Sprouts Farmers Market(SFM) - 2024 Q1 - Quarterly Report

Financial Performance - For the thirteen weeks ended April 2, 2023, net sales were $1,733.3 million, an increase of 5.6$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$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$486.2 million, representing 28.1% of net sales[127]. - Net income decreased by $12.1 million, or 14$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$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].