February 22, 2024
(press release)
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PHOENIX--(BUSINESS WIRE)-- Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week fourth quarter and 52-week year ending December 31, 2023. "Our fourth quarter performance demonstrates our continued strength as a leading specialty grocer," said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "Our 2023 results exceeded our original expectations, with solid comparable sales each quarter, positive traffic, accelerating unit growth, and increasing customer engagement. I am confident our strategy and our passionate, dedicated team will continue to create shareholder value." Fourth Quarter Highlights: Full Year 2023 Highlights: ______________________ Leverage and Liquidity in 2023 First Quarter and Full Year 2024 Outlook The following provides information on our first quarter 2024 outlook: The following provides information on our full year 2024 outlook: Fourth Quarter and Full Year 2023 Conference Call Sprouts will hold a conference call at 5:00 p.m. Eastern Standard Time on Thursday, February 22, 2024, during which Sprouts executives will further discuss fourth quarter and full year 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 8:00 p.m. Eastern Standard Time on Thursday, February 22, 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 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 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Thirteen Weeks Ended Fifty-Two Weeks Ended December 31, January 1, December 31, January 1, Net sales $ 1,698,545 $ 1,576,554 $ 6,837,384 $ 6,404,223 Cost of sales 1,078,172 1,003,745 4,315,543 4,055,659 Gross profit 620,373 572,809 2,521,841 2,348,564 Selling, general and administrative expenses 513,476 472,795 2,000,437 1,855,649 Depreciation and amortization (exclusive of depreciation included in cost of sales) 32,059 30,153 131,893 123,530 Store closure and other costs, net 5,400 7,991 39,280 11,025 Income from operations 69,438 61,870 350,231 358,360 Interest expense, net 433 1,399 6,491 9,047 Income before income taxes 69,005 60,471 343,740 349,313 Income tax provision 18,956 15,351 84,884 88,149 Net income $ 50,049 $ 45,120 $ 258,856 $ 261,164 Net income per share: Basic $ 0.49 $ 0.43 $ 2.53 $ 2.41 Diluted $ 0.49 $ 0.42 $ 2.50 $ 2.39 Weighted average shares outstanding: Basic 101,383 105,730 102,479 108,232 Diluted 102,207 106,832 103,390 109,139 SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) December 31, January 1, ASSETS Current assets: Cash and cash equivalents $ 201,794 $ 293,233 Accounts receivable, net 30,313 16,108 Inventories 323,198 310,545 Prepaid expenses and other current assets 48,467 53,918 Total current assets 603,772 673,804 Property and equipment, net of accumulated depreciation 798,707 722,241 Operating lease assets, net 1,322,854 1,106,524 Intangible assets 208,060 184,960 Goodwill 381,741 368,878 Other assets 12,294 13,973 Total assets $ 3,327,428 $ 3,070,380 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 179,927 $ 172,904 Accrued liabilities 164,887 151,306 Accrued salaries and benefits 74,752 61,574 Current portion of operating lease liabilities 126,271 135,584 Current portion of finance lease liabilities 1,032 1,012 Total current liabilities 546,869 522,380 Long-term operating lease liabilities 1,399,676 1,145,173 Long-term debt and finance lease liabilities 133,685 258,902 Other long-term liabilities 36,270 36,340 Deferred income tax liability 62,381 61,123 Total liabilities 2,178,881 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, 101,211,984 shares issued and outstanding, December 31, 2023; 105,072,756 shares issued and outstanding, January 1, 2023 101 105 Additional paid-in capital 774,834 726,345 Retained earnings 373,612 320,012 Total stockholders' equity 1,148,547 1,046,462 Total liabilities and stockholders' equity $ 3,327,428 $ 3,070,380 SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Fifty-Two Weeks Ended December 31, January 1, Operating activities Net income $ 258,856 $ 261,164 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 137,811 127,067 Operating lease asset amortization 127,208 117,315 Impairment of assets 30,549 8,066 Share-based compensation 18,898 16,603 Deferred income taxes (4,915 ) 3,228 Other non-cash items 1,086 672 Changes in operating assets and liabilities, net of effects from acquisition: Accounts receivable 3,173 13,381 Inventories (10,857 ) (45,158 ) Prepaid expenses and other current assets 2,210 (18,467 ) Other assets 3,482 2,039 Accounts payable 12,215 13,362 Accrued liabilities 11,746 5,416 Accrued salaries and benefits 12,880 2,831 Operating lease liabilities (138,795 ) (132,889 ) Other long-term liabilities (479 ) (3,301 ) Cash flows from operating activities 465,068 371,329 Investing activities Purchases of property and equipment (225,310 ) (124,010 ) Payments for acquisition, net of cash acquired (13,032 ) — Cash flows used in investing activities (238,342 ) (124,010 ) Financing activities Proceeds from revolving credit facilities — 62,500 Payments on revolving credit facilities (125,000 ) (62,500 ) Payments on finance lease liabilities (1,006 ) (819 ) Payments of deferred financing costs — (3,373 ) Repurchase of common stock (203,496 ) (199,980 ) Proceeds from exercise of stock options 11,454 5,041 Cash flows used in financing activities (318,048 ) (199,131 ) (Decrease)/Increase in cash, cash equivalents, and restricted cash (91,322 ) 48,188 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 $ 203,870 $ 295,192 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 fifty-two weeks ended December 31, 2023. There were no such material adjustments during the thirteen and fifty-two weeks ended January 1, 2023. 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 fifty-two weeks ended December 31, 2023 and January 1, 2023: SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Thirteen Weeks Ended Fifty-Two Weeks Ended December 31, January 1, December 31, January 1, Gross profit $ 620,373 $ 572,809 $ 2,521,841 $ 2,348,564 Special items (1) — — 2,955 — Adjusted gross profit $ 620,373 $ 572,809 $ 2,524,796 $ 2,348,564 Gross margin 36.5 % 36.3 % 36.9 % 36.7 % Adjusted gross margin 36.5 % 36.3 % 36.9 % 36.7 % Net income $ 50,049 $ 45,120 $ 258,856 $ 261,164 Income tax provision 18,956 15,351 84,884 88,149 Interest expense, net 433 1,399 6,491 9,047 Earnings before interest and taxes (EBIT) 69,438 61,870 350,231 358,360 Special items (2) — — 46,034 — Adjusted EBIT 69,438 61,870 396,265 358,360 Depreciation, amortization and accretion, adjusted for special items 34,144 31,010 131,933 127,067 Adjusted EBITDA $ 103,582 $ 92,880 $ 528,198 $ 485,427 Net income $ 50,049 $ 45,120 $ 258,856 $ 261,164 Special items, net of tax (2) — — 34,272 — Adjusted net income $ 50,049 $ 45,120 $ 293,128 $ 261,164 Diluted earnings per share $ 0.49 $ 0.42 $ 2.50 $ 2.39 Adjusted diluted earnings per share $ 0.49 $ 0.42 $ 2.84 $ 2.39 Diluted weighted average shares outstanding 102,207 106,832 103,390 109,139 (1) For the fifty-two weeks ended December 31, 2023, special items included approximately $3 million in Cost of sales related to store closures and our supply chain transition. (2) For the fifty-two weeks ended December 31, 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. Investor Contact: Media Contact: Source: Sprouts Farmers Market
(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.
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Susannah Livingston
(602) 682-1584
susannahlivingston@sprouts.com
media@sprouts.com
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