Sprouts Farmers Market, Inc. Reports First Quarter 2023 Results

Phoenix, Arizona, UNITED STATES

PHOENIX, May 01, 2023 (GLOBE NEWSWIRE) -- 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

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 Outlook
The 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 Call
Sprouts 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 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 380 stores in 23 states nationwide. To learn more about Sprouts, and the good it brings communities, visit about.sprouts.com.


  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
  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 



  April 2, 2023  January 1, 2023 
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 
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 



  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:


  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 Livingstonmedia@sprouts.com 
(602) 682-1584  

Source: Sprouts Farmers Market, Inc
Phoenix, AZ