Sprouts Farmers Market, Inc. Reports Second Quarter 2022 Results

·11 min read
SFM, LLC d/b/a Sprouts Farmers Market
SFM, LLC d/b/a Sprouts Farmers Market

Sprouts Achieves Milestone of Celebrating 20th Year Anniversary

PHOENIX, AZ, Aug. 03, 2022 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week second quarter ended July 3, 2022.

"The disciplined execution of our long-term strategy, with a sharp focus on near-term initiatives, delivered results that surpassed our expectations during the second quarter," said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "As we celebrate our company's 20th anniversary, I want to express my sincere appreciation to all of our team members for their passion and dedication to our customers."

Second Quarter Highlights:

  • Net sales totaled $1.6 billion; a 5% increase from the same period in 2021. Net sales growth was driven by an increase in comparable store sales and new stores opened

  • Comparable store sales growth of 2.0%

  • Diluted earnings per share of $0.57; compared to diluted earnings per share of $0.52 in the same period in 2021

  • Opened 2 new stores and closed 3 stores due to lease expirations, resulting in 378 stores in 23 states as of July 3, 2022

Leverage and Liquidity in Second Quarter 2022

  • Ended the quarter with $289 million in cash and cash equivalents and a $250 million balance on its $700 million revolving credit facility

  • Repurchased 2.4 million shares of common stock for a total investment of $65 million

  • Generated cash from operations of $209 million and invested $46 million in capital expenditures, net of landlord reimbursement, year-to-date thru July 3, 2022

Third Quarter and Full-Year 2022 Outlook

”We are relatively pleased with our financial performance year to date and continue to be encouraged by another quarter of positive traffic," said Chip Molloy, chief financial officer of Sprouts Farmers Market. “We are cautiously optimistic that we can continue to successfully navigate the remainder of the year during these highly inflationary times while simultaneously pushing forward with our long-term strategy which is supported by our strong cash generation.”

The following provides information on our Full-Year 2022 Outlook:

  • Net sales growth: 4.0% to 5.0%

  • Comparable store sales growth: 1.0% to 2.0%

  • Adjusted diluted earnings per share: $2.18 to $2.26

  • Unit Growth: 15 to 17 new stores

  • Capital Expenditures (net of landlord reimbursements): $130M to $150M

The following provides information on our Third Quarter 2022 Outlook:

  • Comparable store sales growth: 1.0% to 2.0%

  • Adjusted diluted earnings per share: $0.49 to $0.53

Second 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, August 3, 2022, during which Sprouts executives will further discuss second 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 877-344-7529 (toll-free) or412-317-0088 (international) and entering the confirmation code: 7359561.

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. This year, Sprouts celebrates its 20th year anniversary. 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

 

 

Twenty-six weeks ended

 

 

July 3, 2022

 

 

July 4, 2021

 

 

July 3, 2022

 

 

July 4, 2021

 

Net sales

$

1,595,482

 

 

$

1,521,993

 

 

$

3,236,643

 

 

$

3,097,440

 

Cost of sales

 

1,015,125

 

 

 

971,912

 

 

 

2,044,538

 

 

 

1,961,185

 

Gross profit

 

580,357

 

 

 

550,081

 

 

 

1,192,105

 

 

 

1,136,255

 

Selling, general and administrative expenses

 

462,110

 

 

 

436,420

 

 

 

922,020

 

 

 

876,082

 

Depreciation and amortization (exclusive of depreciation included in cost of sales)

 

31,244

 

 

 

30,430

 

 

 

63,064

 

 

 

61,659

 

Store closure and other costs, net

 

493

 

 

 

(419

)

 

 

870

 

 

 

1,629

 

Income from operations

 

86,510

 

 

 

83,650

 

 

 

206,151

 

 

 

196,885

 

Interest expense, net

 

2,658

 

 

 

2,938

 

 

 

5,697

 

 

 

5,929

 

Income before income taxes

 

83,852

 

 

 

80,712

 

 

 

200,454

 

 

 

190,956

 

Income tax provision

 

21,855

 

 

 

19,698

 

 

 

50,150

 

 

 

46,894

 

Net income

$

61,997

 

 

$

61,014

 

 

$

150,304

 

 

$

144,062

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.57

 

 

$

0.52

 

 

$

1.37

 

 

$

1.22

 

Diluted

$

0.57

 

 

$

0.52

 

 

$

1.36

 

 

$

1.22

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

109,067

 

 

 

117,246

 

 

 

109,985

 

 

 

117,645

 

Diluted

 

109,619

 

 

 

117,831

 

 

 

110,762

 

 

 

118,265

 

 

 

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

 

July 3, 2022

 

 

January 2, 2022

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

288,965

 

 

$

245,287

 

Accounts receivable, net

 

13,260

 

 

 

21,574

 

Inventories

 

292,862

 

 

 

265,387

 

Prepaid expenses and other current assets

 

49,520

 

 

 

35,468

 

Total current assets

 

644,607

 

 

 

567,716

 

Property and equipment, net of accumulated depreciation

 

690,460

 

 

 

716,029

 

Operating lease assets, net

 

1,083,183

 

 

 

1,072,019

 

Intangible assets, net of accumulated amortization

 

184,960

 

 

 

184,960

 

Goodwill

 

368,878

 

 

 

368,878

 

Other assets

 

15,236

 

 

 

13,513

 

Total assets

$

2,987,324

 

 

$

2,923,115

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

173,687

 

 

$

145,901

 

Accrued liabilities

 

138,659

 

 

 

155,996

 

Accrued salaries and benefits

 

48,222

 

 

 

58,743

 

Current portion of operating lease liabilities

 

153,651

 

 

 

151,755

 

Current portion of finance lease liabilities

 

1,130

 

 

 

1,078

 

Total current liabilities

 

515,349

 

 

 

513,473

 

Long-term operating lease liabilities

 

1,101,148

 

 

 

1,095,909

 

Long-term debt and finance lease liabilities

 

259,219

 

 

 

259,656

 

Other long-term liabilities

 

38,253

 

 

 

36,306

 

Deferred income tax liability

 

59,665

 

 

 

57,895

 

Total liabilities

 

1,973,634

 

 

 

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, 107,967,677 shares issued and outstanding, July 3, 2022; 111,114,374 shares issued and outstanding, January 2, 2022

 

108

 

 

 

111

 

Additional paid-in capital

 

715,331

 

 

 

704,701

 

Accumulated other comprehensive income (loss)

 

193

 

 

 

(3,758

)

Retained earnings

 

298,058

 

 

 

258,822

 

Total stockholders' equity

 

1,013,690

 

 

 

959,876

 

Total liabilities and stockholders' equity

$

2,987,324

 

 

$

2,923,115

 

 

 

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

 

Twenty-six
Weeks Ended

 

 

Twenty-six
Weeks Ended

 

 

July 3, 2022

 

 

July 4, 2021

 

Operating activities

 

 

 

 

 

Net income

$

150,304

 

 

$

144,062

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

64,856

 

 

 

63,152

 

Operating lease asset amortization

 

57,360

 

 

 

52,631

 

Store closure and other costs, net

 

171

 

 

 

 

Share-based compensation

 

7,920

 

 

 

7,851

 

Deferred income taxes

 

1,770

 

 

 

2,920

 

Other non-cash items

 

324

 

 

 

740

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

11,389

 

 

 

14,685

 

Inventories

 

(27,475

)

 

 

(19,873

)

Prepaid expenses and other current assets

 

(12,851

)

 

 

(13,679

)

Other assets

 

164

 

 

 

(4,363

)

Accounts payable

 

32,877

 

 

 

23,653

 

Accrued liabilities

 

(318

)

 

 

(8,416

)

Accrued salaries and benefits

 

(10,521

)

 

 

(28,587

)

Operating lease liabilities

 

(65,502

)

 

 

(58,131

)

Other long-term liabilities

 

(1,505

)

 

 

660

 

Cash flows from operating activities

 

208,963

 

 

 

177,305

 

Investing activities

 

 

 

 

 

Purchases of property and equipment

 

(53,098

)

 

 

(39,421

)

Cash flows used in investing activities

 

(53,098

)

 

 

(39,421

)

Financing activities

 

 

 

 

 

Payments on finance lease liabilities

 

(385

)

 

 

(333

)

Payments of deferred financing costs

 

(3,373

)

 

 

 

Repurchase of common stock

 

(111,071

)

 

 

(87,484

)

Proceeds from exercise of stock options

 

2,710

 

 

 

1,246

 

Cash flows used in financing activities

 

(112,119

)

 

 

(86,571

)

Increase in cash, cash equivalents, and restricted cash

 

43,746

 

 

 

51,313

 

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

$

290,750

 

 

$

222,754

 


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 and twenty-six weeks ended July 3, 2022 and July 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

 

 

Twenty-six
Weeks Ended

 

 

Twenty-six
Weeks Ended

 

 

July 3, 2022

 

 

July 4, 2021

 

 

July 3, 2022

 

 

July 4, 2021

 

Net income

$

61,997

 

 

$

61,014

 

 

$

150,304

 

 

$

144,062

 

Income tax provision

 

21,855

 

 

 

19,698

 

 

 

50,150

 

 

 

46,894

 

Interest expense, net

 

2,658

 

 

 

2,938

 

 

 

5,697

 

 

 

5,929

 

Earnings before interest and taxes (EBIT)

 

86,510

 

 

 

83,650

 

 

 

206,151

 

 

 

196,885

 

Depreciation, amortization and accretion

 

32,136

 

 

 

31,311

 

 

 

64,856

 

 

 

63,152

 

EBITDA

$

118,646

 

 

$

114,961

 

 

$

271,007

 

 

$

260,037

 


Source: Sprouts Farmers Market, Inc
Phoenix, AZ
8/3/22

 

 

Investor Contact:

Media Contact:

Susannah Livingston

media@sprouts.com

(602) 682-1584

 

susannahlivingston@sprouts.com