Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported
results for the 13-week third quarter ended October 1, 2023.
"We are pleased to report another solid quarter at Sprouts, with
continued increases in both traffic and comparable store sales,"
said Jack Sinclair, chief executive officer of Sprouts Farmers
Market. "Our results signal the alignment of our 31,000 team
members across merchandising, marketing, supply chain, and
operational initiatives-- propelling our strategy forward."
Third Quarter Highlights:
- Net sales totaled $1.7 billion; a 7.6% increase from the
same period in 2022
- Comparable store sales growth of 3.9%
- Diluted earnings per share of $0.64; Adjusted diluted
earnings per share of $0.65(1); compared to diluted earnings
per share of $0.61 in the same period in 2022.
- Opened 10 new stores, resulting in 401 stores in 23
states as of October 1, 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 Third Quarter 2023
- Ended the quarter with $252 million in cash and cash
equivalents and a $150 million balance on its $700 million
revolving credit facility
- Repurchased 831 thousand shares of common stock for a
total investment of $32 million
- Generated cash from operations of $409 million and
invested $157 million in capital expenditures, net of
landlord reimbursement, year-to-date thru October 1, 2023
Fourth Quarter and Full-Year 2023 Outlook
The following provides information on our fourth quarter 2023
outlook:
- Comparable store sales growth: approximately 3%
- Adjusted diluted earnings per share: $0.42 to $0.46
The following provides information on our full-year 2023
outlook:
- Net sales growth: 6.5% to 7%
- Comparable store sales growth: approximately 3%
- Adjusted EBIT: $387 million to $393 million
- Adjusted diluted earnings per share: $2.77 to $2.81
- Unit growth: 30 new stores
- Capital expenditures (net of landlord reimbursements):
$190 million to $210 million
Third Quarter 2023 Conference Call
Sprouts will hold a conference call at 10:30 a.m. Eastern
Daylight Time on Tuesday, October 31, 2023, during which Sprouts
executives will further discuss third quarter 2023 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 1:30 p.m.
Eastern Daylight Time on October 31, 2023. 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; 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 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 31,000
team members and operates more than 400 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
Thirty-nine weeks
ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net sales
$
1,713,282
$
1,591,026
$
5,138,839
$
4,827,669
Cost of sales
1,087,848
1,007,376
3,237,371
3,051,914
Gross profit
625,434
583,650
1,901,468
1,775,755
Selling, general and administrative
expenses
502,801
460,834
1,486,961
1,382,854
Depreciation and amortization (exclusive
of depreciation included in cost of sales)
31,802
30,313
99,834
93,377
Store closure and other costs, net
3,176
2,164
33,880
3,034
Income from operations
87,655
90,339
280,793
296,490
Interest expense, net
1,698
1,951
6,058
7,648
Income before income taxes
85,957
88,388
274,735
288,842
Income tax provision
20,644
22,648
65,928
72,798
Net income
$
65,313
$
65,740
$
208,807
$
216,044
Net income per share:
Basic
$
0.64
$
0.61
$
2.03
$
1.98
Diluted
$
0.64
$
0.61
$
2.01
$
1.97
Weighted average shares outstanding:
Basic
101,881
107,229
102,844
109,066
Diluted
102,703
108,095
103,758
109,888
SPROUTS FARMERS MARKET, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
October 1, 2023
January 1, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
251,780
$
293,233
Accounts receivable, net
16,203
16,108
Inventories
323,662
310,545
Prepaid expenses and other current
assets
28,906
53,918
Total current assets
620,551
673,804
Property and equipment, net of accumulated
depreciation
773,072
722,241
Operating lease assets, net
1,294,270
1,106,524
Intangible assets
208,060
184,960
Goodwill
381,741
368,878
Other assets
12,814
13,973
Total assets
$
3,290,508
$
3,070,380
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
190,133
$
172,904
Accrued liabilities
175,769
151,306
Accrued salaries and benefits
66,380
61,574
Current portion of operating lease
liabilities
108,225
135,584
Current portion of finance lease
liabilities
1,038
1,012
Total current liabilities
541,545
522,380
Long-term operating lease liabilities
1,382,937
1,145,173
Long-term debt and finance lease
liabilities
158,936
258,902
Other long-term liabilities
38,009
36,340
Deferred income tax liability
54,072
61,123
Total liabilities
2,175,499
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, 101,623,482 shares issued and
outstanding, October 1, 2023; 105,072,756 shares issued and
outstanding, January 1, 2023
101
105
Additional paid-in capital
768,057
726,345
Retained earnings
346,851
320,012
Total stockholders' equity
1,115,009
1,046,462
Total liabilities and stockholders'
equity
$
3,290,508
$
3,070,380
SPROUTS FARMERS MARKET, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Thirty-nine weeks
ended
October 1, 2023
October 2, 2022
Operating activities
Net income
$
208,807
$
216,044
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
103,668
96,057
Operating lease asset amortization
94,403
87,316
Impairment of assets
27,845
171
Share-based compensation
14,731
11,672
Deferred income taxes
(13,225
)
1,025
Other non-cash items
596
404
Changes in operating assets and
liabilities, net of effects from acquisition:
Accounts receivable
10,070
16,491
Inventories
(11,322
)
(36,280
)
Prepaid expenses and other current
assets
21,093
(7,880
)
Other assets
3,870
1,678
Accounts payable
27,446
23,121
Accrued liabilities
19,027
2,482
Accrued salaries and benefits
4,509
(4,868
)
Operating lease liabilities
(103,787
)
(99,055
)
Other long-term liabilities
1,294
(1,588
)
Cash flows from operating activities
409,025
306,790
Investing activities
Purchases of property and equipment
(165,016
)
(80,749
)
Payments for acquisition, net of cash
acquired
(13,032
)
—
Cash flows used in investing
activities
(178,048
)
(80,749
)
Financing activities
Proceeds from revolving credit
facilities
—
62,500
Payments on revolving credit
facilities
(100,000
)
(62,500
)
Payments on finance lease liabilities
(749
)
(600
)
Payments of deferred financing costs
—
(3,373
)
Repurchase of common stock
(180,415
)
(155,094
)
Proceeds from exercise of stock
options
8,844
4,074
Cash flows used in financing
activities
(272,320
)
(154,993
)
(Decrease)/Increase in cash, cash
equivalents, and restricted cash
(41,343
)
71,048
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
$
253,849
$
318,052
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 gross margin, 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 gross margin, 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 and thirty-nine weeks ended October 1,
2023. There were no such material adjustments during the thirteen
and thirty-nine weeks ended October 2, 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 gross
margin to gross margin, (ii) Adjusted EBITDA and Adjusted EBIT to
net income and (iii) Adjusted diluted earnings per share to diluted
earnings per share, in each case, for the thirteen and thirty-nine
weeks ended October 1, 2023 and October 2, 2022:
SPROUTS FARMERS MARKET, INC.
AND SUBSIDIARIES
NON-GAAP MEASURE
RECONCILIATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Thirteen weeks ended
Thirty-nine weeks
ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Gross profit
$
625,434
$
583,650
$
1,901,468
$
1,775,755
Special items (1)
1,302
—
2,955
—
Adjusted gross profit
$
626,736
$
583,650
$
1,904,423
$
1,775,755
Gross margin
36.5
%
36.7
%
37.0
%
36.8
%
Adjusted gross margin
36.6
%
36.7
%
37.1
%
36.8
%
Net income
$
65,313
$
65,740
$
208,807
$
216,044
Income tax provision
20,644
22,648
65,928
72,798
Interest expense, net
1,698
1,951
6,058
7,648
Earnings before interest and taxes
(EBIT)
87,655
90,339
280,793
296,490
Special items (2)
2,392
—
46,034
—
Adjusted EBIT
90,047
90,339
326,827
296,490
Depreciation, amortization and accretion,
adjusted for special items
33,655
31,201
97,789
96,057
Adjusted EBITDA
$
123,702
$
121,540
$
424,616
$
392,547
Net income
$
65,313
$
65,740
$
208,807
$
216,044
Special items, net of tax (2)
1,780
—
34,272
—
Adjusted net income
$
67,093
$
65,740
$
243,079
$
216,044
Diluted earnings per share
$
0.64
$
0.61
$
2.01
$
1.97
Adjusted diluted earnings per share
$
0.65
$
0.61
$
2.34
$
1.97
Diluted weighted average shares
outstanding
102,703
108,095
103,758
109,888
(1) For the thirteen and thirty-nine weeks ended October 1,
2023, special items included approximately $1 million and $3
million, respectively, in Cost of sales related to store closures
and our supply chain transition.
(2) For the thirteen weeks ended October 1, 2023, special items
included approximately $1 million in Selling, general and
administrative expenses primarily related to store closures and $1
million in Cost of sales related to our supply chain transition.
For the thirty-nine weeks ended October 1, 2023, special items
included approximately $28 million in Store Closure and other
costs, net primarily related to impairment charges and $6 million
in Depreciation and amortization (exclusive of depreciation in cost
of sales) for accelerated depreciation in connection with store
closures, $9 million in Selling, general and administrative
expenses related to store closures, our supply chain transition and
acquisition related costs, and $3 million in Cost of sales related
to store closures and our supply chain transition. After-tax impact
included the tax benefit on the pre-tax charge.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031601418/en/
Investor Contact: Susannah Livingston (602) 682-1584
susannahlivingston@sprouts.com
Media Contact: media@sprouts.com
Sprouts Farmers Market (NASDAQ:SFM)
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