Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results
for the 13-week first quarter ended April 2, 2023.
"We are pleased with our first quarter; we believe our long-term
growth strategy is gaining traction and driving positive
performance," said Jack Sinclair, chief executive officer of
Sprouts Farmers Market. "Our results included comparable store
sales growth of 3.1%, total sales growth of 6 percent, and adjusted
diluted earnings per share growth of 24 percent."
First Quarter Highlights:
- Net sales totaled $1.7 billion; a 6% increase
from the same period in 2022
- Comparable store sales growth of 3.1%
- Diluted earnings per share of $0.73;
Adjusted diluted earnings per share of $0.98(1); a
24% increase from the same period in 2022
- Opened 8 new stores, closed 1 store, and
acquired 2 previously licensed stores, resulting in 395
stores in 23 states as of April 2, 2023
________________________1 Adjusted diluted earnings per
share, a non-GAAP financial measure, excludes the impact of certain
special items. See the “Non-GAAP Financial Measures” section
of this release for additional information about this item.
Leverage and Liquidity in First Quarter
2023
- Ended the quarter with $295 million in cash and cash
equivalents and a $225 million balance on its $700 million
revolving credit facility
- Repurchased 3 million shares of common stock
for a total investment of $98 million
- Generated cash from operations of $180 million
and invested $45 million in capital expenditures,
net of landlord reimbursement, year-to-date thru April 2, 2023
Second Quarter and Full-Year 2023 OutlookThe
following provides information on our full-year 2023 outlook:
- Net sales growth: 5% to 6%
- Comparable store sales growth: 2% to 3%
- Adjusted EBIT: $370 million to $385
million
- Adjusted diluted earnings per share: $2.58 to
$2.68
- Unit growth: 30 new stores, closing 11 stores,
and acquisition of 2 previously licensed stores
- Capital expenditures (net of landlord
reimbursements): $210 million to $230 million
The following provides information on our second quarter 2023
outlook:
- Comparable store sales growth: approximately
3%
- Adjusted diluted earnings per share: $0.61 to
$0.65
First Quarter 2023 Conference CallSprouts will
hold a conference call at 5:00 p.m. Eastern Daylight Time on
Monday, May 1, 2023, during which Sprouts executives will further
discuss first quarter 2023 financial results.
A webcast of the conference call will be available through
Sprouts’ investor relations webpage located at
investors.sprouts.com. 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 Daylight Time on Monday, May 1, 2023. This can be
accessed with the following link.
Important Information Regarding OutlookThere 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 StatementsCertain 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; the impact of the COVID-19
pandemic; 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 ProfileTrue 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 31,000 team members and operates more than
380 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
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
INCOME(UNAUDITED)(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
|
|
Thirteen weeks ended |
|
|
|
April 2, 2023 |
|
|
April 3, 2022 |
|
Net sales |
|
$ |
1,733,310 |
|
|
$ |
1,641,161 |
|
Cost of sales |
|
|
1,083,248 |
|
|
|
1,029,413 |
|
Gross profit |
|
|
650,062 |
|
|
|
611,748 |
|
Selling, general and
administrative expenses |
|
|
486,195 |
|
|
|
459,910 |
|
Depreciation and amortization
(exclusive of depreciation included in cost of
sales) |
|
|
34,068 |
|
|
|
31,820 |
|
Store closure and other costs,
net |
|
|
28,277 |
|
|
|
377 |
|
Income from operations |
|
|
101,522 |
|
|
|
119,641 |
|
Interest expense, net |
|
|
2,220 |
|
|
|
3,039 |
|
Income before income taxes |
|
|
99,302 |
|
|
|
116,602 |
|
Income tax provision |
|
|
23,142 |
|
|
|
28,295 |
|
Net income |
|
$ |
76,160 |
|
|
$ |
88,307 |
|
Net income per share: |
|
|
|
|
|
|
Basic |
|
$ |
0.73 |
|
|
$ |
0.80 |
|
Diluted |
|
$ |
0.73 |
|
|
$ |
0.79 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
|
103,827 |
|
|
|
110,903 |
|
Diluted |
|
|
104,876 |
|
|
|
111,833 |
|
SPROUTS FARMERS MARKET, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(UNAUDITED)(IN THOUSANDS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
|
|
April 2, 2023 |
|
|
January 1, 2023 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
294,905 |
|
|
$ |
293,233 |
|
Accounts receivable, net |
|
|
12,404 |
|
|
|
16,108 |
|
Inventories |
|
|
306,940 |
|
|
|
310,545 |
|
Prepaid expenses and other current assets |
|
|
41,699 |
|
|
|
53,918 |
|
Total current assets |
|
|
655,948 |
|
|
|
673,804 |
|
Property and equipment, net of
accumulated depreciation |
|
|
715,342 |
|
|
|
722,241 |
|
Operating lease assets,
net |
|
|
1,195,187 |
|
|
|
1,106,524 |
|
Intangible assets |
|
|
208,060 |
|
|
|
184,960 |
|
Goodwill |
|
|
381,751 |
|
|
|
368,878 |
|
Other assets |
|
|
13,106 |
|
|
|
13,973 |
|
Total assets |
|
$ |
3,169,394 |
|
|
$ |
3,070,380 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
187,948 |
|
|
$ |
172,904 |
|
Accrued liabilities |
|
|
148,865 |
|
|
|
151,306 |
|
Accrued salaries and benefits |
|
|
48,160 |
|
|
|
61,574 |
|
Accrued income tax |
|
|
5,456 |
|
|
|
— |
|
Current portion of operating lease liabilities |
|
|
123,726 |
|
|
|
135,584 |
|
Current portion of finance lease liabilities |
|
|
976 |
|
|
|
1,012 |
|
Total current liabilities |
|
|
515,131 |
|
|
|
522,380 |
|
Long-term operating lease
liabilities |
|
|
1,266,282 |
|
|
|
1,145,173 |
|
Long-term debt and finance
lease liabilities |
|
|
233,720 |
|
|
|
258,902 |
|
Other long-term
liabilities |
|
|
36,421 |
|
|
|
36,340 |
|
Deferred income tax
liability |
|
|
66,910 |
|
|
|
61,123 |
|
Total liabilities |
|
|
2,118,464 |
|
|
|
2,023,918 |
|
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,
103,470,717 shares issued and outstanding, April 2, 2023;
105,072,756 shares issued and outstanding, January 1, 2023 |
|
|
104 |
|
|
|
105 |
|
Additional paid-in capital |
|
|
753,822 |
|
|
|
726,345 |
|
Retained earnings |
|
|
297,004 |
|
|
|
320,012 |
|
Total stockholders'
equity |
|
|
1,050,930 |
|
|
|
1,046,462 |
|
Total liabilities and stockholders' equity |
|
$ |
3,169,394 |
|
|
$ |
3,070,380 |
|
SPROUTS FARMERS MARKET, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(IN
THOUSANDS)
|
|
Thirteen weeks ended |
|
|
|
April 2, 2023 |
|
|
April 3, 2022 |
|
Operating
activities |
|
|
|
|
|
|
Net income |
|
$ |
76,160 |
|
|
$ |
88,307 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
34,912 |
|
|
|
32,720 |
|
Operating lease asset amortization |
|
|
30,696 |
|
|
|
28,043 |
|
Impairment of assets |
|
|
27,845 |
|
|
|
171 |
|
Share-based compensation |
|
|
3,852 |
|
|
|
4,456 |
|
Deferred income taxes |
|
|
(386 |
) |
|
|
2,291 |
|
Other non-cash items |
|
|
14 |
|
|
|
313 |
|
Changes in operating assets and liabilities, net of effects from
acquisition: |
|
|
|
|
|
|
Accounts receivable |
|
|
6,241 |
|
|
|
9,770 |
|
Inventories |
|
|
5,400 |
|
|
|
(6,790 |
) |
Prepaid expenses and other current assets |
|
|
9,528 |
|
|
|
3,613 |
|
Other assets |
|
|
2,609 |
|
|
|
1,757 |
|
Accounts payable |
|
|
27,006 |
|
|
|
27,645 |
|
Accrued liabilities |
|
|
(2,024 |
) |
|
|
(6,857 |
) |
Accrued salaries and benefits |
|
|
(13,712 |
) |
|
|
(14,106 |
) |
Accrued income tax |
|
|
5,456 |
|
|
|
15,275 |
|
Operating lease liabilities |
|
|
(33,956 |
) |
|
|
(32,180 |
) |
Other long-term liabilities |
|
|
179 |
|
|
|
(1,399 |
) |
Cash flows from operating activities |
|
|
179,820 |
|
|
|
153,029 |
|
Investing
activities |
|
|
|
|
|
|
Purchases of property and
equipment |
|
|
(47,044 |
) |
|
|
(27,227 |
) |
Payments for acquisition, net
of cash acquired |
|
|
(13,042 |
) |
|
|
— |
|
Cash flows used in investing activities |
|
|
(60,086 |
) |
|
|
(27,227 |
) |
Financing
activities |
|
|
|
|
|
|
Proceeds from revolving credit
facilities |
|
|
— |
|
|
|
62,500 |
|
Payments on revolving credit
facilities |
|
|
(25,000 |
) |
|
|
(62,500 |
) |
Payments on finance lease
liabilities |
|
|
(219 |
) |
|
|
(176 |
) |
Payments of deferred financing
costs |
|
|
— |
|
|
|
(3,373 |
) |
Repurchase of common
stock |
|
|
(98,349 |
) |
|
|
(45,715 |
) |
Proceeds from exercise of
stock options |
|
|
5,488 |
|
|
|
2,555 |
|
Cash flows used in financing activities |
|
|
(118,080 |
) |
|
|
(46,709 |
) |
Increase in cash, cash equivalents, and restricted cash |
|
|
1,654 |
|
|
|
79,093 |
|
Cash, cash equivalents, and
restricted cash at beginning of the period |
|
|
295,192 |
|
|
|
247,004 |
|
Cash, cash equivalents, and
restricted cash at the end of the period |
|
$ |
296,846 |
|
|
$ |
326,097 |
|
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 has begun reporting 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 April 3, 2022.
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 April 2, 2023 and April 3, 2022:
SPROUTS FARMERS MARKET, INC. AND
SUBSIDIARIESNON-GAAP MEASURE
RECONCILIATION(UNAUDITED)(IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
|
|
Thirteen Weeks Ended |
|
|
|
April 2, 2023 |
|
|
April 3, 2022 |
|
Net Income |
|
$ |
76,160 |
|
|
$ |
88,307 |
|
Income tax provision |
|
|
23,142 |
|
|
|
28,295 |
|
Interest expense, net |
|
|
2,220 |
|
|
|
3,039 |
|
Earnings before interest and
taxes (EBIT) |
|
|
101,522 |
|
|
|
119,641 |
|
Special items (1) |
|
|
35,527 |
|
|
|
— |
|
Adjusted EBIT |
|
|
137,049 |
|
|
|
119,641 |
|
|
|
|
|
|
|
|
Depreciation, amortization and
accretion, adjusted for special items |
|
|
30,913 |
|
|
|
32,720 |
|
Adjusted EBITDA |
|
$ |
167,962 |
|
|
$ |
152,361 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
76,160 |
|
|
$ |
88,307 |
|
Special Items, net of tax
(1) |
|
|
26,521 |
|
|
|
— |
|
Adjusted Net income |
|
$ |
102,681 |
|
|
$ |
88,307 |
|
Diluted earnings per
share |
|
$ |
0.73 |
|
|
$ |
0.79 |
|
Adjusted diluted earnings per
share |
|
$ |
0.98 |
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
Diluted weighted average
shares outstanding |
|
|
104,876 |
|
|
|
111,833 |
|
|
|
|
|
|
|
|
|
|
(1) Includes 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 includes the tax
benefit on the pre-tax charge.
|
|
|
Investor Contact: |
Media Contact: |
|
Susannah Livingston |
media@sprouts.com |
|
(602) 682-1584 |
|
|
susannahlivingston@sprouts.com |
|
|
|
|
|
Source: Sprouts Farmers Market, IncPhoenix, AZ5/1/23
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