10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36029

 

Sprouts Farmers Market, Inc.

(Exact name of registrant as specified in its charter)

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

5455 East 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)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2022, the registrant had 105,852,470 shares of common stock, $0.001 par value per share, outstanding.

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED OCTOBER 2, 2022

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.		4
	Consolidated Balance Sheets as of October 2, 2022 (unaudited) and January 2, 2022	4
	Consolidated Statements of Income for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021 (unaudited)	5
	Consolidated Statements of Comprehensive Income for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021 (unaudited)	6
	Consolidated Statements of Stockholders’ Equity for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021 (unaudited)	7
	Consolidated Statements of Cash Flows for the thirty-nine weeks ended October 2, 2022 and October 3, 2021 (unaudited)	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		37
Item 4. Controls and Procedures.		37
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.		38
Item 1A. Risk Factors.		38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		39
Item 6. Exhibits.		40
Signatures		41

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the “Exchange Act”), including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses, and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “continue,” “objective,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, and our other filings with the Securities and Exchange Commission. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the “Company,” “Sprouts,” “Sprouts Farmers Market,” “we,” “us” and “our” refer to Sprouts Farmers Market, Inc. and, where appropriate, its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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 (Note 7)
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

The accompanying notes are an integral part of these consolidated financial statements.

4

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

The accompanying notes are an integral part of these consolidated financial statements.

5

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN THOUSANDS)

	Thirteen 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
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on cash flow    hedging activities, net of income tax of     $149, $707, $2,167 and $2,192		432			2,044			6,266			6,339
Reclassification of net gains (losses) on    cash flow hedges to net income, net    of income tax of ($44), ($372), ($695) and ($1,112)		(127	)		(1,076	)		(2,010	)		(3,216	)
Total other comprehensive income (loss)		305			968			4,256			3,123
Comprehensive income	$	66,045		$	64,835		$	220,300		$	211,052

The accompanying notes are an integral part of these consolidated financial statements.

6

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

For the thirteen and thirty-nine weeks ended October 2, 2022
	Shares			Common Stock			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balances at July 3, 2022		107,967,677		$	108		$	715,331	$	298,058		$	193		$	1,013,690
Net income		—			—			—		65,740			—			65,740
Other comprehensive income (loss)		—			—			—		—			305			305
Issuance of shares under stock plans		81,841			—			1,364		—			—			1,364
Repurchase and retirement of common stock		(1,558,196	)		(2	)		—		(44,021	)		—			(44,023	)
Share-based compensation		—			—			3,752		—			—			3,752
Balances at October 2, 2022		106,491,322		$	106		$	720,447	$	319,777		$	498		$	1,040,828
	Shares			Common Stock			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balances at January 2, 2022		111,114,374		$	111		$	704,701	$	258,822		$	(3,758	)	$	959,876
Net income		—			—			—		216,044			—			216,044
Other comprehensive income (loss)		—			—			—		—			4,256			4,256
Issuance of shares under stock plans		814,002			—			4,074		—			—			4,074
Repurchase and retirement of common stock		(5,437,054	)		(5	)		—		(155,089	)		—			(155,094	)
Share-based compensation		—			—			11,672		—			—			11,672
Balances at October 2, 2022		106,491,322		$	106		$	720,447	$	319,777		$	498		$	1,040,828

The accompanying notes are an integral part of these consolidated financial statements.

7

For the thirteen and thirty-nine weeks ended October 3, 2021
	Shares			Common Stock			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balances at July 4, 2021		115,180,832		$	115		$	695,745	$	259,582		$	(6,319	)	$	949,123
Net income		—			—			—		63,867			—			63,867
Other comprehensive income (loss)		—			—			—		—			968			968
Issuance of shares under stock plans		54,007			—			672		—			—			672
Repurchase and retirement of common stock		(2,079,420	)		(2	)		—		(49,998	)		—			(50,000	)
Share-based compensation		—			—			3,453		—			—			3,453
Balances at October 3, 2021		113,155,419		$	113		$	699,870	$	273,451		$	(5,351	)	$	968,083
	Shares			Common Stock			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balances at January 3, 2021		117,953,435		$	118		$	686,648	$	203,001		$	(8,474	)	$	881,293
Net income		—			—			—		207,929			—			207,929
Other comprehensive income (loss)		—			—			—		—			3,123			3,123
Issuance of shares under stock plans		562,021			—			1,918		—			—			1,918
Repurchase and retirement of common stock		(5,360,037	)		(5	)		—		(137,479	)		—			(137,484	)
Share-based compensation		—			—			11,304		—			—			11,304
Balances at October 3, 2021		113,155,419		$	113		$	699,870	$	273,451		$	(5,351	)	$	968,083

The accompanying notes are an integral part of these consolidated financial statements.

8

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

	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
Supplemental disclosure of cash flow information
Cash paid for interest	$	8,415		$	8,710
Cash paid for income taxes		65,671			65,783
Leased assets obtained in exchange for new operating lease liabilities		96,956			96,713
Supplemental disclosure of non-cash investing and financing activities
Property and equipment in accounts payable and accrued liabilities	$	17,834		$	19,228

The accompanying notes are an integral part of these consolidated financial statements.

9

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

Sprouts Farmers Market, Inc., a Delaware corporation, through its subsidiaries, operates as a healthy grocery store that offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. The Company continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. As of October 2, 2022, the Company operated 379 stores in 23 states. The “Company” is used to refer collectively to Sprouts Farmers Market, Inc. and unless the context otherwise requires, its subsidiaries.

The accompanying unaudited consolidated financial statements include the accounts of the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The information included in these consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the fiscal year ended January 2, 2022 (“fiscal year 2021”) included in the Company’s Annual Report on Form 10-K, filed on February 24, 2022.

The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.

The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. The fiscal year ending January 1, 2023 (“fiscal year 2022”) and fiscal year 2021 are 52-week years. The Company reports its results of operations on a 13-week quarter, except for 53-week fiscal years (in which the fourth quarter has 14 weeks).

All dollar amounts are in thousands, unless otherwise noted.

10

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. Summary of Significant Accounting Policies

Revenue Recognition

The Company’s performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and payment from customers is also due at the time of sale. Proceeds from the sale of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer and the performance obligation is satisfied by the Company. The Company’s gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.

	Balance at January 2, 2022		Gift Cards Issued During Current Period but Not Redeemed(1)		Revenue Recognized from Beginning Liability			Balance at October 2, 2022
Gift card liability, net	$	12,586	$	1,911	$	(5,350	)	$	9,147

(1) net of estimated breakage

The Company does not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current period from performance obligations satisfied in previous periods, or any remaining performance obligations as of October 2, 2022.

Restricted Cash

Restricted cash relates to defined benefit plan forfeitures as well as healthcare, general liability and workers’ compensation restricted funds of approximately $2.0 million and $1.7 million as of October 2, 2022 and January 2, 2022, respectively. These balances are included in prepaid expenses and other current assets in the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

Reference Rate Reform

In March 2020 and January 2021, the FASB issued ASU no. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively. The amendments in these updates provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. In the thirty-nine weeks ended October 2, 2022, the Company adopted certain optional expedients provided under Topic 848 that permit its hedging relationships to continue without de-designation upon changes due to reference rate reform. The adoption of this guidance resulted in no material impact to the Company’s consolidated financial statements. See Note 10, “Derivative Financial Instruments” for more information on our hedging activities. The optional expedients and accounting relief in Topic 848 remain effective through December 31, 2022.

Recently Issued Accounting Pronouncements Not Yet Adopted

No other new accounting pronouncements issued or effective during the thirteen weeks ended October 2, 2022 had, or are expected to have, a material impact on the Company’s consolidated financial statements.

11

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. Fair Value Measurements

The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the valuation of derivative instruments, impairment analysis of goodwill, intangible assets and long-lived assets.

The following tables present the fair value hierarchy for the Company’s financial liabilities measured at fair value on a recurring basis as of October 2, 2022 and January 2, 2022:

October 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Total financial liabilities	$	—	$	250,000	$	—	$	250,000
Interest rate swap asset	$	—	$	687	$	—	$	687
Total assets	$	—	$	687	$	—	$	687
January 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Interest rate swap liability		—		5,107		—		5,107
Total financial liabilities	$	—	$	255,107	$	—	$	255,107

The Company’s interest rate swaps are considered Level 2 in the hierarchy and are valued using an income approach. Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates, which is readily available on public markets.

The determination of fair values of certain tangible and intangible assets for purposes of the Company’s goodwill impairment evaluation as described above is based upon Level 3 inputs. The weighted average cost of capital is estimated using information from comparable companies and management’s judgment related to the risk associated with the operations of the stores.

Cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued salaries and benefits approximate fair value because of the short maturity of those instruments. Based on comparable open market transactions, the fair value of the long-term debt approximated carrying value as of October 2, 2022 and January 2, 2022.

12

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. Long-Term Debt and Finance Lease Liabilities

A summary of long-term debt and finance lease liabilities is as follows:

			As of
Facility	Maturity	Interest Rate	October 2, 2022		January 2, 2022
Senior secured debt
$700.0 million Credit Agreement	March 25, 2027	Variable	$	250,000	$	—
Former Credit Facility	March 27, 2023	Variable		—		250,000
Finance lease liabilities	Various	n/a		8,992		9,656
Long-term debt and finance lease liabilities			$	258,992	$	259,656

New Credit Agreement

The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on March 25, 2022 (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $700.0 million. Amounts outstanding under the Credit Agreement may be increased from time to time in accordance with an expansion feature set forth in the Credit Agreement.

The Company capitalized debt issuance costs of $3.4 million related to the Credit Agreement, which, combined with the remaining $0.5 million debt issuance costs in respect of that certain amended and restated credit agreement entered into on March 27, 2018, by and among the Company, Intermediate Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Former Credit Facility”), which remained outstanding as of the time of Intermediate Holdings’ entry into the Credit Agreement, are being amortized on a straight-line basis to interest expense over the five-year term of the Credit Agreement.

The Credit Agreement provides for a $70.0 million letter of credit sub-facility (the "Letter of Credit Sub-Facility") and a $50.0 million swingline facility. Letters of credit issued under the Credit Agreement reduce the capacity of Intermediate Holdings to borrow under the Revolving Credit Facility. Letters of credit totaling $24.8 million have been issued as of October 2, 2022 under the Letter of Credit Sub-Facility, primarily to support the Company’s insurance programs.

Guarantees

Obligations under the Credit Agreement are guaranteed by the Company and substantially all of its existing and future wholly-owned material domestic subsidiaries, and are secured by first-priority security interests in substantially all of the assets of the Company, Intermediate Holdings, and the subsidiary guarantors, including, without limitation, a pledge by the Company of its equity interest in Intermediate Holdings.

13

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Interest and Fees

Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00%) plus a 0.10% SOFR adjustment and 1.00% per annum or base rate (with a floor of 0.00%) plus 0.00% per annum. The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company’s total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05% based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

Under the terms of the Credit Agreement, the Company is obligated to pay a commitment fee on the available unused amount of the commitments, which commitment fee ranges between 0.10% to 0.225% per annum, pursuant to a pricing grid based on the Company’s total net leverage ratio. The commitment fees are subject to upward or downward adjustments of up to 0.01% based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

As of October 2, 2022, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus a 0.10% SOFR adjustment and 1.00% per annum.

The effective interest rate on 100% of outstanding debt under the Credit Agreement is fixed, reflecting the effects of floating to fixed interest rate swaps (see Note 10, “Derivative Financial Instruments”).

As of October 2, 2022, outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 1.00% per annum and an issuance fee of 0.125% per annum.

Payments and Borrowings

The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on March 25, 2027, subject to extensions as set forth therein.

The Company may prepay loans and permanently reduce commitments under the Credit Agreement at any time in agreed-upon minimum principal amounts, without premium or penalty (except SOFR breakage costs, if applicable).

In connection with the execution of the Credit Agreement, the obligations as borrower under the Former Credit Facility were prepaid and terminated.

During the thirteen and thirty-nine weeks ended October 2, 2022, the Company made no additional borrowings or principal payments, resulting in total outstanding debt under the Credit Agreement of $250.0 million as of October 2, 2022.

Covenants

The Credit Agreement contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to:

•incur additional indebtedness;

•grant additional liens;

•enter into sale-leaseback transactions;

•make loans or investments;

•merge, consolidate or enter into acquisitions;

•pay dividends or distributions;

•enter into transactions with affiliates;

•enter into new lines of business;

14

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

•modify the terms of certain debt or other material agreements; and

•change its fiscal year.

Each of these covenants is subject to customary and other agreed-upon exceptions.

In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00. Each of these covenants is tested as of the last day of each fiscal quarter.

The Company was in compliance with all applicable covenants under the Credit Agreement as of October 2, 2022.

5. Income Taxes

The Company’s effective tax rate increased to 25.6% for the thirteen weeks ended October 2, 2022, compared to 23.0% for the thirteen weeks ended October 3, 2021.The increase in the effective tax rate is primarily due to a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits as well as an increase of non-deductible executive compensation.

The Company’s effective tax rate increased to 25.2% for the thirty-nine weeks ended October 2, 2022, compared to 24.1% for the thirty-nine weeks ended October 3, 2021.The increase in the effective tax rate is primarily due to a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits as well as an increase of non-deductible executive compensation, partially offset by an increase in benefit from share-based payment awards in the current year. The income tax effect resulting from excess tax benefits of share-based payment awards were $1.6 million and $0.2 million for the thirty-nine weeks ended October 2, 2022 and October 3, 2021, respectively.

The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three years, following the tax year to which those filings relate.

6. Related Party Transactions

On May 24, 2022, the Company appointed a new member to its board of directors who is an executive officer of a company that is a supplier of nutrition bars and related products to the Company for resale. The cost of sales recognized from this supplier was $1.2 million during the thirteen weeks ended October 2, 2022 and was $2.5 million since the beginning of the second quarter of 2022.

7. Commitments and Contingencies

The Company is exposed to claims and litigation matters arising in the ordinary course of business and uses various methods to resolve these matters that are believed to best serve the interests of the Company’s stakeholders. The Company’s primary contingencies are associated with self-insurance obligations and litigation matters. Self-insurance liabilities require significant judgment and actual claim settlements and associated expenses may differ from the Company’s current provisions for loss.

Proposition 65 Coffee Action

On April 13, 2010, an organization named Council for Education and Research on Toxics (“CERT”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against nearly 80 defendants who manufacture, package, distribute or sell brewed coffee, including the Company. CERT alleged that the defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. CERT seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties.

15

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company, as part of a joint defense group, asserted multiple defenses against the lawsuit. On May 7, 2018, the trial court issued a ruling adverse to defendants on these defenses to liability. On October 1, 2019, before the court tried damages, remedies and attorneys' fees, California’s Office of Environmental Health Hazard Assessment adopted a regulation that exempted “Exposures to listed chemicals in coffee created by and inherent in the processes of roasting coffee beans or brewing coffee” from Proposition 65’s warning requirement. On August 25, 2020, the court granted the defense motion for summary judgment based on the regulation, and the case was dismissed.

On November 20, 2020, CERT filed a notice of appeal to appeal the ruling on the defense motion for summary judgment. On October 26, 2022, the appellate court affirmed the trial court’s decision. As the Company expects CERT to appeal this ruling, the Company is unable to predict or reasonably estimate any potential loss or effect on the Company or its operations. Accordingly, no loss contingency was recorded for this matter.

8. Stockholders’ Equity

Share Repurchases

On March 2, 2022, the Company's board of directors authorized a new $600 million share repurchase program for its common stock. The new authorization replaced the Company's then-existing share repurchase authorization of $300 million that was due to expire on March 3, 2024, of which $99.8 million remained available upon its replacement. No further shares may be repurchased under the $300 million authorization. The following table outlines the common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of October 2, 2022.

Effective date	Expiration date	Amount authorized		Cost of repurchases		Authorization available
March 3, 2021	March 2, 2022	$	300,000	$	200,200	$	—
March 2, 2022	December 31, 2024	$	600,000	$	143,236	$	456,764

The shares under the Company’s repurchase programs may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The board’s authorization of the share repurchase programs does not obligate the Company to acquire any particular amount of common stock, and the repurchase programs may be commenced, suspended, or discontinued at any time.

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Number of common shares acquired		1,558,196		2,079,420		5,437,054		5,360,037
Average price per common share acquired	$	28.25	$	24.05	$	28.53	$	25.65
Total cost of common shares acquired	$	44,023	$	50,000	$	155,094	$	137,484

Shares purchased under the Company’s repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings.

Subsequent to October 2, 2022 and through November 4, 2022, the Company repurchased an additional 0.6 million shares of common stock for $17.8 million.

16

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. Net Income Per Share

The computation of basic net income per share is based on the number of weighted average shares outstanding during the period. The computation of diluted net income per share includes the dilutive effect of share equivalents consisting of incremental shares deemed outstanding from the assumed exercise of options, assumed vesting of restricted stock units (“RSUs”) and assumed vesting of performance share awards (“PSAs”). PSAs are included in the computation of diluted net income per share only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be satisfied if the end of the reporting period were the end of the related performance period, and if the effect would be dilutive.

A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (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
Basic net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding		107,229		114,201		109,066		116,497
Basic net income per share	$	0.61	$	0.56	$	1.98	$	1.78
Diluted net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding -    basic		107,229		114,201		109,066		116,497
Dilutive effect of share-based awards:
Assumed exercise of options to purchase    shares		314		197		318		211
RSUs		266		245		371		376
PSAs		286		175		133		168
Weighted average shares and    equivalent shares outstanding		108,095		114,818		109,888		117,252
Diluted net income per share	$	0.61	$	0.56	$	1.97	$	1.77

For the thirteen weeks ended October 2, 2022, the Company had 0.3 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirteen weeks ended October 3, 2021, the Company had 0.5 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

For the thirty-nine weeks ended October 2, 2022, the Company had 0.5 million options, 0.1 million RSUs, and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirty-nine weeks ended October 3, 2021, the Company had 0.5 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

17

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10. Derivative Financial Instruments

The Company entered into an interest rate swap agreement in December 2017 to manage its cash flow associated with variable interest rates. This forward contract has been designated and qualifies as a cash flow hedge, and its change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. The forward contract initially consisted of five cash flow hedges, of which one was outstanding at October 2, 2022. To qualify as a hedge, the Company needs to formally document, designate and assess the effectiveness of the transactions that receive hedge accounting.

The notional dollar amount of the one outstanding swap was $250.0 million at October 2, 2022 and January 2, 2022, under which the Company pays a fixed rate and receives a variable rate of interest (cash flow swap). The cash flow swap hedges the change in interest rates on debt related to fluctuations in interest rates and has a length of one year, maturing in 2022. This interest rate swap has been designated and qualifies as a cash flow hedge and has met the requirements to assume zero ineffectiveness. The Company reviews the effectiveness of its hedging instruments on a quarterly basis. During the first quarter of 2022, the Company elected to apply certain hedge accounting optional expedients allowed under Topic 848. The expedients allow the Company to continue the method of assessing effectiveness as documented in the original hedge documentation and allows the reference rate on the hypothetical derivative to match the reference rate on the hedging instrument.

The counterparties to these derivative financial instruments are major financial institutions. The Company evaluates the credit ratings of the financial institutions and believes that credit risk is at an acceptable level. The following table summarizes the fair value of the Company’s derivative instruments designated as hedging instruments:

	As of October 2, 2022			As of January 2, 2022
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Other current assets	$	687	Other current assets	$	—
Interest rate swaps	Accrued liabilities	$	—	Accrued liabilities	$	5,107

The gain or loss on these derivative instruments is recognized in other comprehensive income, net of tax, with the portion related to current period interest payments reclassified to interest expense, net on the consolidated statements of income. The following table summarizes these losses classified on the consolidated statements of income:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Consolidated Statements of    Income Classification
Interest expense, net	$	171	$	1,448	$	2,705	$	4,328

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SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. Comprehensive Income

The following table presents the changes in accumulated other comprehensive income (loss) for the thirty-nine weeks ended October 3, 2021 and October 2, 2022.

	Cash Flow Hedges
Balance at January 3, 2021	$	(8,474	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,192		6,339
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($1,112)		(3,216	)
Total other comprehensive income (loss)		3,123
Balance at October 3, 2021	$	(5,351	)
Balance at January 2, 2022	$	(3,758	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,167		6,266
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($695)		(2,010	)
Total other comprehensive income (loss)		4,256
Balance at October 2, 2022	$	498

Amounts reclassified from accumulated other comprehensive income (loss) are included within interest expense, net on the consolidated statements of income.

12. Segments

The Company has one reportable and one operating segment, healthy grocery stores.

In accordance with ASC 606, the following table represents a disaggregation of revenue for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021.

	Thirteen weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	928,908	58.4	%	$	867,880	57.5	%
Non-Perishables		662,118	41.6	%		641,753	42.5	%
Net Sales	$	1,591,026	100.0	%	$	1,509,633	100.0	%
	Thirty-nine weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	2,817,268	58.4	%	$	2,668,532	57.9	%
Non-Perishables		2,010,401	41.6	%		1,938,541	42.1	%
Net Sales	$	4,827,669	100.0	%	$	4,607,073	100.0	%

The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care.

19

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

13. Share-Based Compensation

2022 Incentive Plan

In March 2022, the Company’s board of directors adopted the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Incentive Plan”), which became effective May 25, 2022, upon approval by the Company’s stockholders. The 2022 Incentive Plan provides team members of the Company, certain consultants and advisors who perform services for the Company, and non-employee members of the Company's board of directors with the opportunity to receive grants of equity awards, including stock options, RSUs, PSAs, and other stock-based awards. The 2022 Incentive Plan replaced the 2013 Incentive Plan (as described below).

Awards Granted under the 2022 Incentive Plan

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2022 Incentive Plan:

Grant Date	RSUs		PSAs		Options
June 7, 2022		58,057		—		—
September 7, 2022		21,598		—		—
Total		79,655		—		—
Weighted-average grant date fair value	$	27.75	$	—	$	—
Weighted-average exercise price		—		—		—

The aggregate number of shares of common stock that may be issued to team members and directors under the 2022 Incentive Plan may not exceed 6,600,000, subject to the following adjustments. If any awards granted under the 2022 Incentive Plan, terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid in shares, the shares will again be available for purposes of the 2022 Incentive Plan. In addition, the number of shares subject to outstanding awards under the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “2013 Incentive Plan”) that terminate, expire, are paid in cash, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Incentive Plan after the effective date of the 2022 Incentive Plan will be available for issuance under the 2022 Incentive Plan. As of October 2, 2022, there were 79,655 stock awards outstanding and 6,621,800 shares remaining available for issuance under the 2022 Incentive Plan.

2013 Incentive Plan

Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members. Upon adoption of the 2022 Incentive Plan on May 25, 2022, no further awards will be granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan.

Awards Granted under the 2013 Incentive Plan

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2013 Incentive Plan:

Grant Date	RSUs		PSAs		Options
March 15, 2022		370,177		147,846		211,352
March 21, 2022		104,913		14,260		20,270
Total		475,090		162,106		231,622
Weighted-average grant date fair value	$	31.60	$	31.52	$	10.58
Weighted-average exercise price		—		—	$	31.52

20

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Stock Options

The Company uses the Black-Scholes option pricing model to estimate the fair value of options at grant date. Options vest in accordance with the terms set forth in the grant letter.

Time-based options vest annually over a period of three years.

RSUs

The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date. RSUs generally vest annually over a period of two or three years from the grant date.

PSAs

PSAs granted in 2018 were subject to the Company achieving certain earnings before interest and taxes (“EBIT”) performance targets for the 2020 fiscal year. The criteria was based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. The performance conditions with respect to fiscal year 2020 EBIT were deemed to have been met, and the PSAs vested at the maximum pay out level on the third anniversary of the grant date (March 2021). There were no outstanding 2018 PSAs as of October 2, 2022.

PSAs granted in 2019 are subject to the Company achieving certain EBIT performance targets for the 2021 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. The performance conditions with respect to fiscal year 2021 EBIT were deemed to have been met, and the PSAs vested at the maximum pay out level on the third anniversary of the grant date (March 2022). During the thirty-nine weeks ended October 2, 2022, 208,172 of the 2019 PSAs vested. There were no outstanding 2019 PSAs as of October 2, 2022.

PSAs granted in 2020 are subject to the Company achieving certain earnings before taxes (“EBT”) performance targets for the 2022 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2023).

PSAs granted in 2021 are subject to the Company achieving certain EBIT performance targets for the 2023 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2024).

PSAs granted in 2022 are subject to the Company achieving certain EBIT performance targets for the 2024 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2025).

Share-based Compensation Expense

The Company presents share-based compensation expense in selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Share-based compensation expense	$	3,752	$	3,453	$	11,672	$	11,304

21

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following share-based awards were outstanding as of October 2, 2022 and October 3, 2021:

	As of
	October 2, 2022		October 3, 2021
	(in thousands)
Options
Vested		313		244
Unvested		1,047		1,134
RSUs		974		935
PSAs		460		433

As of October 2, 2022, total unrecognized compensation expense and remaining weighted average recognition period related to outstanding share-based awards was as follows:

	Unrecognized compensation expense		Remaining weighted average recognition period
Options	$	3,781		1.1
RSUs		19,114		1.7
PSAs		784		1.4
Total unrecognized compensation expense at October 2, 2022	$	23,679

During the thirty-nine weeks ended October 2, 2022 and October 3, 2021, the Company received $4.1 million and $1.9 million, respectively, in cash proceeds from the exercise of options.

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the 2021 fiscal year, filed on February 24, 2022 (“Form 10-K”) with the Securities and Exchange Commission. All dollar amounts included below are in thousands, unless otherwise noted.

Business Overview

Sprouts Farmers Market 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. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. Headquartered in Phoenix with 379 stores in 23 states as of October 2, 2022, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.

Our Heritage

In 2002, we opened the first Sprouts Farmers Market store in Chandler, Arizona. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability, including successfully rebranding 43 Henry’s Farmers Market and 39 Sunflower Farmers Market stores added in 2011 and 2012, respectively, through acquisitions to the Sprouts banner. These three businesses all trace their lineage back to Henry’s Farmers Market and were built with similar store formats and operations including a strong emphasis on value, produce and service in smaller, convenient locations.

Outlook

In 2020, we announced our new long-term growth strategy that we believe will transform our company and drive profitable growth. We are executing on this strategy, focusing on the following areas:

•Win with Target Customers. We are focusing attention on our target customers, identified through research as 'health enthusiasts' and 'experience seekers', where there is ample opportunity to gain share within these customer segments. We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app.

•Update Format and Expand in Select Markets. We are beginning to deliver unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. In 2021, we opened three stores and remodeled one store featuring our new format, and in the thirty-nine weeks ended October 2, 2022, we opened two new format stores. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth beginning in 2024.

•Create an Advantaged Fresh Supply Chain. We believe our network of fresh distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. With the opening of two fresh distribution centers in 2021, we now have more than 85% of our stores within 250 miles of a distribution center.

23

•Refine Brand and Marketing Approach. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are investing savings from removing our print ad into increasing customer engagement through digital and social connections, driving additional sales growth and loyalty.

•Deliver on Financial Targets and Box Economics. We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. With the implementation of our strategy, we have significantly improved our margin structure above our 2019 baseline.

Recent Developments

Our operations have generally stabilized since the onset of the COVID-19 pandemic. However, we continue to experience varying levels of inflation through increased product costs which we continue to pass through to retail pricing. In addition, due to continued difficulties in obtaining necessary equipment from third parties and inflationary pressures due to supply chain delays complicated by the COVID-19 pandemic, we have experienced and may continue to experience increased costs and delays in our planned new store openings. See “Risk Factors—The coronavirus (COVID-19) pandemic has disrupted our business and could negatively impact our financial condition.” in our Form 10-K for additional information.

24

Results of Operations for Thirteen Weeks Ended October 2, 2022 and October 3, 2021

The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted.

	Thirteen weeks ended
	October 2, 2022		October 3, 2021
Unaudited Quarterly Consolidated Statement of Income Data:
Net sales	$	1,591,026	$	1,509,633
Cost of sales		1,007,376		969,904
Gross profit		583,650		539,729
Selling, general and administrative expenses		460,834		423,416
Depreciation and amortization (exclusive of depreciation included    in cost of sales)		30,313		30,377
Store closure and other costs, net		2,164		128
Income from operations		90,339		85,808
Interest expense, net		1,951		2,911
Income before income taxes		88,388		82,897
Income tax provision		22,648		19,030
Net income	$	65,740	$	63,867
Weighted average shares outstanding - basic		107,229		114,201
Diluted effect of equity-based awards		866		617
Weighted average shares and equivalent shares outstanding		108,095		114,818
Diluted net income per share	$	0.61	$	0.56

	Thirteen weeks ended
	October 2, 2022			October 3, 2021
Other Operating Data:
Comparable store sales growth		2.4	%		(5.4	)%
Stores at beginning of period		378			363
Closed		—			—
Opened		1			3
Stores at end of period		379			366

Comparison of Thirteen Weeks Ended October 2, 2022 to Thirteen Weeks Ended

October 3, 2021

Net sales

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change		% Change
Net sales	$	1,591,026		$	1,509,633		$	81,393		5	%
Comparable store sales growth		2.4	%		(5.4	)%

Net sales during the thirteen weeks ended October 2, 2022 totaled $1.6 billion, an increase of $81.4 million, or 5%, compared to the thirteen weeks ended October 3, 2021. The sales increase was driven by sales from new stores opened in the last twelve months and a 2.4% increase in comparable store sales. The increase in comparable store sales was due in part to an increase in basket value due to retail price inflation, partially offset by a slight reduction in the number of items per basket. Comparable stores contributed approximately 97% of total sales for each of the thirteen weeks ended October 2, 2022 and October 3, 2021.

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Cost of sales and gross profit

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Net sales	$	1,591,026		$	1,509,633		$	81,393			5	%
Cost of sales		1,007,376			969,904			37,472			4	%
Gross profit		583,650			539,729			43,921			8	%
Gross margin		36.7	%		35.8	%		0.9	%

Gross profit totaled $583.7 million during the thirteen weeks ended October 2, 2022, an increase of $43.9 million, or 8%, compared to the thirteen weeks ended October 3, 2021, driven by increased sales volume. Gross margin increased by 0.9% to 36.7% for the thirteen weeks ended October 2, 2022, compared to 35.8% for the thirteen weeks ended October 3, 2021, primarily as a result of offering fewer promotions in the current year.

Selling, general and administrative expenses

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Selling, general and administrative    expenses	$	460,834		$	423,416		$	37,418			9	%
Percentage of net sales		29.0	%		28.0	%		1.0	%

Selling, general and administrative expenses increased $37.4 million, or 9%, compared to the thirteen weeks ended October 3, 2021.The increase is primarily due to new stores opened since the comparable period in the prior year, higher wages and higher marketing spend in the current year, as well as higher credit card and ecommerce fees.

Depreciation and amortization

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Depreciation and amortization	$	30,313		$	30,377		$	(64	)		0	%
Percentage of net sales		1.9	%		2.0	%		(0.1	)%

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $30.3 million for the thirteen weeks ended October 2, 2022, compared to $30.4 million for the thirteen weeks ended October 3, 2021. Depreciation and amortization primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment.

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Store closure and other costs, net

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Store closure and other costs, net	$	2,164		$	128		$	2,036		n/m
Percentage of net sales		0.1	%		0.0	%		0.1	%

Store closure and other costs, net increased $2.0 million to $2.2 million for the thirteen weeks ended October 2, 2022 compared to $0.1 million for the thirteen weeks ended October 3, 2021. The increase in store closure and other costs, net was driven by inventory loss and other expenses incurred by several of our stores impacted by Hurricane Ian in the current quarter.

Interest expense, net

	Thirteen weeks ended
	October 2, 2022			October 3, 2021		Change			% Change
Long-term debt	$	2,246		$	1,133	$	1,113			98	%
Capital and financing leases		209			223		(14	)		(6	)%
Deferred financing costs		193			141		52			37	%
Interest rate hedge and other		(697	)		1,414		(2,111	)		(149	)%
Total interest expense, net	$	1,951		$	2,911	$	(960	)		(33	)%

Interest expense, net decreased to $2.0 million for the thirteen weeks ended October 2, 2022, compared to $2.9 million for the thirteen weeks ended October 3, 2021 primarily due to higher interest income and lower credit facility fees. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.

Income tax provision

Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pretax income as a result of the following:

	Thirteen weeks ended
	October 2, 2022			October 3, 2021
Federal statutory rate		21.0	%		21.0	%
Change in income taxes resulting from:
State income taxes, net of federal benefit		4.9	%		3.9	%
Enhanced charitable contributions		(0.9	)%		(1.3	)%
Federal credits		(0.3	)%		(0.3	)%
Return to Provision		(0.3	)%		(0.6	)%
Other, net		1.2	%		0.3	%
Effective tax rate		25.6	%		23.0	%

The effective tax rate increased to 25.6% for the thirteen weeks ended October 2, 2022 from 23.0% for the thirteen weeks ended October 3, 2021. The increase in the effective tax rate was primarily due to an increase of non-deductible executive compensation as well as a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits.

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Net income

	Thirteen weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Net income	$	65,740		$	63,867		$	1,873			3	%
Percentage of net sales		4.1	%		4.2	%		(0.1	)%

Net income increased $1.9 million primarily due to increased sales and gross profit, partially offset by higher selling, general and administrative expenses and a higher effective tax rate for the reasons discussed above.

Diluted earnings per share

	Thirteen weeks ended
	October 2, 2022		October 3, 2021		Change			% Change
Diluted earnings per share	$	0.61	$	0.56	$	0.05			9	%
Diluted weighted average shares    outstanding		108,095		114,818		(6,723	)

The increase in diluted earnings per share of $0.05 was driven by higher net income in addition to fewer diluted shares outstanding compared to the prior year, due primarily to the share repurchase program.

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Results of Operations for Thirty-nine Weeks Ended October 2, 2022 and October 3, 2021

The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted.

Comparison of Thirty-nine Weeks Ended October 2, 2022 to Thirty-nine Weeks Ended

October 3, 2021

	Thirty-nine weeks ended
	October 2, 2022		October 3, 2021
Unaudited Quarterly Consolidated Statement of Income Data:
Net sales	$	4,827,669	$	4,607,073
Cost of sales		3,051,914		2,931,089
Gross profit		1,775,755		1,675,984
Selling, general and administrative expenses		1,382,854		1,299,498
Depreciation and amortization (exclusive of depreciation included    in cost of sales)		93,377		92,036
Store closure and other costs, net		3,034		1,757
Income from operations		296,490		282,693
Interest expense, net		7,648		8,840
Income before income taxes		288,842		273,853
Income tax provision		72,798		65,924
Net income	$	216,044	$	207,929
Weighted average shares outstanding - basic		109,066		116,497
Diluted effect of equity-based awards		822		755
Weighted average shares and equivalent shares outstanding		109,888		117,252
Diluted net income per share	$	1.97	$	1.77

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021
Other Operating Data:
Comparable store sales growth		2.0	%		(8.4	)%
Stores at beginning of period		374			362
Closed		(4	)		—
Opened		9			4
Stores at end of period		379		366

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Net Sales

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change		% Change
Net sales	$	4,827,669		$	4,607,073		$	220,596		5	%
Comparable store sales growth		2.0	%		(8.4	)%

Net sales during the thirty-nine weeks ended October 2, 2022 totaled $4.8 billion, an increase of $220.6 million, or 5%, over the same period of the prior fiscal year. The sales increase was primarily due to a 2.0% increase in comparable store sales, driven primarily by an increase in basket due to retail inflation partially offset by a slight reduction of items in the basket, as well as sales from new stores opened in the last twelve months. Comparable stores contributed approximately 97% of total sales for the thirty-nine weeks ended October 2, 2022 and approximately 96% for the thirty-nine weeks ended October 3, 2021.

Cost of sales and gross profit

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Net sales	$	4,827,669		$	4,607,073		$	220,596			5	%
Cost of sales		3,051,914			2,931,089			120,825			4	%
Gross profit		1,775,755			1,675,984			99,771			6	%
Gross margin		36.8	%		36.4	%		0.4	%

Gross profit totaled $1.8 billion during the thirty-nine weeks ended October 2, 2022, an increase of $99.8 million, or 6%, compared to the thirty-nine weeks ended October 3, 2021 driven by increased sales volume. Gross margin increased to 36.8% for the thirty-nine weeks ended October 2, 2022, compared to 36.4% for the thirty-nine weeks ended October 3, 2021, due to improved shrink and offering fewer promotions in the current year.

Selling, general and administrative expenses

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Selling, general and administrative expenses	$	1,382,854		$	1,299,498		$	83,356			6	%
Percentage of net sales		28.6	%		28.2	%		0.4	%

Selling, general and administrative expenses increased $83.4 million, or 6%, compared to the thirty-nine weeks ended October 3, 2021.The increase was primarily driven by the net increase in new stores opened since the prior year period as well as inflationary conditions driving increases in costs including wages, utilities and supplies. In addition, we have seen higher credit card fees as more consumers shift to credit compared to the prior year and ecommerce costs resulting from an increase in ecommerce sales compared to the prior year.

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Depreciation and amortization

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Depreciation and amortization	$	93,377		$	92,036		$	1,341			1	%
Percentage of net sales		1.9	%		2.0	%		(0.1	)%

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $93.4 million for the thirty-nine weeks ended October 2, 2022, compared to $92.0 million for the thirty-nine weeks ended October 3, 2021.Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment.

Store closure and other costs, net

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Store closure and other costs, net	$	3,034		$	1,757		$	1,277			73	%
Percentage of net sales		0.1	%		0.0	%		0.1	%

Store closure and other costs, net increased $1.3 million to $3.0 million, compared to $1.8 million for the thirty-nine weeks ended October 3, 2021. Store closure and other costs, net during the thirty-nine weeks ended October 2, 2022 primarily related to inventory loss and expenses incurred by several of our stores impacted by Hurricane Ian in addition to costs associated with the closing of four stores year-to-date. Store closure and other costs, net during the thirty-nine weeks ended October 3, 2021 was driven by inventory loss and additional expenses, net of insurance recovery, related to the impact of winter storms at several of our stores and a fire at one of our stores during the thirty-nine weeks ended October 3, 2021.

Interest expense, net

	Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		Change			% Change
Long-term debt	$	4,745	$	3,474	$	1,271			37	%
Capital and financing leases		646		686		(40	)		(6	)%
Deferred financing costs		609		423		186			44	%
Interest rate hedge and other		1,648		4,257		(2,609	)		(61	)%
Total interest expense, net	$	7,648	$	8,840	$	(1,192	)		(13	)%

Interest expense, net decreased to $7.6 million for the thirty-nine weeks ended October 2, 2022, compared to $8.8 million for the thirty-nine weeks ended October 3, 2021 primarily due to higher interest income and lower credit facility fees. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.

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Income tax provision

Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pretax income as a result of the following:

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021
Federal statutory rate		21.0	%		21.0	%
Change in income taxes resulting from:
State income taxes, net of federal benefit		4.9	%		4.5	%
Enhanced charitable contributions		(1.0	)%		(1.2	)%
Federal Credits		(0.4	)%		(0.4	)%
Share-based payment awards		(0.6	)%		(0.1	)%
Return to Provision		(0.1	)%		(0.2	)%
Other, net		1.4	%		0.5	%
Effective tax rate		25.2	%		24.1	%

The effective tax rate increased to 25.2% for the thirty-nine weeks ended October 2, 2022 from 24.1% in the same period last year. The increase in the effective tax rate is primarily due to an increase of non-deductible executive compensation as well as a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits, partially offset by an increase in benefit from share-based payment awards in the current year.

Net income

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021			Change			% Change
Net income	$	216,044		$	207,929		$	8,115			4	%
Percentage of net sales		4.5	%		4.5	%		0.0	%

Net income increased $8.1 million primarily due to increased sales and gross profit, partially offset by higher selling, general and administrative expenses and a higher effective tax rate for the reasons discussed above.

Diluted earnings per share

	Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		Change			% Change
Diluted earnings per share	$	1.97	$	1.77	$	0.20			11	%
Diluted weighted average shares    outstanding		109,888		117,252		(7,364	)

The increase in diluted earnings per share of $0.20 was driven by higher net income in addition to fewer diluted shares outstanding compared to the prior year, due primarily to the share repurchase program.

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Return on Invested Capital

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (referred to as “ROIC”) as additional information about our operating results. ROIC is a non-GAAP financial measure and should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. ROIC is an important measure used by management to evaluate our investment returns on capital and provides a meaningful measure of the effectiveness of our capital allocation over time.

We define ROIC as net operating profit after tax (referred to as “NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease (capital lease prior to adoption of ASC 842). The assumed ownership and associated interest expense are calculated using the discount rate for each lease as recorded as a component of rent expense within selling, general and administrative expenses. Invested capital reflects a trailing twelve-month average.

As numerous methods exist for calculating ROIC, our method may differ from methods used by other companies to calculate their ROIC. It is important to understand the methods and the differences in those methods used by other companies to calculate their ROIC before comparing our ROIC to that of other companies.

Our calculation of ROIC for the fiscal periods indicated was as follows:

	Rolling Four Quarters Ended
	October 2, 2022			October 3, 2021 (1)
	(dollars in thousands)
Net Income (2)	$	252,272		$	276,326
Special items, net of tax (3), (4)		—			1,339
Interest expense, net of tax (4)		7,843			9,075
Net operating profit after tax (NOPAT)	$	260,115		$	286,740
Total rent expense, net of tax (4)		152,942			151,764
Estimated depreciation on operating leases, net of tax (4)		(90,349	)		(85,366	)
Estimated interest on operating leases, net of tax (4), (5)		62,593			66,398
NOPAT, including effect of operating leases	$	322,708		$	353,138
Average working capital		258,834			164,740
Average property and equipment		702,206			716,425
Average other assets		568,716			568,922
Average other liabilities		(97,834	)		(103,444	)
Average invested capital	$	1,431,922		$	1,346,643
Average operating leases (6)		1,249,404			1,213,852
Average invested capital, including operating leases	$	2,681,326		$	2,560,495
ROIC, including operating leases		12.0	%		13.8	%

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(1)Fiscal 2020 included 53 weeks.

(2)Net income amounts represent total net income for the past four trailing quarters.

(3)Special items include professional fees related to strategic initiatives.

(4)Net of tax amounts are calculated using the normalized effective tax rate for the periods presented.

(5)2022 and 2021 estimated interest on operating leases is calculated by multiplying operating leases by the 6.7% and 7.2% discount rate, respectively, for each lease recorded as rent expense within direct store expense.

(6)Average operating leases represents the average net present value of outstanding lease obligations over the past four trailing quarters.

Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands):

	Thirty-nine weeks ended
	October 2, 2022			October 3, 2021
Cash, cash equivalents and restricted cash at end of period	$	318,052		$	262,017
Cash flows from operating activities	$	306,790		$	296,659
Cash flows used in investing activities	$	(80,749	)	$	(70,010	)
Cash flows used in financing activities	$	(154,993	)	$	(136,073	)

We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures primarily for opening new stores, remodels and maintenance, repurchases of our common stock and debt service. Our principal contractual obligations and commitments consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Our operating and finance leases for the rental of land, buildings, and for rental of facilities and equipment expire or become subject to renewal clauses at various dates through 2045. We believe that our existing cash, cash equivalents and restricted cash, and cash anticipated to be generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including new store openings, remodel and maintenance capital expenditures at existing stores, store initiatives and other corporate capital expenditures and activities. Our cash, cash equivalents and restricted cash position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within days from the related sale.

Operating Activities

Cash flows from operating activities increased $10.1 million to $306.8 million for the thirty-nine weeks ended October 2, 2022 compared to $296.7 million for the thirty-nine weeks ended October 3, 2021. The increase in cash flows from operating activities was primarily a result of cash generated from higher net income and changes in working capital.

Cash flows used in operating activities from changes in working capital were $6.9 million in the thirty-nine weeks ended October 2, 2022 compared to $9.9 million in the thirty-nine weeks ended October 3, 2021. The decrease was primarily driven by the higher payout of COVID related incentive compensation amounts earned in 2020 and paid in 2021, partially offset by higher inventories impacted by inflationary cost increases on our purchases in the current year.

Investing Activities

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments. Cash flows used in investing activities were $80.7 million and $70.0 million, for the thirty-nine weeks ended October 2, 2022 and October 3, 2021, respectively.

34

We expect capital expenditures to be in the range of $120 - $135 million in 2022, including expenditures incurred to date, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.

Financing Activities

Cash flows used in financing activities were $155.0 million for the thirty-nine weeks ended October 2, 2022 compared to $136.1 million for the thirty-nine weeks ended October 3, 2021. During the thirty-nine weeks ended October 2, 2022, cash flows used in financing activities primarily consisted of $155.1 million for stock repurchases and $3.4 million in debt issuance costs in connection with our Credit Agreement, partially offset by $4.1 million in proceeds from the exercise of stock options.

During the thirty-nine weeks ended October 3, 2021, cash flows used in financing activities primarily consisted of $137.5 million for stock repurchases.

Long-Term Debt and Credit Facilities

Long-term debt outstanding was $250.0 million as of October 2, 2022 and January 2, 2022.

See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements for a description of our new Credit Agreement and our Former Credit Facility (each as defined therein).

Share Repurchase Program

Our board of directors from time to time authorizes share repurchase programs for our common stock. The following table outlines the share repurchase programs authorized by our board, and the related repurchase activity and available authorization as of October 2, 2022.

Effective date	Expiration date	Amount authorized		Cost of repurchases		Authorization available
March 3, 2021	March 2, 2022	$	300,000	$	200,200	$	—
March 2, 2022	December 31, 2024	$	600,000	$	143,236	$	456,764

The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. Our board’s authorization of the share repurchase program does not obligate our Company to acquire any particular amount of common stock, and the repurchase program may be commenced, suspended, or discontinued at any time.

Share repurchase activity under our repurchase program for the periods indicated was as follows (total cost in thousands):

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Number of common shares acquired		1,558,196		2,079,420		5,437,054		5,360,037
Average price per common share acquired	$	28.25	$	24.05	$	28.53	$	25.65
Total cost of common shares acquired	$	44,023	$	50,000	$	155,094	$	137,484

Shares purchased under our repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings.

Subsequent to October 2, 2022 and through November 4, 2022, we repurchased an additional 0.6 million shares of common stock for $17.8 million.

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Contractual Obligations

Our principal contractual obligations and commitments arising in the normal course of business consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Except as otherwise disclosed in Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements, there have been no material changes outside the normal course of business as of October 2, 2022 in our contractual obligations and commitments from those reported in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.

The future amount and timing of interest payments are expected to vary with the outstanding amounts and then prevailing contractual interest rates, net of interest rate swaps. Interest payments through the March 25, 2027 maturity date of our Credit Agreement based on the outstanding amounts as of October 2, 2022 and interest rates in effect at the time of this filing, are estimated to be approximately $52.7 million, with $12.5 million payable within 12 months.

Impact of Inflation and Deflation

Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross margin. Food inflation, when combined with reduced consumer spending, could also reduce sales, gross profit margins and comparable store sales. Inflationary pressures on compensation, utilities, commodities, equipment and supplies may also impact our profitability. Food deflation across multiple categories, particularly in produce, could reduce sales growth and earnings if our competitors react by lowering their retail pricing and expanding their promotional activities, which can lead to retail deflation higher than cost deflation that could reduce our sales, gross profit margins and comparable store sales. The short-term impact of inflation and deflation is largely dependent on whether or not the effects are passed through to our customers, which is subject to competitive market conditions.

Food inflation and deflation is affected by a variety of factors and our determination of whether to pass on the effects of inflation or deflation to our customers is made in conjunction with our overall pricing and marketing strategies, as well as our competitors’ responses. Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, including pressures we are currently experiencing due to product cost inflation which we are largely passing along to retail pricing, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, cash flow and related disclosure of contingent assets and liabilities. Our critical accounting estimates include inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

There have been no substantial changes to these estimates, or the policies related to them during the thirteen and thirty-nine weeks ended October 2, 2022. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.

Recently Issued Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies” to our accompanying unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As described in Note 4, “Long-Term Debt and Finance Lease Liabilities” to our unaudited consolidated financial statements located elsewhere in this Quarterly Report on Form 10-Q, our Credit Agreement bears interest at a rate based in part on SOFR. Accordingly, we could be exposed to fluctuations in interest rates. Based solely on the $250.0 million principal outstanding under our Credit Agreement as of October 2, 2022, each hundred basis point change in SOFR would result in a change in interest expense by $2.5 million annually. We entered into an interest rate swap agreement in December 2017 to manage our cash flow associated with variable interest rates. The notional dollar amount of the one outstanding swap at October 2, 2022 and January 2, 2022 was $250.0 million under which we pay a fixed rate and received a variable rate of interest (cash flow swap). Taking into account the interest rate swap, based on the $250.0 million principal outstanding under our Credit Agreement as of October 2, 2022, each hundred basis point change in SOFR would result in no change in interest expense annually.

This sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions.

We do not enter into derivative financial instruments for trading purposes (see Note 10, “Derivative Financial Instruments” of our unaudited consolidated financial statements).

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of October 2, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

During the quarterly period ended October 2, 2022, there were no changes in our internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

37

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we are a party to legal proceedings, including matters involving personnel and employment issues, product liability, personal injury, intellectual property and other proceedings arising in the ordinary course of business, which have not resulted in any material losses to date. Although management does not expect that the outcome in these proceedings will have a material adverse effect on our financial condition or results of operations, litigation is inherently unpredictable. Therefore, we could incur judgments or enter into settlements of claims that could materially impact our results.

See Note 7, “Commitments and Contingencies” to our unaudited consolidated financial statements for information regarding certain legal proceedings in which we are involved.

Item 1A. Risk Factors.

Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should carefully consider the risks and uncertainties referenced below, together with all of the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes. Any of those risks could materially and adversely affect our business, operating results, financial condition, or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment.

There have been no material changes to the Risk Factors described under “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table provides information about our share repurchase activity during the thirteen weeks ended October 2, 2022.

Period (1)	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the plans or programs (2)
July 4, 2022 - July 31, 2022		502,432	$	26.70		502,432	$	487,373,000
August 1, 2022 - August 28, 2022		457,650	$	29.49		457,650	$	473,875,000
August 29, 2022 - October 2, 2022		598,114	$	28.61		598,114	$	456,764,000

(1)Periodic information is presented by reference to our fiscal periods during the third quarter of fiscal year 2022.

(2)On March 2, 2022, our board of directors authorized a $600 million share repurchase program of our common stock. The shares may be purchased on a discretionary basis from time to time through December 31, 2024, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans.

39

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

40

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 thereunto duly authorized.

		SPROUTS FARMERS MARKET, INC.
Date: November 8, 2022	By:	/s/ Lawrence P. Molloy
	Name:	Lawrence P. Molloy
	Title:	Chief Financial Officer
		(Principal Financial Officer)

41

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Jack L. Sinclair, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sprouts Farmers Market, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2022	/s/ Jack L. Sinclair
	Jack L. Sinclair
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Lawrence P. Molloy, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sprouts Farmers Market, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2022	/s/ Lawrence P. Molloy
	Lawrence P. Molloy
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Sprouts Farmers Market, Inc. (the “Company”), on Form 10-Q for the quarterly period ended October 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack L. Sinclair, Chief Executive Officer of the Company, certify, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2022	/s/ Jack L. Sinclair
	Jack L. Sinclair
	Chief Executive Officer
	(Principal Executive Officer)

This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Sprouts Farmers Market, Inc. (the “Company”), on Form 10-Q for the quarterly period ended October 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lawrence P. Molloy, Chief Financial Officer of the Company, certify, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2022	/s/ Lawrence P. Molloy
	Lawrence P. Molloy
	Chief Financial Officer
	(Principal Financial Officer)

This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 02, 2022	Nov. 04, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 02, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Trading Symbol	SFM
Entity Registrant Name	Sprouts Farmers Market, Inc.
Entity Central Index Key	0001575515
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--01-01
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		105,852,470
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.001 par value
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Entity File Number	001-36029
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	32-0331600
Entity Address, Address Line One	5455 East 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
Document Quarterly Report	true
Document Transition Report	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 02, 2022	Apr. 03, 2022	Jan. 02, 2022
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
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 (Note 6)
Stockholders’ equity:
Undesignated preferred stock; $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding	0		0
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

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 02, 2022	Jan. 02, 2022
Statement of Financial Position [Abstract]
Undesignated preferred stock, par value	$ 0.001	$ 0.001
Undesignated preferred stock, shares authorized	10,000,000	10,000,000
Undesignated preferred stock, shares issued	0	0
Undesignated preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	106,491,322	111,114,374
Common stock, shares outstanding	106,491,322	111,114,374

XML

Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Income Statement [Abstract]
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

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 65,740	$ 63,867	$ 216,044	$ 207,929
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on cash flow hedging activities, net of income tax of $149, $707, $2,167 and $2,192	432	2,044	6,266	6,339
Reclassification of net gains (losses) on cash flow hedges to net income, net of income tax of ($274), ($370), ($651) and ($740)	(127)	(1,076)	(2,010)	(3,216)
Total other comprehensive income (loss)	305	968	4,256	3,123
Comprehensive income	$ 66,045	$ 64,835	$ 220,300	$ 211,052

XML

Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Statement of Comprehensive Income [Abstract]
Income tax expenses (Benefit) on cash flow hedging activities	$ 149	$ 707	$ 2,167	$ 2,192
Income tax expenses (Benefit) for reclassification of net gains (losses) on cash flow hedges	$ (44)	$ (372)	$ (695)	$ (1,112)

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Jan. 03, 2021	$ 881,293	$ 118	$ 686,648	$ 203,001	$ (8,474)
Beginning Balance, Shares at Jan. 03, 2021		117,953,435
Net income	207,929			207,929
Other comprehensive income (loss)	3,123				3,123
Issuance of shares under stock plans	1,918		1,918
Issuance of shares under stock plans, Shares		562,021
Repurchase and retirement of common stock	(137,484)	$ 5		(137,479)
Repurchase and retirement of common stock, Shares		(5,360,037)
Share-based compensation	11,304		11,304
Ending Balance at Oct. 03, 2021	968,083	$ 113	699,870	273,451	(5,351)
Ending Balance, Shares at Oct. 03, 2021		113,155,419
Beginning Balance at Jul. 04, 2021	949,123	$ 115	695,745	259,582	(6,319)
Beginning Balance, Shares at Jul. 04, 2021		115,180,832
Net income	63,867			63,867
Other comprehensive income (loss)	968				968
Issuance of shares under stock plans	672		672
Issuance of shares under stock plans, Shares		54,007
Repurchase and retirement of common stock	(50,000)	$ (2)		(49,998)
Repurchase and retirement of common stock, Shares		(2,079,420)
Share-based compensation	3,453		3,453
Ending Balance at Oct. 03, 2021	968,083	$ 113	699,870	273,451	(5,351)
Ending Balance, Shares at Oct. 03, 2021		113,155,419
Beginning Balance at Jan. 02, 2022	959,876	$ 111	704,701	258,822	(3,758)
Beginning Balance, Shares at Jan. 02, 2022		111,114,374
Net income	216,044			216,044
Other comprehensive income (loss)	4,256				4,256
Issuance of shares under stock plans	4,074		4,074
Issuance of shares under stock plans, Shares		814,002
Repurchase and retirement of common stock	(155,094)	$ (5)		(155,089)
Repurchase and retirement of common stock, Shares		(5,437,054)
Share-based compensation	11,672		11,672
Ending Balance at Oct. 02, 2022	1,040,828	$ 106	720,447	319,777	498
Ending Balance, Shares at Oct. 02, 2022		106,491,322
Beginning Balance at Jul. 03, 2022	1,013,690	$ 108	715,331	298,058	(193)
Beginning Balance, Shares at Jul. 03, 2022		107,967,677
Net income	65,740			65,740
Other comprehensive income (loss)	305				305
Issuance of shares under stock plans	1,364		1,364
Issuance of shares under stock plans, Shares		81,841
Repurchase and retirement of common stock	(44,023)	$ (2)	(44,021)
Repurchase and retirement of common stock, Shares		(1,558,196)
Share-based compensation	3,752		3,752
Ending Balance at Oct. 02, 2022	$ 1,040,828	$ 106	$ 720,447	$ 319,777	$ 498
Ending Balance, Shares at Oct. 02, 2022		106,491,322

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2022	Oct. 03, 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	0
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)	0
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
Supplemental disclosure of cash flow information
Cash paid for interest	8,415	8,710
Cash paid for income taxes	65,671	65,783
Leased assets obtained in exchange for new operating lease liabilities	96,956	96,713
Supplemental disclosure of non-cash investing and financing activities
Property and equipment in accounts payable and accrued liabilities	$ 17,834	$ 19,228

XML

Basis of Presentation

9 Months Ended

Oct. 02, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

Sprouts Farmers Market, Inc., a Delaware corporation, through its subsidiaries, operates as a healthy grocery store that offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. The Company continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. As of October 2, 2022, the Company operated 379 stores in 23 states. The “Company” is used to refer collectively to Sprouts Farmers Market, Inc. and unless the context otherwise requires, its subsidiaries.

The accompanying unaudited consolidated financial statements include the accounts of the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The information included in these consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the fiscal year ended January 2, 2022 (“fiscal year 2021”) included in the Company’s Annual Report on Form 10-K, filed on February 24, 2022.

The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.

The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. The fiscal year ending January 1, 2023 (“fiscal year 2022”) and fiscal year 2021 are 52-week years. The Company reports its results of operations on a 13-week quarter, except for 53-week fiscal years (in which the fourth quarter has 14 weeks).

All dollar amounts are in thousands, unless otherwise noted.

XML

Summary of Significant Accounting Policies

9 Months Ended

Oct. 02, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Revenue Recognition

The Company’s performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and payment from customers is also due at the time of sale. Proceeds from the sale of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer and the performance obligation is satisfied by the Company. The Company’s gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.

	Balance at January 2, 2022		Gift Cards Issued During Current Period but Not Redeemed(1)		Revenue Recognized from Beginning Liability			Balance at October 2, 2022
Gift card liability, net	$	12,586	$	1,911	$	(5,350	)	$	9,147

(1) net of estimated breakage

The Company does not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current period from performance obligations satisfied in previous periods, or any remaining performance obligations as of October 2, 2022.

Restricted Cash

Restricted cash relates to defined benefit plan forfeitures as well as healthcare, general liability and workers’ compensation restricted funds of approximately $2.0 million and $1.7 million as of October 2, 2022 and January 2, 2022, respectively. These balances are included in prepaid expenses and other current assets in the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

Reference Rate Reform

In March 2020 and January 2021, the FASB issued ASU no. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively. The amendments in these updates provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. In the thirty-nine weeks ended October 2, 2022, the Company adopted certain optional expedients provided under Topic 848 that permit its hedging relationships to continue without de-designation upon changes due to reference rate reform. The adoption of this guidance resulted in no material impact to the Company’s consolidated financial statements. See Note 10, “Derivative Financial Instruments” for more information on our hedging activities. The optional expedients and accounting relief in Topic 848 remain effective through December 31, 2022.

Recently Issued Accounting Pronouncements Not Yet Adopted

No other new accounting pronouncements issued or effective during the thirteen weeks ended October 2, 2022 had, or are expected to have, a material impact on the Company’s consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Oct. 02, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the valuation of derivative instruments, impairment analysis of goodwill, intangible assets and long-lived assets.

The following tables present the fair value hierarchy for the Company’s financial liabilities measured at fair value on a recurring basis as of October 2, 2022 and January 2, 2022:

October 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Total financial liabilities	$	—	$	250,000	$	—	$	250,000
Interest rate swap asset	$	—	$	687	$	—	$	687
Total assets	$	—	$	687	$	—	$	687
January 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Interest rate swap liability		—		5,107		—		5,107
Total financial liabilities	$	—	$	255,107	$	—	$	255,107

The Company’s interest rate swaps are considered Level 2 in the hierarchy and are valued using an income approach. Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates, which is readily available on public markets.

The determination of fair values of certain tangible and intangible assets for purposes of the Company’s goodwill impairment evaluation as described above is based upon Level 3 inputs. The weighted average cost of capital is estimated using information from comparable companies and management’s judgment related to the risk associated with the operations of the stores.

Cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued salaries and benefits approximate fair value because of the short maturity of those instruments. Based on comparable open market transactions, the fair value of the long-term debt approximated carrying value as of October 2, 2022 and January 2, 2022.

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Long-Term Debt and Finance Lease Liabilities

9 Months Ended

Oct. 02, 2022

Long Term Debt And Finance Lease Liabilities [Abstract]

Long-Term Debt and Finance Lease Liabilities

4. Long-Term Debt and Finance Lease Liabilities

A summary of long-term debt and finance lease liabilities is as follows:

			As of
Facility	Maturity	Interest Rate	October 2, 2022		January 2, 2022
Senior secured debt
$700.0 million Credit Agreement	March 25, 2027	Variable	$	250,000	$	—
Former Credit Facility	March 27, 2023	Variable		—		250,000
Finance lease liabilities	Various	n/a		8,992		9,656
Long-term debt and finance lease liabilities			$	258,992	$	259,656

New Credit Agreement

The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on March 25, 2022 (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $700.0 million. Amounts outstanding under the Credit Agreement may be increased from time to time in accordance with an expansion feature set forth in the Credit Agreement.

The Company capitalized debt issuance costs of $3.4 million related to the Credit Agreement, which, combined with the remaining $0.5 million debt issuance costs in respect of that certain amended and restated credit agreement entered into on March 27, 2018, by and among the Company, Intermediate Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Former Credit Facility”), which remained outstanding as of the time of Intermediate Holdings’ entry into the Credit Agreement, are being amortized on a straight-line basis to interest expense over the five-year term of the Credit Agreement.

The Credit Agreement provides for a $70.0 million letter of credit sub-facility (the "Letter of Credit Sub-Facility") and a $50.0 million swingline facility. Letters of credit issued under the Credit Agreement reduce the capacity of Intermediate Holdings to borrow under the Revolving Credit Facility. Letters of credit totaling $24.8 million have been issued as of October 2, 2022 under the Letter of Credit Sub-Facility, primarily to support the Company’s insurance programs.

Guarantees

Obligations under the Credit Agreement are guaranteed by the Company and substantially all of its existing and future wholly-owned material domestic subsidiaries, and are secured by first-priority security interests in substantially all of the assets of the Company, Intermediate Holdings, and the subsidiary guarantors, including, without limitation, a pledge by the Company of its equity interest in Intermediate Holdings.

Interest and Fees

Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00%) plus a 0.10% SOFR adjustment and 1.00% per annum or base rate (with a floor of 0.00%) plus 0.00% per annum. The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company’s total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05% based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

Under the terms of the Credit Agreement, the Company is obligated to pay a commitment fee on the available unused amount of the commitments, which commitment fee ranges between 0.10% to 0.225% per annum, pursuant to a pricing grid based on the Company’s total net leverage ratio. The commitment fees are subject to upward or downward adjustments of up to 0.01% based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

As of October 2, 2022, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus a 0.10% SOFR adjustment and 1.00% per annum.

The effective interest rate on 100% of outstanding debt under the Credit Agreement is fixed, reflecting the effects of floating to fixed interest rate swaps (see Note 10, “Derivative Financial Instruments”).

As of October 2, 2022, outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 1.00% per annum and an issuance fee of 0.125% per annum.

Payments and Borrowings

The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on March 25, 2027, subject to extensions as set forth therein.

The Company may prepay loans and permanently reduce commitments under the Credit Agreement at any time in agreed-upon minimum principal amounts, without premium or penalty (except SOFR breakage costs, if applicable).

In connection with the execution of the Credit Agreement, the obligations as borrower under the Former Credit Facility were prepaid and terminated.

During the thirteen and thirty-nine weeks ended October 2, 2022, the Company made no additional borrowings or principal payments, resulting in total outstanding debt under the Credit Agreement of $250.0 million as of October 2, 2022.

Covenants

The Credit Agreement contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to:

•incur additional indebtedness;

•grant additional liens;

•enter into sale-leaseback transactions;

•make loans or investments;

•merge, consolidate or enter into acquisitions;

•pay dividends or distributions;

•enter into transactions with affiliates;

•enter into new lines of business;

•modify the terms of certain debt or other material agreements; and

•change its fiscal year.

Each of these covenants is subject to customary and other agreed-upon exceptions.

In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00. Each of these covenants is tested as of the last day of each fiscal quarter.

The Company was in compliance with all applicable covenants under the Credit Agreement as of October 2, 2022.

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Income Taxes

9 Months Ended

Oct. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

The Company’s effective tax rate increased to 25.6% for the thirteen weeks ended October 2, 2022, compared to 23.0% for the thirteen weeks ended October 3, 2021.The increase in the effective tax rate is primarily due to a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits as well as an increase of non-deductible executive compensation.

The Company’s effective tax rate increased to 25.2% for the thirty-nine weeks ended October 2, 2022, compared to 24.1% for the thirty-nine weeks ended October 3, 2021.The increase in the effective tax rate is primarily due to a decrease in enhanced charitable contributions due to the expiration of CARES Act benefits as well as an increase of non-deductible executive compensation, partially offset by an increase in benefit from share-based payment awards in the current year. The income tax effect resulting from excess tax benefits of share-based payment awards were $1.6 million and $0.2 million for the thirty-nine weeks ended October 2, 2022 and October 3, 2021, respectively.

The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three years, following the tax year to which those filings relate.

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Related Party Transactions

9 Months Ended

Oct. 02, 2022

Related Party Transactions [Abstract]

Related Party Transactions

6. Related Party Transactions

On May 24, 2022, the Company appointed a new member to its board of directors who is an executive officer of a company that is a supplier of nutrition bars and related products to the Company for resale. The cost of sales recognized from this supplier was $1.2 million during the thirteen weeks ended October 2, 2022 and was $2.5 million since the beginning of the second quarter of 2022.

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Commitments and Contingencies

9 Months Ended

Oct. 02, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

. Commitments and Contingencies

The Company is exposed to claims and litigation matters arising in the ordinary course of business and uses various methods to resolve these matters that are believed to best serve the interests of the Company’s stakeholders. The Company’s primary contingencies are associated with self-insurance obligations and litigation matters. Self-insurance liabilities require significant judgment and actual claim settlements and associated expenses may differ from the Company’s current provisions for loss.

Proposition 65 Coffee Action

On April 13, 2010, an organization named Council for Education and Research on Toxics (“CERT”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against nearly 80 defendants who manufacture, package, distribute or sell brewed coffee, including the Company. CERT alleged that the defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. CERT seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties.

The Company, as part of a joint defense group, asserted multiple defenses against the lawsuit. On May 7, 2018, the trial court issued a ruling adverse to defendants on these defenses to liability. On October 1, 2019, before the court tried damages, remedies and attorneys' fees, California’s Office of Environmental Health Hazard Assessment adopted a regulation that exempted “Exposures to listed chemicals in coffee created by and inherent in the processes of roasting coffee beans or brewing coffee” from Proposition 65’s warning requirement. On August 25, 2020, the court granted the defense motion for summary judgment based on the regulation, and the case was dismissed.

On November 20, 2020, CERT filed a notice of appeal to appeal the ruling on the defense motion for summary judgment. On October 26, 2022, the appellate court affirmed the trial court’s decision. As the Company expects CERT to appeal this ruling, the Company is unable to predict or reasonably estimate any potential loss or effect on the Company or its operations. Accordingly, no loss contingency was recorded for this matter.

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Stockholders' Equity

9 Months Ended

Oct. 02, 2022

Equity [Abstract]

Stockholders' Equity

. Stockholders’ Equity

Share Repurchases

On March 2, 2022, the Company's board of directors authorized a new $600 million share repurchase program for its common stock. The new authorization replaced the Company's then-existing share repurchase authorization of $300 million that was due to expire on March 3, 2024, of which $99.8 million remained available upon its replacement. No further shares may be repurchased under the $300 million authorization. The following table outlines the common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of October 2, 2022.

Effective date	Expiration date	Amount authorized		Cost of repurchases		Authorization available
March 3, 2021	March 2, 2022	$	300,000	$	200,200	$	—
March 2, 2022	December 31, 2024	$	600,000	$	143,236	$	456,764

The shares under the Company’s repurchase programs may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The board’s authorization of the share repurchase programs does not obligate the Company to acquire any particular amount of common stock, and the repurchase programs may be commenced, suspended, or discontinued at any time.

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Number of common shares acquired		1,558,196		2,079,420		5,437,054		5,360,037
Average price per common share acquired	$	28.25	$	24.05	$	28.53	$	25.65
Total cost of common shares acquired	$	44,023	$	50,000	$	155,094	$	137,484

Shares purchased under the Company’s repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings.

Subsequent to October 2, 2022 and through November 4, 2022, the Company repurchased an additional 0.6 million shares of common stock for $17.8 million.

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Net Income Per Share

9 Months Ended

Oct. 02, 2022

Earnings Per Share [Abstract]

Net Income Per Share

9. Net Income Per Share

The computation of basic net income per share is based on the number of weighted average shares outstanding during the period. The computation of diluted net income per share includes the dilutive effect of share equivalents consisting of incremental shares deemed outstanding from the assumed exercise of options, assumed vesting of restricted stock units (“RSUs”) and assumed vesting of performance share awards (“PSAs”). PSAs are included in the computation of diluted net income per share only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be satisfied if the end of the reporting period were the end of the related performance period, and if the effect would be dilutive.

A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (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
Basic net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding		107,229		114,201		109,066		116,497
Basic net income per share	$	0.61	$	0.56	$	1.98	$	1.78
Diluted net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding -    basic		107,229		114,201		109,066		116,497
Dilutive effect of share-based awards:
Assumed exercise of options to purchase    shares		314		197		318		211
RSUs		266		245		371		376
PSAs		286		175		133		168
Weighted average shares and    equivalent shares outstanding		108,095		114,818		109,888		117,252
Diluted net income per share	$	0.61	$	0.56	$	1.97	$	1.77

For the thirteen weeks ended October 2, 2022, the Company had 0.3 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirteen weeks ended October 3, 2021, the Company had 0.5 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

For the thirty-nine weeks ended October 2, 2022, the Company had 0.5 million options, 0.1 million RSUs, and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirty-nine weeks ended October 3, 2021, the Company had 0.5 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

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Derivative Financial Instruments

9 Months Ended

Oct. 02, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

. Derivative Financial Instruments

The Company entered into an interest rate swap agreement in December 2017 to manage its cash flow associated with variable interest rates. This forward contract has been designated and qualifies as a cash flow hedge, and its change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. The forward contract initially consisted of five cash flow hedges, of which one was outstanding at October 2, 2022. To qualify as a hedge, the Company needs to formally document, designate and assess the effectiveness of the transactions that receive hedge accounting.

The notional dollar amount of the one outstanding swap was $250.0 million at October 2, 2022 and January 2, 2022, under which the Company pays a fixed rate and receives a variable rate of interest (cash flow swap). The cash flow swap hedges the change in interest rates on debt related to fluctuations in interest rates and has a length of one year, maturing in 2022. This interest rate swap has been designated and qualifies as a cash flow hedge and has met the requirements to assume zero ineffectiveness. The Company reviews the effectiveness of its hedging instruments on a quarterly basis. During the first quarter of 2022, the Company elected to apply certain hedge accounting optional expedients allowed under Topic 848. The expedients allow the Company to continue the method of assessing effectiveness as documented in the original hedge documentation and allows the reference rate on the hypothetical derivative to match the reference rate on the hedging instrument.

The counterparties to these derivative financial instruments are major financial institutions. The Company evaluates the credit ratings of the financial institutions and believes that credit risk is at an acceptable level. The following table summarizes the fair value of the Company’s derivative instruments designated as hedging instruments:

	As of October 2, 2022			As of January 2, 2022
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Other current assets	$	687	Other current assets	$	—
Interest rate swaps	Accrued liabilities	$	—	Accrued liabilities	$	5,107

The gain or loss on these derivative instruments is recognized in other comprehensive income, net of tax, with the portion related to current period interest payments reclassified to interest expense, net on the consolidated statements of income. The following table summarizes these losses classified on the consolidated statements of income:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Consolidated Statements of    Income Classification
Interest expense, net	$	171	$	1,448	$	2,705	$	4,328

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Comprehensive Income

9 Months Ended

Oct. 02, 2022

Equity [Abstract]

Comprehensive Income

11. Comprehensive Income

The following table presents the changes in accumulated other comprehensive income (loss) for the thirty-nine weeks ended October 3, 2021 and October 2, 2022.

	Cash Flow Hedges
Balance at January 3, 2021	$	(8,474	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,192		6,339
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($1,112)		(3,216	)
Total other comprehensive income (loss)		3,123
Balance at October 3, 2021	$	(5,351	)
Balance at January 2, 2022	$	(3,758	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,167		6,266
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($695)		(2,010	)
Total other comprehensive income (loss)		4,256
Balance at October 2, 2022	$	498

Amounts reclassified from accumulated other comprehensive income (loss) are included within interest expense, net on the consolidated statements of income.

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Segments

9 Months Ended

Oct. 02, 2022

Segment Reporting [Abstract]

Segments

12. Segments

The Company has one reportable and one operating segment, healthy grocery stores.

In accordance with ASC 606, the following table represents a disaggregation of revenue for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021.

	Thirteen weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	928,908	58.4	%	$	867,880	57.5	%
Non-Perishables		662,118	41.6	%		641,753	42.5	%
Net Sales	$	1,591,026	100.0	%	$	1,509,633	100.0	%
	Thirty-nine weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	2,817,268	58.4	%	$	2,668,532	57.9	%
Non-Perishables		2,010,401	41.6	%		1,938,541	42.1	%
Net Sales	$	4,827,669	100.0	%	$	4,607,073	100.0	%

The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care.

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Share-Based Compensation

9 Months Ended

Oct. 02, 2022

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

13. Share-Based Compensation

2022 Incentive Plan

In March 2022, the Company’s board of directors adopted the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Incentive Plan”), which became effective May 25, 2022, upon approval by the Company’s stockholders. The 2022 Incentive Plan provides team members of the Company, certain consultants and advisors who perform services for the Company, and non-employee members of the Company's board of directors with the opportunity to receive grants of equity awards, including stock options, RSUs, PSAs, and other stock-based awards. The 2022 Incentive Plan replaced the 2013 Incentive Plan (as described below).

Awards Granted under the 2022 Incentive Plan

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2022 Incentive Plan:

Grant Date	RSUs		PSAs		Options
June 7, 2022		58,057		—		—
September 7, 2022		21,598		—		—
Total		79,655		—		—
Weighted-average grant date fair value	$	27.75	$	—	$	—
Weighted-average exercise price		—		—		—

The aggregate number of shares of common stock that may be issued to team members and directors under the 2022 Incentive Plan may not exceed 6,600,000, subject to the following adjustments. If any awards granted under the 2022 Incentive Plan, terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid in shares, the shares will again be available for purposes of the 2022 Incentive Plan. In addition, the number of shares subject to outstanding awards under the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “2013 Incentive Plan”) that terminate, expire, are paid in cash, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Incentive Plan after the effective date of the 2022 Incentive Plan will be available for issuance under the 2022 Incentive Plan. As of October 2, 2022, there were 79,655 stock awards outstanding and 6,621,800 shares remaining available for issuance under the 2022 Incentive Plan.

2013 Incentive Plan

Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members. Upon adoption of the 2022 Incentive Plan on May 25, 2022, no further awards will be granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan.

Awards Granted under the 2013 Incentive Plan

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2013 Incentive Plan:

Grant Date	RSUs		PSAs		Options
March 15, 2022		370,177		147,846		211,352
March 21, 2022		104,913		14,260		20,270
Total		475,090		162,106		231,622
Weighted-average grant date fair value	$	31.60	$	31.52	$	10.58
Weighted-average exercise price		—		—	$	31.52

Stock Options

The Company uses the Black-Scholes option pricing model to estimate the fair value of options at grant date. Options vest in accordance with the terms set forth in the grant letter.

Time-based options vest annually over a period of three years.

RSUs

The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date. RSUs generally vest annually over a period of two or three years from the grant date.

PSAs

PSAs granted in 2018 were subject to the Company achieving certain earnings before interest and taxes (“EBIT”) performance targets for the 2020 fiscal year. The criteria was based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. The performance conditions with respect to fiscal year 2020 EBIT were deemed to have been met, and the PSAs vested at the maximum pay out level on the third anniversary of the grant date (March 2021). There were no outstanding 2018 PSAs as of October 2, 2022.

PSAs granted in 2019 are subject to the Company achieving certain EBIT performance targets for the 2021 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. The performance conditions with respect to fiscal year 2021 EBIT were deemed to have been met, and the PSAs vested at the maximum pay out level on the third anniversary of the grant date (March 2022). During the thirty-nine weeks ended October 2, 2022, 208,172 of the 2019 PSAs vested. There were no outstanding 2019 PSAs as of October 2, 2022.

PSAs granted in 2020 are subject to the Company achieving certain earnings before taxes (“EBT”) performance targets for the 2022 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2023).

PSAs granted in 2021 are subject to the Company achieving certain EBIT performance targets for the 2023 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2024).

PSAs granted in 2022 are subject to the Company achieving certain EBIT performance targets for the 2024 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2025).

Share-based Compensation Expense

The Company presents share-based compensation expense in selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Share-based compensation expense	$	3,752	$	3,453	$	11,672	$	11,304

The following share-based awards were outstanding as of October 2, 2022 and October 3, 2021:

	As of
	October 2, 2022		October 3, 2021
	(in thousands)
Options
Vested		313		244
Unvested		1,047		1,134
RSUs		974		935
PSAs		460		433

As of October 2, 2022, total unrecognized compensation expense and remaining weighted average recognition period related to outstanding share-based awards was as follows:

	Unrecognized compensation expense		Remaining weighted average recognition period
Options	$	3,781		1.1
RSUs		19,114		1.7
PSAs		784		1.4
Total unrecognized compensation expense at October 2, 2022	$	23,679

During the thirty-nine weeks ended October 2, 2022 and October 3, 2021, the Company received $4.1 million and $1.9 million, respectively, in cash proceeds from the exercise of options.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Oct. 02, 2022

Accounting Policies [Abstract]

Fiscal Years

The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. The fiscal year ending January 1, 2023 (“fiscal year 2022”) and fiscal year 2021 are 52-week years. The Company reports its results of operations on a 13-week quarter, except for 53-week fiscal years (in which the fourth quarter has 14 weeks).

Revenue Recognition

Revenue Recognition

The Company’s performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and payment from customers is also due at the time of sale. Proceeds from the sale of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer and the performance obligation is satisfied by the Company. The Company’s gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.

	Balance at January 2, 2022		Gift Cards Issued During Current Period but Not Redeemed(1)		Revenue Recognized from Beginning Liability			Balance at October 2, 2022
Gift card liability, net	$	12,586	$	1,911	$	(5,350	)	$	9,147

(1) net of estimated breakage

The Company does not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current period from performance obligations satisfied in previous periods, or any remaining performance obligations as of October 2, 2022.

Restricted Cash

Restricted Cash

Restricted cash relates to defined benefit plan forfeitures as well as healthcare, general liability and workers’ compensation restricted funds of approximately $2.0 million and $1.7 million as of October 2, 2022 and January 2, 2022, respectively. These balances are included in prepaid expenses and other current assets in the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Reference Rate Reform

In March 2020 and January 2021, the FASB issued ASU no. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively. The amendments in these updates provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. In the thirty-nine weeks ended October 2, 2022, the Company adopted certain optional expedients provided under Topic 848 that permit its hedging relationships to continue without de-designation upon changes due to reference rate reform. The adoption of this guidance resulted in no material impact to the Company’s consolidated financial statements. See Note 10, “Derivative Financial Instruments” for more information on our hedging activities. The optional expedients and accounting relief in Topic 848 remain effective through December 31, 2022.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

No other new accounting pronouncements issued or effective during the thirteen weeks ended October 2, 2022 had, or are expected to have, a material impact on the Company’s consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Oct. 02, 2022

Schedule of Estimated Breakage Revenue Recognized

Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.

	Balance at January 2, 2022		Gift Cards Issued During Current Period but Not Redeemed(1)		Revenue Recognized from Beginning Liability			Balance at October 2, 2022
Gift card liability, net	$	12,586	$	1,911	$	(5,350	)	$	9,147

(1) net of estimated breakage

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Fair Value Measurements (Tables)

9 Months Ended

Oct. 02, 2022

Fair Value Disclosures [Abstract]

Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis

The following tables present the fair value hierarchy for the Company’s financial liabilities measured at fair value on a recurring basis as of October 2, 2022 and January 2, 2022:

October 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Total financial liabilities	$	—	$	250,000	$	—	$	250,000
Interest rate swap asset	$	—	$	687	$	—	$	687
Total assets	$	—	$	687	$	—	$	687
January 2, 2022	Level 1		Level 2		Level 3		Total
Long-term debt	$	—	$	250,000	$	—	$	250,000
Interest rate swap liability		—		5,107		—		5,107
Total financial liabilities	$	—	$	255,107	$	—	$	255,107

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Long-Term Debt and Finance Lease Liabilities (Tables)

9 Months Ended

Oct. 02, 2022

Long Term Debt And Finance Lease Liabilities [Abstract]

Summary of Long-Term Debt and Finance Lease Liabilities

A summary of long-term debt and finance lease liabilities is as follows:

			As of
Facility	Maturity	Interest Rate	October 2, 2022		January 2, 2022
Senior secured debt
$700.0 million Credit Agreement	March 25, 2027	Variable	$	250,000	$	—
Former Credit Facility	March 27, 2023	Variable		—		250,000
Finance lease liabilities	Various	n/a		8,992		9,656
Long-term debt and finance lease liabilities			$	258,992	$	259,656

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Stockholders' Equity (Tables)

9 Months Ended

Oct. 02, 2022

Equity [Abstract]

Schedule of Common Stock Share Repurchase Programs Authorized by Board of Directors from Time to Time and Related Repurchase Activity and Available Authorized

The following table outlines the common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of October 2, 2022.

Effective date	Expiration date	Amount authorized		Cost of repurchases		Authorization available
March 3, 2021	March 2, 2022	$	300,000	$	200,200	$	—
March 2, 2022	December 31, 2024	$	600,000	$	143,236	$	456,764

Schedule of Share Repurchase Activity Under Share Repurchase Programs

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Number of common shares acquired		1,558,196		2,079,420		5,437,054		5,360,037
Average price per common share acquired	$	28.25	$	24.05	$	28.53	$	25.65
Total cost of common shares acquired	$	44,023	$	50,000	$	155,094	$	137,484

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Net Income Per Share (Tables)

9 Months Ended

Oct. 02, 2022

Earnings Per Share [Abstract]

Summary of Reconciliation of Numerators and Denominators of Basic and Diluted Net Income Per Share

A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (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
Basic net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding		107,229		114,201		109,066		116,497
Basic net income per share	$	0.61	$	0.56	$	1.98	$	1.78
Diluted net income per share:
Net income	$	65,740	$	63,867	$	216,044	$	207,929
Weighted average shares outstanding -    basic		107,229		114,201		109,066		116,497
Dilutive effect of share-based awards:
Assumed exercise of options to purchase    shares		314		197		318		211
RSUs		266		245		371		376
PSAs		286		175		133		168
Weighted average shares and    equivalent shares outstanding		108,095		114,818		109,888		117,252
Diluted net income per share	$	0.61	$	0.56	$	1.97	$	1.77

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Derivative Financial Instruments (Tables)

9 Months Ended

Oct. 02, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Fair Value of Derivative Instruments

The following table summarizes the fair value of the Company’s derivative instruments designated as hedging instruments:

	As of October 2, 2022			As of January 2, 2022
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Other current assets	$	687	Other current assets	$	—
Interest rate swaps	Accrued liabilities	$	—	Accrued liabilities	$	5,107

Summary of Losses of Derivative Instruments

The following table summarizes these losses classified on the consolidated statements of income:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Consolidated Statements of    Income Classification
Interest expense, net	$	171	$	1,448	$	2,705	$	4,328

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Comprehensive Income (Tables)

9 Months Ended

Oct. 02, 2022

Equity [Abstract]

Schedule of Changes in Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) for the thirty-nine weeks ended October 3, 2021 and October 2, 2022.

	Cash Flow Hedges
Balance at January 3, 2021	$	(8,474	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,192		6,339
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($1,112)		(3,216	)
Total other comprehensive income (loss)		3,123
Balance at October 3, 2021	$	(5,351	)
Balance at January 2, 2022	$	(3,758	)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax of $2,167		6,266
Reclassification of net losses on cash flow hedges to net income, net of income     tax of ($695)		(2,010	)
Total other comprehensive income (loss)		4,256
Balance at October 2, 2022	$	498

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Segments (Tables)

9 Months Ended

Oct. 02, 2022

Segment Reporting [Abstract]

Summary of Disaggregation of Revenue

In accordance with ASC 606, the following table represents a disaggregation of revenue for the thirteen and thirty-nine weeks ended October 2, 2022 and October 3, 2021.

	Thirteen weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	928,908	58.4	%	$	867,880	57.5	%
Non-Perishables		662,118	41.6	%		641,753	42.5	%
Net Sales	$	1,591,026	100.0	%	$	1,509,633	100.0	%
	Thirty-nine weeks ended
	October 2, 2022				October 3, 2021
Perishables	$	2,817,268	58.4	%	$	2,668,532	57.9	%
Non-Perishables		2,010,401	41.6	%		1,938,541	42.1	%
Net Sales	$	4,827,669	100.0	%	$	4,607,073	100.0	%

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Share-Based Compensation (Tables)

9 Months Ended

Oct. 02, 2022

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Share-Based Compensation Expense in Selling, General and Administrative Expenses

The Company presents share-based compensation expense in selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows:

	Thirteen weeks ended				Thirty-nine weeks ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Share-based compensation expense	$	3,752	$	3,453	$	11,672	$	11,304

Summary of Outstanding Share-Based Awards

The following share-based awards were outstanding as of October 2, 2022 and October 3, 2021:

	As of
	October 2, 2022		October 3, 2021
	(in thousands)
Options
Vested		313		244
Unvested		1,047		1,134
RSUs		974		935
PSAs		460		433

Summary of Total Unrecognized Compensation Expense and Remaining Weighted Average Recognition Period Related to Outstanding Share-Based Awards

As of October 2, 2022, total unrecognized compensation expense and remaining weighted average recognition period related to outstanding share-based awards was as follows:

	Unrecognized compensation expense		Remaining weighted average recognition period
Options	$	3,781		1.1
RSUs		19,114		1.7
PSAs		784		1.4
Total unrecognized compensation expense at October 2, 2022	$	23,679

Awards Granted under the 2022 Incentive Plan [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Share-Based Compensation Awards Granted

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2022 Incentive Plan:

Grant Date	RSUs		PSAs		Options
June 7, 2022		58,057		—		—
September 7, 2022		21,598		—		—
Total		79,655		—		—
Weighted-average grant date fair value	$	27.75	$	—	$	—
Weighted-average exercise price		—		—		—

Awards Granted under the 2013 Incentive Plan [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Share-Based Compensation Awards Granted

During the thirty-nine weeks ended October 2, 2022, the Company granted the following share-based compensation awards under the 2013 Incentive Plan:

Grant Date	RSUs		PSAs		Options
March 15, 2022		370,177		147,846		211,352
March 21, 2022		104,913		14,260		20,270
Total		475,090		162,106		231,622
Weighted-average grant date fair value	$	31.60	$	31.52	$	10.58
Weighted-average exercise price		—		—	$	31.52

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Basis of Presentation - Additional Information (Detail)	Oct. 02, 2022 State Store
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Operating stores | Store	379
Number of states entity operates | State	23

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Summary of Significant Accounting Policies - Schedule of Estimated Breakage Revenue Recognized (Detail) - Gift Card Revenue [Member] $ in Thousands	9 Months Ended
	Oct. 02, 2022 USD ($)
Disaggregation Of Revenue [Line Items]
Net gift card liability beginning balance	$ 12,586
Gift cards issued during current period but not redeemed	1,911	[1]
Revenue recognized from beginning liability	(5,350)
Net gift card liability ending balance	$ 9,147

[1] net of estimated breakage

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Millions	Oct. 02, 2022	Jan. 02, 2022
ASU no. 2021-01 [Member]
Summary Of Significant Accounting Policy [Line Items]
Change in accounting principle, ASU, adopted	true
Prepaid Expenses and Other Current Assets [Member]
Summary Of Significant Accounting Policy [Line Items]
Restricted cash related to defined benefit plan forfeitures and healthcare, general liability and workers compensation plan benefits	$ 2.0	$ 1.7

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Fair Value Measurements - Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis (Detail) - Recurring [Member] - USD ($) $ in Thousands	Oct. 02, 2022	Jan. 02, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Long-term debt	$ 250,000	$ 250,000
Interest rate swap liability		5,107
Total financial liabilities	250,000	255,107
Interest rate swap asset	687
Total assets	687
Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Long-term debt	250,000	250,000
Interest rate swap liability		5,107
Total financial liabilities	250,000	$ 255,107
Interest rate swap asset	687
Total assets	$ 687

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Long-Term Debt and Finance Lease Liabilities - Summary of Long-Term Debt and Finance Lease Liabilities (Detail) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2022	Jan. 02, 2022
Long Term Debt And Finance Lease Liabilities [Line Items]
Long-term finance lease liabilities	$ 8,992	$ 9,656
Long-term debt and finance lease liabilities	258,992	259,656
Senior Lien [Member] | Secured Debt [Member] | $700.0 million Credit Agreement [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Long-term debt	$ 250,000
Debt instrument maturity	Mar. 25, 2027
Debt instrument, Interest Rate	Variable
Senior Lien [Member] | Secured Debt [Member] | Former Credit Facility [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Long-term debt		$ 250,000
Debt instrument maturity	Mar. 27, 2023
Debt instrument, Interest Rate	Variable

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Long-Term Debt and Finance Lease Liabilities - Summary of Long-Term Debt and Finance Lease Liabilities (Parenthetical) (Detail) $ in Millions	Oct. 02, 2022 USD ($)
Senior Lien [Member] | Secured Debt [Member] | $700.0 million Credit Agreement [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Debt instrument face amount	$ 700.0

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Long-Term Debt and Finance Lease Liabilities - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended
	Oct. 02, 2022	Oct. 02, 2022	Mar. 25, 2022	Mar. 27, 2018
Credit Agreement [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Fixed portion of outstanding debt percentage		100.00%
Participation fee		1.00%
Issuance fee		0.125%
Credit facility termination date		Mar. 25, 2027
Borrowings during the period	$ 0	$ 0
Principal payments on the Credit Facility	0	0
Borrowings under credit facilities	250,000,000.0	$ 250,000,000.0
Net leverage ratio		375.00%
Interest coverage ratio		3.00%
Secured Debt [Member] | Credit Agreement [Member] | SOFR [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Interest rate spread on base rate		0.10%
Secured Debt [Member] | Current Credit Facility Agreement [Member] | SOFR [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Interest rate spread on base rate		1.00%
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Debt instrument face amount	70,000,000.0	$ 70,000,000.0
Letters of credit issued	24,800,000	$ 24,800,000
Interest rate spread on base rate		0.05%
Credit facility commitment fee percentage subject to upward or downward adjustments		0.01%
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member] | SOFR [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Line of credit interest rate terms		at the Company's option, either at the Term SOFR (with a floor of 0.00%) plus a 0.10% SOFR adjustment and 1.00% per annum or base rate (with a floor of 0.00%) plus 0.00% per annum.
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member] | Prime Plus [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Interest rate spread on base rate		0.00%
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member] | Minimum [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Credit facility unused commitment fee percentage		0.10%
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member] | Maximum [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Credit facility unused commitment fee percentage		0.225%
Senior Lien [Member] | Secured Debt [Member] | Credit Agreement [Member] | Swingline Loan Sub-facility [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Debt instrument face amount	50,000,000.0	$ 50,000,000.0
Senior Lien [Member] | Secured Debt [Member] | Current Credit Facility Agreement [Member] | SOFR [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Interest rate spread on base rate		0.10%
Senior Lien [Member] | Secured Debt [Member] | Current Credit Facility Agreement [Member] | Secured Overnight Financing Rate [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Interest rate spread on base rate		1.00%
Senior Lien [Member] | Secured Debt [Member] | Former Credit Facility [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Capitalized debt issuance costs				$ 500,000
Senior Lien [Member] | Secured Debt [Member] | $700.0 million Credit Facility [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Debt instrument face amount	$ 700,000,000.0	$ 700,000,000.0
Senior Lien [Member] | Secured Debt [Member] | $700.0 million Credit Facility [Member] | Credit Agreement [Member]
Long Term Debt And Finance Lease Liabilities [Line Items]
Credit facility maximum borrowing capacity			$ 700,000,000.0
Capitalized debt issuance costs			$ 3,400,000

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 03, 2022	Oct. 02, 2022	Oct. 03, 2021
Income Tax Disclosure [Abstract]
Effective tax rate	25.60%	23.00%		25.20%	24.10%
Excess tax benefits of equity-based compensation			$ 0.2	$ 1.6

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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Oct. 02, 2022	Oct. 02, 2022
Nutrition Bars Supplier [Member]
Related Party Transaction [Line Items]
Cost Of Sales Recognized from supplier	$ 1.2	$ 2.5

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Commitments and Contingencies - Additional Information (Detail)	Apr. 13, 2010 Defendant
Superior Court of State of California and County of Los Angeles [Member]
Other Commitments [Line Items]
Number of defendants	80

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Stockholders' Equity - Additional Information (Detail) - USD ($) shares in Millions	Nov. 04, 2022	Oct. 02, 2022	Mar. 02, 2022
Equity Class Of Treasury Stock [Line Items]
Common stock repurchased during the period, value	$ 17,800,000
Subsequent Event [Member]
Equity Class Of Treasury Stock [Line Items]
Common stock repurchased during the period, shares	0.6
March 3, 2021 Share Repurchase Program [Member]
Equity Class Of Treasury Stock [Line Items]
Shares authorized to be repurchased		$ 300,000,000	$ 300,000,000
Authorization available		0	99,800,000
March 2, 2022 [Member]
Equity Class Of Treasury Stock [Line Items]
Shares authorized to be repurchased		600,000,000	$ 600,000,000
Authorization available		$ 456,764,000

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Stockholders' Equity - Schedule of Common Stock Share Repurchase Programs Authorized by Board of Directors from Time to Time and Related Repurchase Activity and Available Authorized (Detail) - USD ($)	9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Mar. 02, 2022
Equity Class Of Treasury Stock [Line Items]
Cost of repurchases	$ 155,094,000	$ 137,484,000
March 3, 2021 [Member]
Equity Class Of Treasury Stock [Line Items]
Effective date	Mar. 03, 2021
Expiration date	Mar. 02, 2022
Amount authorized	$ 300,000,000		$ 300,000,000
Cost of repurchases	200,200,000
Authorization available	$ 0		99,800,000
March 2, 2022 [Member]
Equity Class Of Treasury Stock [Line Items]
Effective date	Mar. 02, 2022
Expiration date	Dec. 31, 2024
Amount authorized	$ 600,000,000		$ 600,000,000
Cost of repurchases	143,236,000
Authorization available	$ 456,764,000

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Stockholders' Equity - Schedule of Share Repurchase Activity under Share Repurchase Programs (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Equity [Abstract]
Number of common shares acquired	1,558,196	2,079,420	5,437,054	5,360,037
Average price per common share acquired	$ 28.25	$ 24.05	$ 28.53	$ 25.65
Total cost of common shares acquired	$ 44,023	$ 50,000	$ 155,094	$ 137,484

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Net Income Per Share - Summary of Reconciliation of Numerators and Denominators of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Basic net income per share:
Basic net income per share	$ 0.61	$ 0.56	$ 1.98	$ 1.78
Diluted net income per share:
Net income	$ 65,740	$ 63,867	$ 216,044	$ 207,929
Weighted average shares outstanding - basic	107,229,000	114,201,000	109,066,000	116,497,000
Dilutive effect of share-based awards:
Assumed exercise of options to purchase shares	314,000	197,000	318,000	211,000
Weighted average shares and equivalent shares outstanding	108,095,000	114,818,000	109,888,000	117,252,000
Diluted net income per share	$ 0.61	$ 0.56	$ 1.97	$ 1.77
RSUs [Member]
Dilutive effect of share-based awards:
Dilutive effect	266,000	245,000	371,000	376,000
PSAs [Member]
Dilutive effect of share-based awards:
Dilutive effect	286,000	175,000	133,000	168,000

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Net Income Per Share - Additional Information (Detail) - shares shares in Millions	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Stock option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	0.3	0.5	0.5	0.5
RSUs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities			0.1
PSAs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	0.3	0.3	0.3	0.3

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Derivative Financial Instruments - Additional Information (Detail) $ in Millions	9 Months Ended
	Oct. 02, 2022 USD ($) Hedge Swap	Jan. 02, 2022 USD ($)
Derivative [Line Items]
Derivative, cash flow swaps length period	1 year
Cash flow swaps mature annually, ending year	2022
Cash Flow Hedges [Member]
Derivative [Line Items]
Interest rate swaps hedge ineffectiveness	0.00%
Swaps [Member]
Derivative [Line Items]
Derivative, notional amount of outstanding swaps | $	$ 250.0	$ 250.0
Forward Contract [Member]
Derivative [Line Items]
Derivative, number of cash flow hedges | Hedge	5
Number of outstanding swaps | Swap	1

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Derivative Financial Instruments - Summary of Fair Value of Derivative Instruments (Detail) - Designated as Hedging Instrument [Member] - Swaps [Member] - USD ($) $ in Thousands	Oct. 02, 2022	Jan. 02, 2022
Derivatives Fair Value [Line Items]
Liability Derivatives, Fair Value		$ 5,107
Asset Derivatives, Fair Value	$ 687

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Derivative Financial Instruments - Summary of Losses of Derivative Instruments (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Derivative Instruments Gain Loss [Line Items]
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Interest Income (Expense), Net	Interest Income (Expense), Net	Interest Income (Expense), Net	Interest Income (Expense), Net
Interest expense, net	$ 171	$ 1,448	$ 2,705	$ 4,328

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Comprehensive Income - Changes In Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 1,013,690	$ 949,123	$ 959,876	$ 881,293
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax	432	2,044	6,266	6,339
Reclassification of net gains (losses) on cash flow hedges to net income, net of income tax	(127)	(1,076)	(2,010)	(3,216)
Total other comprehensive income (loss)	305	968	4,256	3,123
Ending Balance	1,040,828	968,083	1,040,828	968,083
Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance			(3,758)	(8,474)
Other comprehensive income (loss), net of tax
Unrealized gains on cash flow hedging activities, net of income tax			6,266	6,339
Reclassification of net gains (losses) on cash flow hedges to net income, net of income tax			(2,010)	(3,216)
Total other comprehensive income (loss)			4,256	3,123
Ending Balance	$ 498	$ (5,351)	$ 498	$ (5,351)

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Comprehensive Income - Changes In Accumulated Other Comprehensive Income (Loss) (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Accumulated Other Comprehensive Income Loss [Line Items]
Income tax expenses (Benefit) on cash flow hedging activities	$ 149	$ 707	$ 2,167	$ 2,192
Income tax expenses (Benefit) for reclassification of net gains (losses) on cash flow hedges	$ (44)	$ (372)	(695)	(1,112)
Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Income tax expenses (Benefit) on cash flow hedging activities			2,167	2,192
Income tax expenses (Benefit) for reclassification of net gains (losses) on cash flow hedges			$ (695)	$ (1,112)

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Segments - Additional Information (Detail)	9 Months Ended
	Oct. 02, 2022 Segment
Segment Reporting [Abstract]
Number of reportable segment	1
Number of operating segment	1

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Segments - Summary of Disaggregation of Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Disaggregation Of Revenue [Line Items]
Net Sales, amount	$ 1,591,026	$ 1,509,633	$ 4,827,669	$ 4,607,073
Sales Revenue, Goods, Net [Member] | Product Concentration Risk [Member]
Disaggregation Of Revenue [Line Items]
Net Sales, percentage	100.00%	100.00%	100.00%	100.00%
Perishables [Member]
Disaggregation Of Revenue [Line Items]
Net Sales, amount	$ 928,908	$ 867,880	$ 2,817,268	$ 2,668,532
Perishables [Member] | Sales Revenue, Goods, Net [Member] | Product Concentration Risk [Member]
Disaggregation Of Revenue [Line Items]
Net Sales, percentage	58.40%	57.50%	58.40%	57.90%
Non-Perishables [Member]
Disaggregation Of Revenue [Line Items]
Net Sales, amount	$ 662,118	$ 641,753	$ 2,010,401	$ 1,938,541
Non-Perishables [Member] | Sales Revenue, Goods, Net [Member] | Product Concentration Risk [Member]
Disaggregation Of Revenue [Line Items]
Net Sales, percentage	41.60%	42.50%	41.60%	42.10%

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Share-Based Compensation - Summary of Stock-Based Compensation Awards Granted (Detail)	9 Months Ended
	Oct. 02, 2022 $ / shares shares
2013 Incentive Plan [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	475,090
Weighted-average grant date fair value | $ / shares	$ 31.60
Weighted-average exercise price | $ / shares	$ 0
2013 Incentive Plan [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	162,106
Weighted-average grant date fair value | $ / shares	$ 31.52
Weighted-average exercise price | $ / shares	$ 0
2013 Incentive Plan [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	231,622
Weighted-average grant date fair value | $ / shares	$ 10.58
Weighted-average exercise price | $ / shares	$ 31.52
2013 Incentive Plan [Member] | March 15, 2022 [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	370,177
2013 Incentive Plan [Member] | March 15, 2022 [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	147,846
2013 Incentive Plan [Member] | March 15, 2022 [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	211,352
2013 Incentive Plan [Member] | March 21, 2022 [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	104,913
2013 Incentive Plan [Member] | March 21, 2022 [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	14,260
2013 Incentive Plan [Member] | March 21, 2022 [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	20,270
Awards Granted under the 2022 Incentive Plan [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	79,655
Weighted-average grant date fair value | $ / shares	$ 27.75
Weighted-average exercise price | $ / shares	$ 0
Awards Granted under the 2022 Incentive Plan [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0
Weighted-average grant date fair value | $ / shares	$ 0
Weighted-average exercise price | $ / shares	$ 0
Awards Granted under the 2022 Incentive Plan [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0
Weighted-average grant date fair value | $ / shares	$ 0
Weighted-average exercise price | $ / shares	$ 0
Awards Granted under the 2022 Incentive Plan [Member] | June 7, 2022 [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	58,057
Awards Granted under the 2022 Incentive Plan [Member] | June 7, 2022 [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0
Awards Granted under the 2022 Incentive Plan [Member] | June 7, 2022 [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0
Awards Granted under the 2022 Incentive Plan [Member] | September 7, 2022 [Member] | RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	21,598
Awards Granted under the 2022 Incentive Plan [Member] | September 7, 2022 [Member] | PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0
Awards Granted under the 2022 Incentive Plan [Member] | September 7, 2022 [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock	0

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Share-Based Compensation - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended		12 Months Ended
	Mar. 31, 2018	Oct. 02, 2022	Oct. 03, 2021	Jan. 03, 2021	Dec. 29, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from exercise of stock options		$ 4,074	$ 1,918
Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from exercise of stock options		$ 4,100	$ 1,900
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, outstanding		974,000	935,000
RSUs [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		2 years
RSUs [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, outstanding		460,000	433,000
PSAs [Member] | March 2018 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards description		The criteria was based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted.
Number of shares, outstanding		0
PSAs [Member] | 2019 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards description		The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted.
Awards vested		208,172
Number of shares, outstanding		0
PSAs [Member] | 2020 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards description		The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted.
PSAs [Member] | 2021 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards description		The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted.
PSAs [Member] | 2022 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards description		The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted.
PSAs [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards payout percentage of shares granted	0.00%	0.00%		0.00%	0.00%
PSAs [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock awards payout percentage of shares granted	200.00%	200.00%		200.00%	200.00%
Third Anniversary [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
Awards Granted under the 2022 Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance under plan		6,600,000
Stock awards outstanding		79,655
Remaining shares available for issuance		6,621,800

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Share-Based Compensation - Summary of Share-Based Compensation Expense in Selling, General and Administrative Expenses (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2022	Oct. 03, 2021	Oct. 02, 2022	Oct. 03, 2021
Share-Based Payment Arrangement [Abstract]
Share-based compensation expense	$ 3,752	$ 3,453	$ 11,672	$ 11,304

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Share-Based Compensation - Summary of Outstanding Share-Based Awards (Detail) - shares shares in Thousands	Oct. 02, 2022	Oct. 03, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested options, outstanding	313	244
Unvested options, outstanding	1,047	1,134
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based awards other than options, outstanding	974	935
PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based awards other than options, outstanding	460	433

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Share-Based Compensation - Summary of Total Unrecognized Compensation Expense and Remaining Weighted Average Recognition Period Related to Outstanding Share-Based Awards (Detail) $ in Thousands	9 Months Ended
	Oct. 02, 2022 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense at July 3, 2022	$ 23,679
Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to outstanding options	$ 3,781
Remaining weighted average recognition period	1 year 1 month 6 days
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to outstanding equity-based awards other than options	$ 19,114
Remaining weighted average recognition period	1 year 8 months 12 days
PSAs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to outstanding equity-based awards other than options	$ 784
Remaining weighted average recognition period	1 year 4 months 24 days