from share-based payment awards[64]. - The Company recognized $3.0 million in excess tax benefits from share-based payment awards for the twenty-six weeks ended July 2, 2023, compared to $1.6 million for the same period in 2022[65]. - The effective tax rate decreased to 24.0% from 25.0% in the prior year, mainly due to increased excess tax benefits from share-based payment awards[150]. Store Operations and Growth - The company opened 26 new stores and remodeled one store featuring a new format through July 2, 2023, with plans for at least 10% annual unit growth beginning in 2024[123]. - The company opened 14 new stores and acquired 2 stores during the twenty-six weeks ended July 2, 2023, bringing the total number of stores to 391[142]. - Store closure and other costs increased significantly to $30,704 for the twenty-six weeks ended July 2, 2023, compared to $870 in the same period of 2022[142]. - The company closed 11 underperforming stores in February 2023, resulting in a charge of $27.8 million related to impairment of leasehold improvements and right-of-use assets[112]. Compensation and Stock Awards - The company granted a total of 495,931 RSUs, 172,059 PSAs, and 221,085 options under the 2022 Incentive Plan during the twenty-six weeks ended July 2, 2023[95]. - As of July 2, 2023, the company had 975,236 stock awards outstanding and 5,778,129 shares remaining available for issuance under the 2022 Incentive Plan[97]. - Share-based compensation expense for the twenty-six weeks ended July 2, 2023, was $9.461 million, compared to $7.920 million for the same period in 2022[108]. - As of July 2, 2023, total unrecognized compensation expense related to outstanding share-based awards was $34.444 million[108]. Legal and Regulatory Matters - The Company is exposed to claims and litigation matters, including a lawsuit related to Proposition 65 concerning coffee products[71]. - The appellate court affirmed the trial court's decision regarding the Proposition 65 lawsuit, concluding the matter in February 2023[73]. Cash Flow and Capital Expenditures - Cash flows from operating activities increased by $85.8 million to $294.8 million, primarily due to changes in working capital and higher net income[160]. - Cash flows used in investing activities were $111.7 million for the twenty-six weeks ended July 2, 2023, compared to $53.1 million for the same period in 2022, indicating a significant increase in capital expenditures[162]. - Capital expenditures are expected to be in the range of $190 - $210 million in 2023, primarily for new stores, remodels, and maintenance[164]. - Cash flows used in financing activities were $216.6 million for the twenty-six weeks ended July 2, 2023, compared to $112.1 million for the same period in 2022, with $148.3 million allocated for stock repurchases[165]. Other Financial Metrics - Return on Invested Capital (ROIC) improved to 13.0% for the fiscal period ended July 2, 2023, compared to 12.1% in the prior year[157]. - The Company’s performance obligations are satisfied upon the transfer of goods to customers at the point of sale, with revenue recognized at that time[35]. - The Company’s self-insurance liabilities require significant judgment, and actual claim settlements may differ from current provisions for loss[70]. - The company continues to face inflationary pressures, which may impact sales, gross profit margins, and comparable store sales[175]. - There have been no substantial changes to critical accounting estimates during the thirteen and twenty-six weeks ended July 2, 2023[180].

Sprouts Farmers Market, Inc. (NASDAQ:SFM) Q1 2023 Earnings Conference Call May 1, 2023 5:00 PM ET Company Participants Susannah Livingston - Vice President, Investor Relations and Treasurer Jack Sinclair - Chief Executive Officer Chip Molloy - Chief Financial Officer Conference Call Participants Mark Carden - UBS Ken Goldman - JPMorgan Edward Kelly - Wells Fargo Michael Montani - Evercore Rupesh Parikh - Oppenheimer Krisztina Katai - Deutsche Bank Leah Jordan - Goldman Sachs Karen Short - Credit Suisse Chuc ...

2.5% Continuing to Expand Customer Engagement; "Speaking" to more than 6M Customers Across Digital Platforms 9 Appendix Special Items 35,527 (1) - - 1,200 (2) 508 (3) Adjusted EBIT $ 137,049 $ 119,641 $ 113,235 $ 128,789 $ 80,064 The following table shows a reconciliation of EBIT and adjusted EBIT to net income, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share for the thirteen weeks ended April 2, 2023, April 3, 2022, Apr ...

Financial Performance - For the thirteen weeks ended April 2, 2023, net sales were $1,733.3 million, an increase of 5.6% from $1,641.2 million for the same period in 2022[88]. - Net sales for the thirteen weeks ended April 2, 2023, totaled $1.7 billion, an increase of $92.1 million, or 6%, compared to the same period in 2022[125]. - Comparable store sales growth was 3.1% for the thirteen weeks ended April 2, 2023, compared to 1.6% for the same period in 2022[124]. - Gross profit increased by $38.3 million, or 6%, to $650.1 million, with a gross margin of 37.5%, up from 37.3%[126]. - Selling, general and administrative expenses rose by $26.3 million, or 6%, totaling $486.2 million, representing 28.1% of net sales[127]. - Net income decreased by $12.1 million, or 14%, to $76.2 million, with a net income margin of 4.4%[134]. - Basic net income per share for the period was $0.73, down from $0.80 in the prior year, while diluted net income per share also decreased to $0.73 from $0.79[77]. Debt and Financing - The Company reported a long-term debt of $225 million as of April 2, 2023, down from $250 million as of January 1, 2023, reflecting a principal payment of $25 million during the period[54]. - The Company has a maximum total net leverage ratio requirement of 3.75 to 1.00 under its Credit Agreement, which it was in compliance with as of April 2, 2023[59]. - The Company capitalized debt issuance costs of $3.4 million related to its Credit Agreement, which are being amortized over the five-year term[45]. - The Company made no additional borrowings during the thirteen weeks ended April 2, 2023, maintaining a total outstanding debt of $225 million[54]. - Estimated interest payments on the Credit Agreement are approximately $42.7 million, with $12.8 million payable within 12 months[156]. - Each 100 basis point change in SOFR would result in a change in interest expense by $2.3 million annually based on the $225.0 million principal outstanding[165]. Shareholder Activities - The company repurchased 3,038,411 shares at an average price of $32.64, totaling $99.2 million during the thirteen weeks ended April 2, 2023[74]. - The company has a $600 million share repurchase program authorized, with $313.5 million available as of April 2, 2023[70]. - An additional 0.5 million shares were repurchased for $16.0 million after April 2, 2023[154]. Tax and Compliance - The effective tax rate decreased to 23.3% for the thirteen weeks ended April 2, 2023, compared to 24.3% for the same period in 2022, primarily due to increased excess tax benefits from share-based payment awards[61]. - The effective tax rate decreased to 23.3% from 24.3% due to increased excess tax benefits associated with share-based payment awards[132]. Store Operations and Growth - The company opened 8 new stores during the thirteen weeks ended April 2, 2023, bringing the total number of stores to 395, up from 379 at the end of the previous year[124]. - The company aims for at least 10% annual unit growth beginning in 2024, supported by its strategy of geographic store expansion and new store placement[118]. - The company closed 11 underperforming stores in February 2023, resulting in a charge of $27.8 million related to impairment of leasehold improvements and right-of-use assets[107]. Acquisitions and Goodwill - The company completed the acquisition of Ronald Cohn, Inc. on March 20, 2023, for a total consideration of $31.1 million, including $18.1 million in common shares and $13.0 million in cash[108]. - As of April 2, 2023, the company's goodwill balance increased to $381.8 million from $368.9 million at the beginning of the year, reflecting the acquisition activity[105]. Cash Flow and Capital Expenditures - Cash flows from operating activities increased by $26.8 million to $179.8 million, primarily due to higher net income adjusted for non-cash items[142]. - Cash flows used in investing activities were $60.1 million for the thirteen weeks ended April 2, 2023, compared to $27.2 million for the same period in 2022[144]. - Cash flows used in financing activities were $118.1 million for the thirteen weeks ended April 2, 2023, compared to $46.7 million for the same period in 2022[147]. - Capital expenditures are expected to be in the range of $210 - $230 million in 2023, primarily for new stores and remodels[146]. Other Financial Metrics - The Company’s restricted cash related to defined benefit plan forfeitures was approximately $1.9 million as of April 2, 2023[35]. - The company’s self-insurance liabilities require significant judgment, and actual claim settlements may differ from current provisions[66]. - The company is involved in ongoing litigation related to Proposition 65, but no loss contingency has been recorded as the outcome remains uncertain[69]. - Return on Invested Capital (ROIC) increased to 12.7% for the rolling four quarters ended April 2, 2023, compared to 12.2% for the same period in 2022[139]. - Total unrecognized compensation expense related to outstanding share-based awards was $40,794 as of April 2, 2023[103]. - Share-based compensation expense for the thirteen weeks ended April 2, 2023, was $3,852, a decrease from $4,456 for the same period in 2022[103]. - The balance of gift cards at the end of the period was $9.546 million, a decrease from $10.502 million at the same time last year, with revenue recognized from gift cards amounting to $2.582 million[33]. - The Company recognized a breakage revenue from gift cards that was not material in any period presented, indicating a stable percentage of unredeemed gift cards[33]. - The Company’s performance obligations are satisfied upon the transfer of goods to customers at the point of sale, with payment due at that time[33].