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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sprouts Farmers Market Inc | NASDAQ:SFM | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.21 | 1.62% | 75.80 | 40.00 | 77.19 | 75.785 | 74.54 | 74.59 | 795,913 | 05:00:09 |
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:
(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
Fourth Quarter and Full-Year 2023 Outlook
The following provides information on our fourth quarter 2023 outlook:
The following provides information on our full-year 2023 outlook:
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
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