Sprouts Farmers Market, Inc. Reports First Quarter 2022 Results


PHOENIX, May 04, 2022 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week first quarter ended April 3, 2022.

"We are encouraged with the strong start to the year,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "We delivered top line growth, supported by both positive comps and traffic, while simultaneously maintaining our gross margin discipline. The commitment, passion and dedication of Sprouts ~31,000 team members to one another, our customers and communities were key to our success. We look forward to continuing to engage our communities with innovative, healthy products in convenient smaller format stores, shaping our brand as a destination specialty grocer."

First Quarter Highlights:

  • Net sales totaled $1.6 billion; a 4% increase from the same period in 2021. Net sales growth was driven by positive increase in comparable store sales and new stores opened
  • Comparable store sales growth of 1.6%
  • Diluted earnings per share of $0.79; compared to diluted earnings per share a of $0.70 in the same period in 2021
  • Opened 6 new stores and closed one, resulting in 379 stores in 23 states as of April 3, 2022

Leverage and Liquidity in First Quarter 2022

  • Generated cash from operations of $153 million
  • Invested $22 million in capital expenditures net of landlord reimbursement, primarily for new stores
  • Authorized a new $600 million share repurchase program and repurchased 1.5 million shares of common stock for a total investment of $46 million
  • Entered into a new $700 million credit facility with revised pricing and the addition of ESG-linked pricing terms
  • Ended the quarter with $324 million in cash and cash equivalents

Outlook

“While we are pleased with our first quarter performance, inflation is not slowing and customers are continuing to put a few less items in their baskets,” said Chip Molloy, chief financial officer of Sprouts Farmers Market. “Despite transaction comp continuing to be positive, given the level of uncertainty in the marketplace, we believe it is prudent to assume a more conservative approach to our outlook."

"For the full year, we now expect total sales growth, comparable store sales growth and earnings per share to be at the low end of the outlook provided during our last earnings release. We still expect to open between 15-20 new stores. For the second quarter of 2022, we expect comparable stores sales growth to be relatively flat and diluted earnings per share of $0.49 to $0.53.”

First Quarter 2022 Conference Call

Sprouts will hold a conference call at 2 p.m. Pacific Daylight Time (5 p.m. Eastern Daylight Time) on Wednesday, May 4, 2022, during which Sprouts executives will further discuss first quarter 2022 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.

The audio replay will remain available for 72 hours and can be accessed by dialing 855-859-2056 (toll-free) or 404-537-3406 (international) and entering the confirmation code: 8684439.

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 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

Sprouts is the place where goodness grows. 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 approximately 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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

  Thirteen weeks ended 
  April 3, 2022  April 4, 2021 
Net sales $1,641,161  $1,575,447 
Cost of sales  1,029,413   989,273 
Gross profit  611,748   586,174 
Selling, general and administrative expenses  459,910   439,662 
Depreciation and amortization (exclusive
   of depreciation included in cost of
   sales)
  31,820   31,229 
Store closure and other costs, net  377   2,048 
Income from operations  119,641   113,235 
Interest expense, net  3,039   2,991 
Income before income taxes  116,602   110,244 
Income tax provision  28,295   27,196 
Net income $88,307  $83,048 
Net income per share:      
Basic $0.80  $0.70 
Diluted $0.79  $0.70 
Weighted average shares outstanding:      
Basic  110,903   118,044 
Diluted  111,833   118,607 


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

  April 3, 2022  January 2, 2022 
ASSETS      
Current assets:      
Cash and cash equivalents $324,301  $245,287 
Accounts receivable, net  13,675   21,574 
Inventories  272,178   265,387 
Prepaid expenses and other current assets  30,556   35,468 
Total current assets  640,710   567,716 
Property and equipment, net of accumulated depreciation  701,102   716,029 
Operating lease assets, net  1,086,008   1,072,019 
Intangible assets, net of accumulated amortization  184,960   184,960 
Goodwill  368,878   368,878 
Other assets  16,096   13,513 
Total assets $2,997,754  $2,923,115 
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $165,703  $145,901 
Accrued liabilities  143,462   155,996 
Accrued salaries and benefits  44,637   58,743 
Accrued income tax  15,275    
Current portion of operating lease liabilities  153,500   151,755 
Current portion of finance lease liabilities  1,116   1,078 
Total current liabilities  523,693   513,473 
Long-term operating lease liabilities  1,106,716   1,095,909 
Long-term debt and finance lease liabilities  259,442   259,656 
Other long-term liabilities  35,743   36,306 
Deferred income tax liability  60,186   57,895 
Total liabilities  1,985,780   1,963,239 
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,
   110,243,288 shares issued and outstanding, April 3, 2022;
   111,114,374 shares issued and outstanding, January 2, 2022
  110   111 
Additional paid-in capital  711,712   704,701 
Accumulated other comprehensive loss  (1,263)  (3,758)
Retained earnings  301,415   258,822 
Total stockholders' equity  1,011,974   959,876 
Total liabilities and stockholders' equity $2,997,754  $2,923,115 


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

  Thirteen
Weeks Ended
  Thirteen
Weeks Ended
 
  April 3, 2022  April 4, 2021 
Operating activities      
Net income $88,307  $83,048 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization expense  32,720   31,841 
Operating lease asset amortization  28,043   25,816 
Store closure and other costs, net  171    
Share-based compensation  4,456   3,613 
Deferred income taxes  2,291   2,757 
Other non-cash items  313   207 
Changes in operating assets and liabilities:      
Accounts receivable  9,770   8,795 
Inventories  (6,790)  (16,733)
Prepaid expenses and other current assets  3,613   (7,747)
Other assets  1,757   (1,078)
Accounts payable  27,645   27,004 
Accrued liabilities  (6,857)  (10,568)
Accrued salaries and benefits  (14,106)  (32,959)
Accrued income tax  15,275   16,251 
Operating lease liabilities  (32,180)  (28,719)
Other long-term liabilities  (1,399)  3,910 
Cash flows from operating activities  153,029   105,438 
Investing activities      
Purchases of property and equipment  (27,227)  (16,605)
Cash flows used in investing activities  (27,227)  (16,605)
Financing activities      
Payments on finance lease liabilities
  (176)  (163)
Payments of deferred financing costs  (3,373)   
Repurchase of common stock  (45,715)  (3,209)
Proceeds from exercise of stock options  2,555   881 
Cash flows used in financing activities  (46,709)  (2,491)
Increase in cash, cash equivalents, and restricted cash  79,093   86,342 
Cash, cash equivalents, and restricted cash at beginning of the period  247,004   171,441 
Cash, cash equivalents, and restricted cash at the end of the period $326,097  $257,783 


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 EBITDA and EBIT. 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.

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 EBITDA to net income for the thirteen weeks ended April 3, 2022 and April 4, 2021:

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
NON-GAAP MEASURE RECONCILIATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

  Thirteen
Weeks Ended
  Thirteen
Weeks Ended
 
  April 3, 2022  April 4, 2021 
Net income $88,307  $83,048 
Income tax provision  28,295   27,196 
Interest expense, net  3,039   2,991 
Earnings before interest and taxes (EBIT)  119,641   113,235 
Depreciation, amortization and accretion  32,720   31,841 
EBITDA $152,361  $145,076 


   
Investor Contact: Media Contact: 
Susannah Livingstonmedia@sprouts.com 
(602) 682-1584  
susannahlivingston@sprouts.com  


Source: Sprouts Farmers Market, Inc
Phoenix, AZ
5/4/22