8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 8, 2022

Sprouts Farmers Market, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-36029	32-0331600
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

5455 E. High Street, Suite 111

Phoenix, Arizona 85054

(Address of principal executive offices and zip code)

(480) 814-8016

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	SFM	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On November 8, 2022, Sprouts Farmers Market, Inc. (the “Company”) issued a press release announcing its results of operations for its third fiscal quarter ended October 2, 2022. On the same date, the Company posted on its investor relations website, located at investors.sprouts.com, a PowerPoint presentation (the “Earnings Presentation”) that will be used by management during the Company’s earnings conference call. A copy of the press release and the Earnings Presentation are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated into this Item 2.02 by reference.

The information furnished in this Item 2.02, including Exhibits 99.1 and 99.2 attached hereto and incorporated herein, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The text of this Current Report on Form 8-K is available on the Company’s investor relations website located at investors.sprouts.com, although the Company reserves the right to discontinue that availability at any time.

Item 7.01. Regulation FD Disclosure.

The information set forth under Item 2.02 is hereby incorporated by reference.

The Company is also furnishing in this Current Report on Form 8-K a PowerPoint presentation (the “Investor Presentation”) to be used by the Company at various meetings with institutional investors or analysts. The Investor Presentation may be amended or updated at any time and from time to time through another Current Report on Form 8-K, a later company filing or other means. A copy of the Investor Presentation is furnished herewith as Exhibit 99.3 and is incorporated into this Item 7.01 by reference.

The information furnished in this Item 7.01, including Exhibits 99.1, 99.2 and 99.3, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The Company does not have, and expressly disclaims, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement in the attached press release, Earnings Presentation or Investor Presentation is based.

The text of this Current Report on Form 8-K and the attached press release, Earnings Presentation and Investor Presentation are available on the Company’s investor relations website located at investors.sprouts.com, although the Company reserves the right to discontinue that availability at any time.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
99.1	Press release of Sprouts Farmers Market, Inc., dated November 8, 2022, entitled “Sprouts Farmers Market, Inc. Reports Third Quarter 2022 Results”
99.2	Sprouts Farmers Market, Inc. Presentation, dated November 8, 2022, entitled “Q3 2022 Earnings”
99.3	Sprouts Farmers Market, Inc. Presentation, dated November 8, 2022, entitled "Investor Deck"
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SPROUTS FARMERS MARKET, INC.
Date: November 8, 2022	By:	/s/ Brandon F. Lombardi
	Name:	Brandon F. Lombardi
	Title:	Chief Legal Officer and Corporate Secretary

EX-99.1

Exhibit 99.1

 

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

Sprouts Farmers Market, Inc. Reports Third Quarter 2022 Results

PHOENIX, Ariz. – (Globe Newswire) – November 8, 2022 – Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week third quarter ended October 2, 2022.

"We are encouraged by our performance in the third quarter, including total sales growth of 5%, comparable store sales growth of 2.4% and earnings per share growth of 9%," said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "I thank the team for their collaboration and commitment in delivering these results and most importantly, their dedication to helping our customers discover better, healthier eating. We are excited about bringing the holiday season to life in our stores and are well-positioned to benefit from the ongoing health and wellness trends."

Third Quarter Highlights:

•Net sales totaled $1.6 billion; a 5% increase from the same period in 2021

•Comparable store sales growth of 2.4%

•Diluted earnings per share of $0.61; compared to diluted earnings per share of $0.56 in the same period in 2021

•Opened 1 new store, resulting in 379 stores in 23 states as of October 2, 2022

Leverage and Liquidity in Third Quarter 2022

•Ended the quarter with $316 million in cash and cash equivalents and a $250 million balance on its $700 million revolving credit facility

•Repurchased 1.6 million shares of common stock for a total investment of $44 million

•Generated cash from operations of $307 million and invested $71 million in capital expenditures, net of landlord reimbursement,year-to-date thru October 2, 2022

Fourth Quarter and Full-Year 2022 Outlook

"Due to our strong performance to date, we are raising our full-year outlook," said Chip Molloy, chief financial officer of Sprouts Farmers Market. "We remain focused on controlling the controllable to deliver strong results and create sustainable shareholder value for the long-term.”

The following provides information on our full-year 2022 outlook:

•Net sales growth: 4.5% - 5.0%

•Comparable store sales growth: approximately 2%

•Adjusted diluted earnings per share: $2.32 to $2.36

•Unit growth: 16 new stores

•Capital expenditures (net of landlord reimbursements): $120M to $135M

The following provides information on our fourth quarter 2022 outlook:

•Comparable store sales growth: approximately 2.0%

•Adjusted diluted earnings per share: $0.35 to $0.39

Third Quarter 2022 Conference Call

Sprouts will hold a conference call at 5 p.m. Eastern Standard Time on Tuesday, November 8, 2022, during which Sprouts executives will further discuss third 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.

A webcast replay will be available at approximately 8:00 p.m. Eastern Standard Time on November 8, 2022. 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

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				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Net sales	$	1,591,026	$	1,509,633	$	4,827,669	$	4,607,073
Cost of sales		1,007,376		969,904		3,051,914		2,931,089
Gross profit		583,650		539,729		1,775,755		1,675,984
Selling, general and administrative expenses		460,834		423,416		1,382,854		1,299,498
Depreciation and amortization (exclusive    of depreciation included in cost of    sales)		30,313		30,377		93,377		92,036
Store closure and other costs, net		2,164		128		3,034		1,757
Income from operations		90,339		85,808		296,490		282,693
Interest expense, net		1,951		2,911		7,648		8,840
Income before income taxes		88,388		82,897		288,842		273,853
Income tax provision		22,648		19,030		72,798		65,924
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Net income per share:
Basic	$	0.61	$	0.56	$	1.98	$	1.78
Diluted	$	0.61	$	0.56	$	1.97	$	1.77
Weighted average shares outstanding:
Basic		107,229		114,201		109,066		116,497
Diluted		108,095		114,818		109,888		117,252

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	October 2, 2022		January 2, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	316,042	$	245,287
Accounts receivable, net		11,455		21,574
Inventories		301,667		265,387
Prepaid expenses and other current assets		43,867		35,468
Total current assets		673,031		567,716
Property and equipment, net of accumulated depreciation		694,098		716,029
Operating lease assets, net		1,081,514		1,072,019
Intangible assets, net of accumulated amortization		184,960		184,960
Goodwill		368,878		368,878
Other assets		15,036		13,513
Total assets	$	3,017,517	$	2,923,115
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	166,968	$	145,901
Accrued liabilities		144,935		155,996
Accrued salaries and benefits		53,875		58,743
Current portion of operating lease liabilities		158,219		151,755
Current portion of finance lease liabilities		1,141		1,078
Total current liabilities		525,138		513,473
Long-term operating lease liabilities		1,095,154		1,095,909
Long-term debt and finance lease liabilities		258,992		259,656
Other long-term liabilities		38,486		36,306
Deferred income tax liability		58,919		57,895
Total liabilities		1,976,689		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,    106,491,322 shares issued and outstanding, October 2, 2022;    111,114,374 shares issued and outstanding, January 2, 2022		106		111
Additional paid-in capital		720,447		704,701
Accumulated other comprehensive income (loss)		498		(3,758	)
Retained earnings		319,777		258,822
Total stockholders' equity		1,040,828		959,876
Total liabilities and stockholders' equity	$	3,017,517	$	2,923,115

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

	Thirty-nine weeks ended			Thirty-nine weeks ended
	October 2, 2022			October 3, 2021
Operating activities
Net income	$	216,044		$	207,929
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		96,057			94,422
Operating lease asset amortization		87,316			80,295
Store closure and other costs, net		171			—
Share-based compensation		11,672			11,304
Deferred income taxes		1,025			2,085
Other non-cash items		404			883
Changes in operating assets and liabilities:
Accounts receivable		16,491			12,999
Inventories		(36,280	)		(16,860	)
Prepaid expenses and other current assets		(7,880	)		(6,001	)
Other assets		1,678			(2,834	)
Accounts payable		23,121			29,479
Accrued liabilities		2,482			1,046
Accrued salaries and benefits		(4,868	)		(30,544	)
Operating lease liabilities		(99,055	)		(88,664	)
Other long-term liabilities		(1,588	)		1,120
Cash flows from operating activities		306,790			296,659
Investing activities
Purchases of property and equipment		(80,749	)		(70,010	)
Cash flows used in investing activities		(80,749	)		(70,010	)
Financing activities
Payments on finance lease liabilities		(600	)		(507	)
Payments of deferred financing costs		(3,373	)		—
Repurchase of common stock		(155,094	)		(137,484	)
Proceeds from exercise of stock options		4,074			1,918
Cash flows used in financing activities		(154,993	)		(136,073	)
Increase in cash, cash equivalents, and restricted cash		71,048			90,576
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	$	318,052		$	262,017

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 thirty-nine weeks ended October 2, 2022 and October 3, 2021:

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NON-GAAP MEASURE RECONCILIATION

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Thirteen Weeks Ended		Thirteen Weeks Ended		Thirty-Nine Weeks Ended		Thirty-Nine Weeks Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Income tax provision		22,648		19,030		72,798		65,924
Interest expense, net		1,951		2,911		7,648		8,840
Earnings before interest and taxes (EBIT)		90,339		85,808		296,490		282,693
Depreciation, amortization and accretion		31,201		31,270		96,057		94,422
EBITDA	$	121,540	$	117,078	$	392,547	$	377,115

###

Source: Sprouts Farmers Market, Inc

Phoenix, AZ

11/8/22

EX-99.2

Q3 2022 Earnings November 2022 Exhibit 99.2

Forward-Looking Statements Certain statements in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein (including, but not limited to, statements to the effect that Sprouts Farmers Market, Inc. (the “Company”) or its management "anticipates," "plans," "estimates," "expects," "believes," or the negative of these terms and other similar expressions) that are not statements of historical fact should be considered forward-looking statements, including, without limitation, statements regarding the Company’s guidance, outlook, strategy, financial targets, growth and opportunities. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this presentation. 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 rapid growth; the Company’s ability to maintain or improve its comparable store sales and operating margins; the Company’s ability to identify and react to trends in consumer preferences; product supply disruptions; equipment supply disruptions; general economic conditions; accounting standard changes; the current inflationary environment and future potential inflationary and/or deflationary trends; risks associated with the COVID-19 pandemic; and other factors as set forth from time to time in the Company’s Securities and Exchange Commission filings. The Company intends these forward-looking statements to speak only as of the date of this presentation and does not undertake to update or revise them as more information becomes available, except as required by law. Non-GAAP Financial Measures We refer to EBIT, adjusted EBIT, adjusted EBIT Margin, and adjusted diluted earnings per share, each of which is a Non-GAAP Financial Measure. These measures are not prepared in accordance with, and are not intended as alternatives to, generally accepted accounting principles in the United States, or GAAP. The Company's management believes that such measures provide 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 EBIT, as net income before interest expense and provision for income tax, and adjusted EBIT as EBIT, excluding the impact of special items. Adjusted EBIT Margin reflects adjusted EBIT, divided by net sales for the applicable period. The Company defines adjusted diluted earnings per share as diluted earnings per share excluding the impact of special items. 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 you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. To the extent forward looking non-GAAP financial measures are provided herein, they are not reconciled to comparable forward-looking GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation.

Q3 2022 Highlights Net Sales +5% Comps (1) +2.4% Diluted EPS $0.61 New Stores 1 Cash Generation $98M From Operations Share Repurchases $44M Comparable Store Sales

Third Quarter Sales Drivers Continued strength in convenient deli grab and go meals Differentiated departments like Dairy, Bakery and Frozen continue to see year over year growth Ecommerce grew 19% and remains elevated

Ecommerce Remains Here to Stay; Adding DoorDash Marketplace to our Omni Channel In store Pick-up & Delivery available to all customers in all stores & markets Ecommerce Penetration 50% of online orders can be identified to a customer

How We Innovate in Produce

Maintaining a Structurally Improved Margin Profile 7 ($ in mm) ADJUSTED EBIT & Adjusted EBIT Margin (1) See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT – for 2021 and 2022, adjustments to EBIT were immaterial; thus, only EBIT is presented.

From 2015 through Q3, 2022: Repurchased 56 million shares Reduced shares outstanding 36% Purchased $1.3B to date $457M remaining on our share repurchase authorization* $0 Total Annual Share Repurchase Driving Shareholder Value Through An Ongoing Share Repurchase Program ($ in mm) * As of Oct 2, 2022

2022 Outlook 16 new stores Capex $120M to $135M Fourth Quarter, 2022: Comparable sales growth expected to be approximately 2% and EPS $0.35 to $0.39 Total sales growth between 4.5% and 5% Comp sales growth of approximately 2% Earnings per share (EPS) $2.32 to $2.36

Appendix

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of EBIT and adjusted EBIT to net income, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share for the thirty-nine weeks ended Oct 2, 2022, Oct 3, 2021, Sept 27, 2020, and Sept 29, 2019: Appendix Includes professional fees related to strategic initiatives. After-tax impact includes the tax benefit on the pre-tax charge. Includes the direct costs associated with store closures and relocation.

EX-99.3

INVESTOR DECK November 2022 Exhibit 99.3

Forward-Looking Statements Certain statements in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein (including, but not limited to, statements to the effect that Sprouts Farmers Market, Inc. (the “Company”) or its management "anticipates," "plans," "estimates," "expects," "believes," or the negative of these terms and other similar expressions) that are not statements of historical fact should be considered forward-looking statements, including, without limitation, statements regarding the Company’s guidance, outlook, strategy, financial targets, growth and opportunities. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this presentation. 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 rapid growth; the Company’s ability to maintain or improve its comparable store sales and operating margins; the Company’s ability to identify and react to trends in consumer preferences; product supply disruptions; equipment supply disruptions; general economic conditions; accounting standard changes; risks associated with the COVID-19 pandemic; 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. The Company intends these forward-looking statements to speak only as of the date of this presentation and does not undertake to update or revise them as more information becomes available, except as required by law. Non-GAAP Financial Measures We refer to EBIT, adjusted EBIT, adjusted EBIT Margin, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share and ROIC, each of which is a Non-GAAP Financial Measure. These measures are not prepared in accordance with, and are not intended as alternatives to, generally accepted accounting principles in the United States, or GAAP. The Company's management believes that such measures provide 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 EBIT, as net income before interest expense and provision for income tax, and adjusted EBIT as EBIT, excluding the impact of special items. Adjusted EBIT Margin reflects adjusted EBIT, divided by net sales for the applicable period. The Company defines adjusted EBITDA as net income before interest expense, provision for income tax, and depreciation, amortization and accretion, excluding the impact of special items. The Company defines adjusted net income and adjusted diluted earnings per share as net income and diluted earnings per share, respectively, excluding the impact of special items. The Company defines ROIC as net operating profit after tax (“NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. 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 you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. To the extent forward looking non-GAAP financial measures are provided herein, they are not reconciled to comparable forward-looking GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation.

3

A farmers market experience – open layout of fresh produce at the heart of the store, community feel, treasure hunt for unique products Intentional curation of responsibly and locally sourced products A place with happy, helpful team members Culture (care, own it, love being different) The right assortment of healthy alternatives and good-for-you options Making the highest quality fresh foods accessible to all WHAT DEFINES SPROUTS AND WHAT MAKES US DIFFERENT

Targeting at least 30 stores in 2023 with 10%+ annual unit growth beyond 2023 and incredible white space Strong and improving unit economics Sustainable robust cash flows with shareholder friendly capital allocation Building an advantaged fresh supply chain Unique farmers market experience Innovative & differentiated products with lifestyle friendly ingredients WHY INVEST IN SPROUTS? A POWERFUL GROWTH BUSINESS

CO 2021 Environment, Social, & Governance Highlights At the core of our identity is a genuine commitment to environmental sustainability. We are taking steps to reduce our carbon footprint and our natural resource intake while providing our customers with local, organic, and other sustainable food choices. We are diverting food from landfills and providing it to those in need. MTCO2e averted through food recovery programs CLIMATE 172 Sprouts brand products launched with How2Recycle logo reusable bags were used at checkout tons of plastic film recycled from customer and in-store use of our stores do not use single-use plastic bags at checkout PACKAGING & PLASTICS 11M landfill diversion rate 60% WASTE FOOD WASTE RECOVERY 78% of food waste recovered, and donated equivalent to 26 million meals 80% 60% 40% 20% 0% 2019 2020 2021 Food waste recovery rate 2 500 39% 49k tons of food and recyclables diverted from landfill 79k reduction in carbon emissions per sq. ft. over a 2019 baseline 10%

Millions of customers choose Sprouts because they can find products that are grown and produced in ways that are healthier for the planet and people. Our stores are stocked with a wide variety of organically grown, non-GMO, and plant-based options that lower the environmental impact of the food consumed. 100% of Sprouts Butcher Shop chicken and pork are raised without antibiotics 100% cage-free, organic, or free-range eggs Committed to improving chicken welfare in providing environmental enrichments by 2024, reduced stocking density by 2025, and allow for more humane processing, through CAS (controlled-atmosphere stunning), by 2026 $2.7B in sales of products with a social or environmental attribute 24% of total sales from organic products totaling nearly $1.5B in sales 100% of Sprouts Butcher Shop pork is from suppliers that utilize open-pen or group-housed facilities 7 Sustainable & Responsible Sourcing 250 local growers provide fresh seasonally grown produce 25% increase in plant-based product sales 100% responsibly sourced seafood

Providing safe and healthy food is at the core of our commitment to health and well-being. We collaborate with our team members, supply chain partners, community organizations, and industry experts to promote food safety, support workers’ rights, source responsibly, and develop a diverse and inclusive workplace. 5,180 safety audits completed 21,000 safety training hours completed 22% reduction in workers’ safety claims over the prior year TEAM MEMBER SAFETY $3M awarded local programs supporting youth nutrition education and food system equity 120 local non-profit partners supported in the communities we serve $3.1B in sales of products labeled to promote health and nutrition attributes 6,567 food safety audits completed Over 1M temperature checks conducted on sales floor COMMUNITY IMPACT 1,300 new jobs created 22% of team members promoted 51% female and 48% racially/ethnically diverse workforce 585,000 hours of in-store training delivered SAFE AND HEALTHY FOOD TEAM MEMBER DEVELOPMENT & INCLUSION 8 Social

We pride ourselves on operating with integrity, accountability, and transparency. Our ESG goals and initiatives are integrated throughout our business strategy, and strong oversight by our executive leadership team and Board of Directors ensures that the long-term interests of our stakeholders are factored into our decision making. 88% of board members are independent 25% of board members are female and 25% are racially/ethnically diverse Formed a board-level Risk Committee to monitor enterprise risk management program and provide oversight of our risks related to cybersecurity, critical systems, and environmental and social matters among others. RISK MANAGEMENT Maintaining our customers’ and team members’ trust by safeguarding their personal data and respecting their privacy decisions is critical to our success. We did not experience any data breaches during 2021 due to our cybersecurity best practices. DATA PRIVACY & CYBER SECURITY COPORATE GOVERNANCE (1) Acting ethically and with integrity helps us maintain our reputation with our customers as a preferred shopping destination, as a safe and welcoming place to work with our team members, and as a responsible corporate citizen with our communities and stakeholders. Established Commitment to Human Rights with Board oversight that sets forth our high standards and expectations for human rights and fair labor in our operations and supply chain. 19433 ETHICS AND COMPLIANCE 9 Governance As of June 1, 2022

Sprouts’ Five Pillar Long- Term Strategy 10+% UNIT GROWTH (1) LOW DOUBLE- DIGIT EARNINGS GROWTH EXPANDING ROIC REFINE BRAND AND MARKETING APPROACH WIN WITH TARGET CUSTOMERS UPDATE FORMAT AND EXPAND IN SELECT MARKETS CREATING ADVANTAGED SUPPLY CHAIN DIGITAL-FIRST MARKETING PROGRAM CONNECTING WITH TARGET CUSTOMERS ROBUST OMNICHANNEL EXPERIENCE PRODUCTS STEEPED IN INNOVATION SMALLER STORES HIGHER RETURNS FOCUSED ON BUILDING SCALE FRESHER PRODUCTS AND INCREASED LOCAL OFFERING Open at least 30 stores in 2023 with 10%+ unit growth starting in 2024 These are targets and not projections; they are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based on assumptions with respect to future decisions, which may be subject to change. Actual results may vary and the variances may be material. Nothing in this presentation should be regarded as a representation that these targets will be achieved and the Company undertakes no duty to update its targets. See “Forward-Looking Statements.” DELIVER ON FINANCIAL TARGETS (2)

Sprouts Shopper – Higher Income Consumer that Craves Health and Wellness $121K Avg. HHI 49% $100K + 46 Avg. Age 69% College/ Grad 57% Married/ Relationship 2.4 Avg. People in Household Demographics Over Index on Lifestyle Choices 32% committed to buying organic 30% committed to dietary lifestyle (vegan, gluten-free, pesca, etc.) 69% are concerned about the environment 41% review nutrition labels 28% are looking for fair trade / socially responsible 27% are looking to try new things 41% research recipes online 28% listen to podcasts Gen Z & Millennial opportunity Less susceptible to economic downturns Slightly higher educated Serving each family member’s need Typically dual income They are engaged and connected to what they eat – how it makes them feel, where it comes from, the role it can play in their lives. 11

Continue to Expand Customer Engagement 12 Currently “speaking” to more than 6M customers via multiple digital platforms +19% + 42% +14% Growth rate is Q3 2022 vs. Q3 2021 (1) (1) (1) Mobile App Downloads Active SMS Subscribers Active Email Subscribers Active Push Subscribers + 15% (1)

Once Acquired, Sprouts’ Customer Affinity is Very Strong and in-line with Best-in-Class Peers Net Promoter Score (NPS) – Among Frequent Shoppers Frequent as defined as in Respondent’s Top 3 Most Visited for Grocery Promoters Passives Detractors Source: Sprouts NPS study, September 2022 +55 +25 +27 +71 +58 +57 +61 +43 +69 +41 +50 +60 +37 +73 NPS

Pivoting Our Marketing Strategy to Drive More Profitable Growth with More Meaningful Connections OUR DIGITAL-FIRST MARKETING PROGRAM IS FOCUSED ON CONNECTING WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Experience Seekers Geo-Targeting: Align media investments with our most valuable trading zone zip codes Continuous Optimization: Improve customer connections in real-time across all their screens Personal Relevance: Employ data-driven comms addressing target audience’s needs and affinities HIGHER VALUE CUSTOMERS TAPPING INTO CONSUMER NEEDS PRECISION TARGETING DATA-DRIVEN MEDIA Layered with Mass Media to build awareness and Seasonal “Story Telling” Initiatives with Calls-to-Action to Drive more Immediate Transactions and Deeper Engagement

Sprouts Unique Selling Proposition Promote Sprouts’ unique selling proposition by utilizing the following strategy: Fresh & Value – Drive awareness through broader mass media Healthy Discovery – Increase through influencers, vendor partnerships and the customer experience

Ecommerce Remains Here to Stay; Adding DoorDash Marketplace to our Omnichannel Presence In store Pick-up & Delivery available to all customers in all stores & markets Ecommerce Penetration 50% of online orders can be identified to a customer

Produce Remains the Heart of the Store and Priced Well Below Most in the Marketplace Hybrid produce buying model – centralized and regional teams allow us to be flexible and react to the produce markets quickly Meaningful farmer partnerships which deliver new varietals and favorable pricing to our customers through spot buys New distribution channels will allow for increased local buying and deliver fresher products to our customers Building a path forward to grow with farmers as we grow

18 Sprouts’ Stores are Filled with a Curation of Differentiated Good-For-You Products More than 70% of Products Sold in Sprouts are Attribute Driven: Organics, Paleo, Keto, Plant Based, Non-GMO, Gluten Free, Vegan, Dairy-free, Grass Fed, Raw Includes all produce

19 Sprouts Aims To Grow and Establish a Differentiated Private Label Private Label Sales Penetration

20 Deliver a Unique, Friendly Experience with Healthy, Innovative Products in a Smaller Box with Higher Returns Format to Stay True to our Fresh-focused Farmers Market Heritage Prioritize Categories For Growth Potential Continue to Offer all Categories New store size to decrease from 30K to 23K square feet

21 Small Store Benefits Reduce Operating Cost Lower Cost to Build Reduce Non-Selling Space Decrease Occupancy Cost Sales to Remain Flat Strong Returns & Ability to Accelerate Growth

High Growth Retailer Unit growth (1) 300-400 New Stores in Expansion Markets 2019, 2020, 2021 actual unit growth, 2022 outlook, at least 30 stores in 2023 & 10% unit growth in 2024 and thereafter Expansion Markets Existing DCs Future DCs Existing Markets

23 Creating an Advantaged Fresh Supply Chain of DCs within 250 Miles of the Majority of Stores DCs Focused on Fresh, Local and Organic Offerings

24 Long-Term Strategic Financial Targets (1) Low Double-Digit Earnings Growth and Expansion of ROIC Cost to Build Reduced & Attractive New Store Economics 10+% unit growth or more (2) Low single digit comps Stable to Expanding EBIT Margins These are targets and not projections; they are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based on assumptions with respect to future decisions, which may be subject to change. Actual results may vary and the variances may be material. Nothing in this presentation should be regarded as a representation that these targets will be achieved and the Company undertakes no duty to update its targets. See “Forward-Looking Statements.” Open at least 30 stores in 2023 with 10%+ unit growth starting in 2024

25 Low Single Digit Comps Targets with Stable to Expanding EBIT Margins (1) All Stores Smarter Promotions Improved Buying Supply Chain Optimization Labor Productivity Improving Shrink Headwinds from Labor & Benefit Costs Key Comp Drivers Brand and marketing Innovative, differentiated products Omnichannel offering Better new store ramp with smarter promotional approach New Stores Reduction in Cost to Build (improved DA) Lower Rents driven by Smaller Boxes Less Efficient Operations during maturity ramp-up These are targets and not projections; they are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based on assumptions with respect to future decisions, which may be subject to change. Actual results may vary and the variances may be material. Nothing in this presentation should be regarded as a representation that these targets will be achieved and the Company undertakes no duty to update its targets. See “Forward-Looking Statements.”

26 New Store Four Wall Box Target Economics (1) Sales EBITDA Margins Box opens on average at $13M in year 1 annual sales Grows 20% to 25% over next the next 4 years Break even year 1 Grows to a blended ~8% EBITDA Margins over the next 4 years Cash on Cash Return Low to mid thirties by year 5 Cash Investment $3.8M average new store build including CapEx, Inventory and Pre-opening expenses (2) These are targets and not projections; they are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based on assumptions with respect to future decisions, which may be subject to change. Actual results may vary and the variances may be material. Nothing in this presentation should be regarded as a representation that these targets will be achieved and the Company undertakes no duty to update its targets. See “Forward-Looking Statements.” Reflective of inflationary environment

27 ($ in mm) ($ in mm) (2) (2) (2) See the Appendix to this presentation for a reconciliation of adjusted diluted EPS to net income 2020 is presented on a 53-week basis Sprouts is on a Stronger Foundation with Strategic Initiatives Beginning to Take Hold NET SALES NET CASH PROVIDED by OPERATIONS ADJUSTED DILUTED Earnings Per Share (1)

Gross Margin Has Increased and Structurally Changed Structural Changes Driven By: Promotional strategy changes Differentiated products Operational improvements Addition of two new distribution centers in FL & CO Income statement recast which moved buying and occupancy from Cost of Sales to SG&A Gross Margin % 34.2% (1) (1) Income statement recast

Maintained a Structurally Improved Margin Profile 29 See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT; For 2021 & 2022, adjustments to EBIT were immaterial; thus, only EBIT is presented. ($ in mm) ADJUSTED EBIT & Adjusted EBIT Margin (1)

In-line with Strategic Goals…Improving ROIC 30 ROIC (1) ROIC is a non-GAAP measure that we define as net operating profit after taxes divided by average invested capital. See the Appendix to this presentation for a reconciliation of ROIC to net income 2020 is presented on a 53-week basis (2)

Capital Expense Driven by New Stores Capex Spend as % of Sales 3.0% 1.5% ~3% to 4% 2.8% Capital Expenditures is net of landlord reimbursement 2022 and beyond are estimates 1.3% 2.1%

From 2015 through Q3, 2022: Repurchased 56 million shares Reduced shares outstanding 36% Purchased $1.3B to date $457M remaining on our share repurchase authorization* $0 Total Annual Share Repurchase ($ in mm) In Addition To Investing In Growth, We Drive Shareholder Value Through An Ongoing Share Repurchase Program * As of Oct 2, 2022

DELIGHT IN THE GOODNESS OF FRESH, HEALTHY FOODS… Sprouts delivers a unique farmers market experience that brings together passionate, knowledgeable team members and the best assortment of high-quality food that is good for us, and good for the world.

APPENDIX

Executive Management Team with Leading Grocery & Retail Experience Jack Sinclair Chief Executive Officer since 2019 Lawrence “Chip” Molloy Chief Financial Officer since 2021 Scott Neal Chief Merchandising Officer since 2022 (joined SFM in 2020) Dan Sanders Chief Store Operations Officer since 2022 (joined SFM in 2016) Dave McGlinchey Chief Strategy Officer since 2022 (joined SFM in 2017) Brandon Lombardi Chief Legal Officer since 2012 Kim Coffin Senior VP, Chief Forager since 2022 (joined SFM in 2012) Joe Hurley, Senior VP, Supply Chain since 2019 Hunter Bennett Senior VP, Information Technology since 2020 (joined SFM in 2014) Timmi Zalatoris Senior VP, Human Resources since 2020 (joined SFM in 2017) Nick Konat President & Chief Operating Officer since 2022

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of EBITDA and adjusted EBITDA to net income, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share for the fifty-two weeks ended January 2, 2022, January 3, 2021 (53 weeks), December 29, 2019, and December 30, 2018: Appendix

Appendix Income tax provision includes approximately $12 million (or $0.10 per diluted share) benefit during the fifty-two weeks ended December 30, 2018 in excess federal and state tax benefits for share based compensation primarily associated with the exercise of expiring pre-IPO options. Includes professional fees related to strategic initiatives. After-tax impact includes the tax benefit on the pre-tax charge. During the fifty-two weeks ended December 30, 2018, the Company recorded one-time pretax compensation charges of $4 million, associated with the resignation of the former CEO. The after-tax impact includes incremental tax expense associated with certain nondeductible executive compensation costs. Includes the direct costs associated with store closures and relocation. During the fifty-two weeks ended December 30, 2018, in connection with the closure of two stores, the Company recorded one-time non-cash pre-tax charges of $8 million primarily related to the estimated fair value of the lease termination obligations and asset impairments. After-tax impact includes the tax benefit on the pre-tax charge. During the fifty-two weeks ended December 30, 2018, the Company adopted a tax calculation method change for the accelerated deduction of certain items, resulting in a discrete tax benefit of $3 million.

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of EBIT and adjusted EBIT to net income, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share for the thirty-nine weeks ended Oct 2, 2022, Oct 3, 2021, Sept 27, 2020, and Sept 29, 2019: Appendix Includes professional fees related to strategic initiatives. After-tax impact includes the tax benefit on the pre-tax charge. Includes the direct costs associated with store closures and relocation.

Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2018, 2019 , 2020, 2021 fiscal years and third quarter of 2022. SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) Q3, 2022 2021 2020 (1) 2019 2018 Net income 252,272 $ 244,157 $ 287,450 $ 149,629 $ 158,536 $ Income Tax Adjustment (2) - (2,573) Special Items, net of Tax (3,4) 6,565 377 11,573 Interest expense, net of tax (4) 7,843 8,848 11,272 16,214 22,178 Net operating profit after tax (NOPAT) 260,115 $ 253,005 $ 305,287 $ 166,220 $ 189,714 $ Total rent expense, net of tax (4) 152,942 150,047 146,630 129,748 111,401 Estimated depreciation on operating leases, net of tax (4) (90,349) (88,015) (80,944) (61,898) (49,016) Estimated interest on operating leases, net of tax (4, 5,6) 62,593 62,032 65,686 67,850 62,385 NOPAT, including effect of operating leases 322,708 $ 315,037 $ 370,973 $ 234,070 $ 252,099 $ Average working capital 258,834 193,900 101,622 37,505 26,877 Average property and equipment 702,206 712,496 735,651 737,851 754,380 Average other assets 568,716 568,744 567,188 567,554 574,968 Average other liabilities (97,834) (101,339) (100,531) (120,521) (199,233) Average invested capital 1,431,922 $ 1,373,801 $ 1,303,930 $ 1,222,389 $ 1,156,992 $ Average operating leases (7) 1,249,404 1,222,513 1,196,822 1,185,080 1,103,128 Average invested capital, including operating leases 2,681,325 $ 2,596,314 $ 2,500,752 $ 2,407,469 $ 2,260,120 $ ROIC, including operating leases 12.0% 12.1% 14.8% 9.7% 11.2% 1 Fiscal 2020 includes 53 weeks 2 $2.6M credit in 2018 related to adopted tax accounting method change 3 Special items include strategy related charges in 2020, store closures in 2019 & 2018, and executive severance in 2018 4 Net of tax amounts are calculated using the normalized effective tax rate for the period presented 5 2022, 2021, 2020, 2019 estimated interest on operating leases is calculated by multiplying operating leases by a 6.7%, 6.7%, 7.2% and 7.5% discount rate, respectively, for each lease recorded as rent expense within direct store expense 6 2018 interest on operating leases calculated as trailing 4 quarter rents x 8 x 7.0% interest rate factor 7 2022, 2021 & 2020 calculated as trailing 12 month average of operating lease obligations as stated on our balance sheet. 2019 average operating leases represents the net present value of outstanding operating lease obligations. 2018 average operating leases is calculated as the TTM rent expense multiplied by 8

XML

Document and Entity Information	Nov. 08, 2022
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 08, 2022
Entity Registrant Name	Sprouts Farmers Market, Inc.
Entity Central Index Key	0001575515
Entity Emerging Growth Company	false
Entity File Number	001-36029
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	32-0331600
Entity Address, Address Line One	5455 E. High Street
Entity Address, Address Line Two	Suite 111
Entity Address, City or Town	Phoenix
Entity Address, State or Province	AZ
Entity Address, Postal Zip Code	85054
City Area Code	480
Local Phone Number	814-8016
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of Each Class	Common Stock, $0.001 par value
Trading Symbol	SFM
Security Exchange Name	NASDAQ