SFM Sprouts Farmers Market Inc

Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week first quarter ended March 31, 2024.

"We were pleased with our impressive financial results this quarter, with strength in comparable store sales, traffic, and ecommerce," said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "These outcomes highlight the effectiveness of our strategy and the exceptional execution by our team members across the country. We are reinforcing our position as a leading specialty food retailer as we build new stores in line with our growth plans.”

First Quarter Highlights:

• Net sales totaled $1.9 billion; a 9% increase from the same period in 2023
• Comparable store sales growth of 4.0%
• Diluted earnings per share of $1.12; compared to diluted earnings per share of $0.73 and Adjusted diluted earnings per share of $0.98(1) in the same period in 2023
• Opened 7 new stores, resulting in 414 stores in 23 states as of March 31, 2024

(1)

Adjusted diluted earnings per share, a non-GAAP financial measure, excludes the impact of certain special items. For the first quarter ended March 31, 2024, there were no adjustments due to special items. See the “Non-GAAP Financial Measures” section of this release for additional information about this item.

Leverage and Liquidity in First Quarter 2024

• Ended the quarter with $312 million in cash and cash equivalents and a $125 million balance on its $700 million revolving credit facility
• Repurchased 958 thousand shares of common stock for a total investment of $60 million, excluding excise tax
• Generated cash from operations of $220 million and invested $46 million in capital expenditures, net of landlord reimbursement, year-to-date thru March 31, 2024

Second Quarter and Full-Year 2024 Outlook

The following provides information on our second quarter 2024 outlook:

• Comparable store sales growth: 3% to 4%
• Adjusted diluted earnings per share: $0.75 to $0.79

The following provides information on our full-year 2024 outlook:

• Net sales growth: 7% to 8%
• Comparable store sales growth: 2.5% to 3.5%
• Adjusted EBIT: $415 million to $425 million
• Adjusted diluted earnings per share: $3.05 to $3.13
• Unit growth: Approximately 35 new stores
• Capital expenditures (net of landlord reimbursements): $225 million to $245 million

First Quarter 2024 Conference Call

Sprouts will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, May 1, 2024, during which Sprouts executives will further discuss first quarter 2024 financial results.

A webcast of the conference call will be available through Sprouts’ investor relations webpage, accessible via the following link. Participants should register on the website approximately ten minutes prior to the start of the webcast.

A webcast replay will be available at approximately 8:00 p.m. Eastern Time on May 1, 2024. This can be accessed with the following link.

Important Information Regarding Outlook

There is no guarantee that Sprouts will achieve its projected financial expectations, which are based on management estimates, currently available information and assumptions that management believes to be reasonable. These expectations are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. See “Forward-Looking Statements” below.

Forward-Looking Statements

Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact (including, but not limited to, statements to the effect that Sprouts Farmers Market or its management "anticipates," "plans," "estimates," "expects," or "believes," or the negative of these terms and other similar expressions) should be considered forward-looking statements, including, without limitation, statements regarding the company’s outlook, growth, opportunities and long-term strategy. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this release. These risks and uncertainties include, without limitation, the company’s ability to execute on its long-term strategy; the company’s ability to successfully compete in its competitive industry; the company’s ability to successfully open new stores; the company’s ability to manage its growth; the company’s ability to maintain or improve its operating margins; the company’s ability to identify and react to trends in consumer preferences; product supply disruptions; equipment supply disruptions; general economic conditions that impact consumer spending or result in competitive responses; accounting standard changes; the current inflationary environment and future potential inflationary and/or deflationary trends; and other factors as set forth from time to time in the company’s Securities and Exchange Commission filings, including, without limitation, the company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available, except as required by law.

Corporate Profile

True to its farm-stand heritage, Sprouts offers a unique 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. The healthy grocer continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. Headquartered in Phoenix, and one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States, Sprouts employs approximately 32,000 team members and operates more than 410 stores in 23 states nationwide. To learn more about Sprouts, and the good it brings communities, visit about.sprouts.com.

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Thirteen weeks ended

 

March 31, 2024

 

April 2, 2023

Net sales

$

1,883,808

 

$

1,733,310

Cost of sales

 

1,161,495

 

 

1,083,248

Gross profit

 

722,313

 

 

650,062

Selling, general and administrative expenses

 

539,771

 

 

486,195

Depreciation and amortization (exclusive of depreciation included in cost of sales)

 

32,232

 

 

34,068

Store closure and other costs, net

 

2,044

 

 

28,277

Income from operations

 

148,266

 

 

101,522

Interest expense, net

 

818

 

 

2,220

Income before income taxes

 

147,448

 

 

99,302

Income tax provision

 

33,348

 

 

23,142

Net income

$

114,100

 

$

76,160

Net income per share:

 

 

 

Basic

$

1.13

 

$

0.73

Diluted

$

1.12

 

$

0.73

Weighted average shares outstanding:

 

 

 

Basic

 

101,071

 

 

103,827

Diluted

 

102,024

 

 

104,876

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

 

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

312,276

 

$

201,794

Accounts receivable, net

 

36,306

 

 

30,313

Inventories

 

316,202

 

 

323,198

Prepaid expenses and other current assets

 

32,710

 

 

48,467

Total current assets

 

697,494

 

 

603,772

Property and equipment, net of accumulated depreciation

 

809,481

 

 

798,707

Operating lease assets, net

 

1,363,341

 

 

1,322,854

Intangible assets

 

208,060

 

 

208,060

Goodwill

 

381,750

 

 

381,741

Other assets

 

12,289

 

 

12,294

Total assets

$

3,472,415

 

$

3,327,428

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

201,434

 

$

179,927

Accrued liabilities

 

190,217

 

 

164,887

Accrued salaries and benefits

 

57,084

 

 

74,752

Accrued income tax

 

8,869

 

 

—

Current portion of operating lease liabilities

 

127,255

 

 

126,271

Current portion of finance lease liabilities

 

1,089

 

 

1,032

Total current liabilities

 

585,948

 

 

546,869

Long-term operating lease liabilities

 

1,441,068

 

 

1,399,676

Long-term debt and finance lease liabilities

 

133,375

 

 

133,685

Other long-term liabilities

 

37,557

 

 

36,270

Deferred income tax liability

 

63,440

 

 

62,381

Total liabilities

 

2,261,388

 

 

2,178,881

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Undesignated preferred stock; $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding

 

—

 

 

—

Common stock, $0.001 par value; 200,000,000 shares authorized, 100,802,152 shares issued and outstanding, March 31, 2024; 101,211,984 shares issued and outstanding, December 31, 2023

 

101

 

 

101

Additional paid-in capital

 

783,593

 

 

774,834

Retained earnings

 

427,333

 

 

373,612

Total stockholders’ equity

 

1,211,027

 

 

1,148,547

Total liabilities and stockholders’ equity

$

3,472,415

 

$

3,327,428

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

 

 

Thirteen weeks ended

 

March 31, 2024

 

April 2, 2023

Operating activities

 

 

 

Net income

$

114,100

 

 

$

76,160

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization expense

 

34,522

 

 

 

34,912

 

Operating lease asset amortization

 

32,303

 

 

 

30,696

 

Impairment of assets

 

—

 

 

 

27,845

 

Share-based compensation

 

6,477

 

 

 

3,852

 

Deferred income taxes

 

1,072

 

 

 

(386

)

Other non-cash items

 

496

 

 

 

14

 

Changes in operating assets and liabilities, net of effects from acquisition:

 

 

 

Accounts receivable

 

8,601

 

 

 

6,241

 

Inventories

 

6,996

 

 

 

5,400

 

Prepaid expenses and other current assets

 

14,691

 

 

 

9,528

 

Other assets

 

924

 

 

 

2,609

 

Accounts payable

 

28,899

 

 

 

27,006

 

Accrued liabilities

 

17,642

 

 

 

(2,024

)

Accrued salaries and benefits

 

(17,667

)

 

 

(13,712

)

Accrued income tax

 

8,869

 

 

 

5,456

 

Operating lease liabilities

 

(36,580

)

 

 

(33,956

)

Other long-term liabilities

 

(1,650

)

 

 

179

 

Cash flows from operating activities

 

219,695

 

 

 

179,820

 

Investing activities

 

 

 

Purchases of property and equipment

 

(51,241

)

 

 

(47,044

)

Payments for acquisition, net of cash acquired

 

—

 

 

 

(13,042

)

Cash flows used in investing activities

 

(51,241

)

 

 

(60,086

)

Financing activities

 

 

 

Payments on revolving credit facilities

 

—

 

 

 

(25,000

)

Payments on finance lease liabilities

 

(253

)

 

 

(219

)

Repurchase of common stock

 

(60,000

)

 

 

(98,349

)

Proceeds from exercise of stock options

 

2,283

 

 

 

5,488

 

Cash flows used in financing activities

 

(57,970

)

 

 

(118,080

)

Increase in cash, cash equivalents, and restricted cash

 

110,484

 

 

 

1,654

 

Cash, cash equivalents, and restricted cash at beginning of the period

 

203,870

 

 

 

295,192

 

Cash, cash equivalents, and restricted cash at the end of the period

$

314,354

 

 

$

296,846

 

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States (“GAAP”), the company presents Adjusted EBITDA, Adjusted EBIT, and Adjusted diluted earnings per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP. The company's management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the company, and certain of these measures may be used as components of incentive compensation.

The company defines EBITDA as net income before interest expense, provision for income tax, and depreciation, amortization and accretion. Adjusted EBITDA, Adjusted EBIT and Adjusted diluted earnings per share exclude the impact of certain specified special items. The Company reported these adjusted measures to provide additional information with respect to the impact of store closure costs and certain other items during the thirteen weeks ended April 2, 2023. There were no such material adjustments during the thirteen weeks ended March 31, 2024.

Non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, non-GAAP measures should not be considered as a measure of discretionary cash available to use to reinvest in the growth of the company’s business, or as a measure of cash that will be available to meet the company’s obligations. Each non-GAAP measure has its limitations as an analytical tool, and they should not be considered in isolation or as a substitute for analysis of the company’s results as reported under GAAP.

The following table shows a reconciliation of (i) Adjusted EBITDA and Adjusted EBIT to net income and (ii) Adjusted diluted earnings per share to diluted earnings per share, in each case, for the thirteen weeks ended March 31, 2024 and April 2, 2023:

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NON-GAAP MEASURE RECONCILIATION

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Thirteen weeks ended

 

March 31, 2024

 

April 2, 2023

Net income

$

114,100

 

$

76,160

Income tax provision

 

33,348

 

 

23,142

Interest expense, net

 

818

 

 

2,220

Earnings before interest and taxes (EBIT)

 

148,266

 

 

101,522

Special items (1)

 

—

 

 

35,527

Adjusted EBIT

 

148,266

 

 

137,049

 

 

 

 

Depreciation, amortization and accretion, adjusted for special items

 

34,522

 

 

30,913

Adjusted EBITDA

$

182,788

 

$

167,962

 

 

 

 

Net income

$

114,100

 

$

76,160

Special items, net of tax (1)

 

—

 

 

26,521

Adjusted net income

$

114,100

 

$

102,681

Diluted earnings per share

$

1.12

 

$

0.73

Adjusted diluted earnings per share

$

1.12

 

$

0.98

 

 

 

 

Diluted weighted average shares outstanding

 

102,024

 

 

104,876

(1)

For the thirteen weeks ended March 31, 2024, there were no special items. For the thirteen weeks ended April 2, 2023, special items included approximately $28 million in Store Closure and other costs, net primarily related to impairment charges and $4 million in Depreciation and amortization (exclusive of depreciation in cost of sales) for accelerated depreciation in connection with store closures and $3 million in Selling, general and administrative expenses related to our supply chain transition and acquisition related costs. After-tax impact included the tax benefit on the pre-tax charge.

 

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Investors: Susannah Livingston (602) 682-1584 susannahlivingston@sprouts.com

Media: media@sprouts.com