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Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 2021 Results

February, 24, 2022

PHOENIX, Feb. 24, 2022 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week fourth quarter and 52-week year ending January 2, 2022.Period-over-period comparison stated herein reflect 13 and 52 weeks in the fourth quarter and fiscal year 2021 to 14 and 53 weeks in the fourth quarter and fiscal year 2020, respectively, unless otherwise noted(1).

"We are pleased that results for both sales and earnings exceeded our expectations for the quarter and are encouraged by the fact that we experienced quarterly positive comp transactions,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market. "We made progress in 2021 on our strategic roadmap, which sets us up for continued growth and financial success in the years to come. More importantly, I am amazed each and every day by the incredible contribution and dedication of our approximately 31,000 team members, who are committed to providing a broad array of healthy options at great prices for Sprouts' customers."

Fourth Quarter Highlights (2) :

  • Net sales totaled $1.49 billion; a 7% decrease from the same period in 2020, primarily due to the $122 million in sales during the extra week of the fourth quarter of 2020. Net sales increased 9% from the same period in 2019
  • Comparable store sales growth of -1.1% and two-year comparable store sales growth of 2.7%(3)
  • Gross margin of 35.7%, a decrease of approximately 100 basis points to the same period in 2020 and an increase of approximately 135 basis points from the same period in 2019
  • Selling, general and administrative expenses ("SG&A") totaled $449 million, a decrease of $15 million primarily due to the $29 million of SG&A costs for the extra week in 2020. SG&A increased 15.8% compared to the same period in 2019
  • Net income of $36 million; compared to net income of $68 million and adjusted net income(4) of $70 million in the same period in 2020; and compared to net income of $32 million from the same period in 2019
  • Diluted earnings per share of $0.32; compared to $0.58 diluted earnings per share and adjusted diluted earnings per share(4) of $0.59 in the same period in 2020; and compared to $0.27 diluted earnings per share from the same period in 2019

Fiscal Year 2021 Highlights (2) :

  • Net sales of $6.1 billion; a 6% decrease from 2020, primarily due to cycling the demand from the COVID-19 pandemic, as well as the 53rd week in 2020. Net sales increased 8% from the same period 2019
  • Comparable store sales growth of -6.7% and two-year comparable store sales growth of 0.4%(3)
  • Gross margin of 36.2%, a decrease of approximately 55 basis points compared to the same period in 2020 and an increase of approximately 260 basis points from the same period in 2019
  • SG&A totaled $1.75 billion, a decrease of $116 million, reflective of lower COVID-19 pandemic response costs in 2021 and the 53rd week in 2020. SG&A increased 12.8% compared to the same period in 2019
  • Net income of $244 million; compared to net income of $287 million and adjusted net income(4) of $294 million in 2020; and compared to net income of $150 million in 2019
  • Diluted earnings per share of $2.10; compared to $2.43 diluted earnings per share and adjusted diluted earnings per share(4) of $2.49 in 2020; and compared to $1.25 diluted earnings per share in 2019
  • Sprouts opened 12 new stores and relocated one, resulting in 374 stores in 23 states as of January 2, 2022

Leverage and Liquidity in 2021

  • Generated cash from operations of $365 million
  • Invested $81 million in capital expenditures net of landlord reimbursement, primarily for new stores
  • Repurchased 7.4 million shares of common stock for a total investment of $188 million.
  • Sprouts ended the year with:
    • $250 million balance on its revolving credit facility
    • $28 million of letters of credit outstanding under the facility
    • $245 million in cash and cash equivalents
    • $112 million available under the current share repurchase authorization.

1 2020 included a 14th week in the fourth quarter. This extra week added approximately $122 million to sales, $16 million to EBIT and $0.10 to diluted earnings per share in the fourth quarter of 2020.

2 The Company’s results for the fourth quarter of 2020 and FY 2020 were significantly impacted by the COVID-19 pandemic. Accordingly, this presentation also includes certain comparisons to results in the fourth quarter of 2019 and FY 2019.

3 To account for the 53rd week in fiscal 2020 we shifted each week back one week, thereby ignoring the first week of fiscal 2020 to better align holidays for comparison purposes. More information can be found at investors.sprouts.com under additional reports.

4 Adjusted net income and adjusted diluted earnings per share, non-GAAP financial measures, exclude the impact of certain special items. There were no such adjustments for the quarter or fiscal year ended January 2, 2022 or the quarter ended December 29, 2019. See the “Non-GAAP Financial Measures” section of this release for additional information about these items.

Outlook

The following provides our expected outlook for first quarter and full-year 2022:

       
  First Quarter and Full Year 2022 Outlook    
    Q1 2022 Full-Year 2022 Outlook
  Net sales growth   4.0% to 6.0%
  Unit growth   15 to 20 new stores
  Comparable store sales growth 0.0% to 2.0% 0.0% to 2.0%
  Adjusted EBIT   $330M to $345M
  Adjusted diluted earnings per share $0.69 to $0.73 $2.14 to $2.24
  Effective tax rate   Approximately 25%
  Capital expenditures   $150M to $170M
  (net of landlord reimbursements)    

Fourth Quarter and Full Year 2021 Conference Call

Sprouts will hold a conference call at 3 p.m. Mountain Standard Time (5 p.m. Eastern Standard Time) on Thursday, February 24, 2022, during which Sprouts executives will further discuss fourth quarter and fiscal year 2021 financial results.

A webcast of the conference call will be available through Sprouts’ investor relations webpage located at investors.sprouts.com. Participants should register on the website approximately 15 minutes prior to the start of the webcast.

The audio replay will remain available for 72 hours and can be accessed by dialing 855-859-2056 (toll-free) or 404-537-3406 (international) and entering the confirmation code: 6589237.

Important Information Regarding Outlook

There is no guarantee that Sprouts will achieve its projected financial expectations, which are based on management estimates, currently available information and assumptions that management believes to be reasonable. These expectations are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. See “Forward-Looking Statements” below.

Forward-Looking Statements

Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact (including, but not limited to, statements to the effect that Sprouts Farmers Market or its management "anticipates," "plans," "estimates," "expects," or "believes," or the negative of these terms and other similar expressions) should be considered forward-looking statements, including, without limitation, statements regarding the company’s outlook, growth, opportunities and long-term strategy. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this release. These risks and uncertainties include, without limitation, risks associated with the impact of the COVID-19 pandemic; the company’s ability to execute on its long-term strategy; the company’s ability to successfully compete in its competitive industry; the company’s ability to successfully open new stores; the company’s ability to manage its growth; the company’s ability to maintain or improve its operating margins; the company’s ability to identify and react to trends in consumer preferences; product supply disruptions; equipment supply disruptions; general economic conditions; accounting standard changes; and other factors as set forth from time to time in the company’s Securities and Exchange Commission filings, including, without limitation, the company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available, except as required by law.

Corporate Profile

Sprouts is the place where goodness grows. True to its farm-stand heritage, Sprouts offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. The healthy grocer continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. Headquartered in Phoenix, and one of the fastest-growing retailers in the country, Sprouts employs approximately 31,000 team members and operates more than 370 stores in 23 states nationwide. To learn more about Sprouts, and the good it brings communities, visit about.sprouts.com.

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

 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

    Thirteen weeks ended     Fourteen weeks ended     Fifty-two weeks ended     Fifty-three weeks ended  
    January 2,
2022
    January 3,
2021
    January 2,
2022
    January 3,
2021
 
Net sales   $ 1,492,796     $ 1,601,834     $ 6,099,869     $ 6,468,759  
Cost of sales     959,568       1,013,805       3,890,657       4,089,470  
Gross profit     533,228       588,029       2,209,212       2,379,289  
Selling, general and administrative expenses     448,707       463,635       1,748,205       1,863,869  
Depreciation and amortization (exclusive of depreciation included
in cost of sales)
    30,222       31,487       122,258       124,124  
Store closure and other costs, net     2,916       (25 )     4,673       (369 )
Income from operations     51,383       92,932       334,076       391,665  
Interest expense, net     2,844       3,106       11,684       14,787  
Income before income taxes     48,539       89,826       322,392       376,878  
Income tax provision     12,311       21,429       78,235       89,428  
Net income   $ 36,228     $ 68,397     $ 244,157     $ 287,450  
Net income per share:                        
Basic   $ 0.32     $ 0.58     $ 2.12     $ 2.44  
Diluted   $ 0.32     $ 0.58     $ 2.10     $ 2.43  
Weighted average shares outstanding:                        
Basic     112,019       117,951       115,377       117,821  
Diluted     112,786       118,315       116,077       118,224  


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

    January 2,
2022
    January 3,
2021
 
ASSETS            
Current assets:            
Cash and cash equivalents   $ 245,287     $ 169,697  
Accounts receivable, net     21,574       14,815  
Inventories     265,387       254,224  
Prepaid expenses and other current assets     35,468       27,224  
Total current assets     567,716       465,960  
Property and equipment, net of accumulated depreciation     716,029       726,500  
Operating lease assets, net     1,072,019       1,045,408  
Intangible assets, net of accumulated amortization     184,960       184,960  
Goodwill     368,878       368,878  
Other assets     13,513       14,698  
Total assets   $ 2,923,115     $ 2,806,404  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $ 145,901     $ 139,337  
Accrued liabilities     155,996       143,402  
Accrued salaries and benefits     58,743       76,695  
Current portion of operating lease liabilities     151,755       135,739  
Current portion of finance lease liabilities     1,078       959  
Total current liabilities     513,473       496,132  
Long-term operating lease liabilities     1,095,909       1,069,535  
Long-term debt and finance lease liabilities     259,656       260,459  
Other long-term liabilities     36,306       40,912  
Deferred income tax liability     57,895       58,073  
Total liabilities     1,963,239       1,925,111  
Commitments and contingencies            
Stockholders’ equity:            
Undesignated preferred stock; $0.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding
           
Common stock, $0.001 par value; 200,000,000 shares authorized,
111,114,374 shares issued and outstanding, January 2, 2022;
117,953,435 shares issued and outstanding, January 3, 2021
    111       118  
Additional paid-in capital     704,701       686,648  
Accumulated other comprehensive loss     (3,758 )     (8,474 )
Retained earnings     258,822       203,001  
Total stockholders’ equity     959,876       881,293  
Total liabilities and stockholders’ equity   $ 2,923,115     $ 2,806,404  


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

    Fifty-two
weeks ended
    Fifty-three
weeks ended
 
    January 2,
2022
    January 3,
2021
 
Operating activities            
Net income   $ 244,157     $ 287,450  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization expense     125,541       126,507  
Operating lease asset amortization     108,517       99,276  
Store closure and other costs, net     4,762       (321 )
Share-based compensation     15,883       14,339  
Deferred income taxes     (178 )     3,717  
Other non-cash items     1,167       3,683  
Changes in operating assets and liabilities:            
Accounts receivable     16,928       25,977  
Inventories     (11,417 )     21,754  
Prepaid expenses and other current assets     (5,879 )     (14,970 )
Other assets     (1,782 )     (5,461 )
Accounts payable     4,523       20,184  
Accrued liabilities     610       4,296  
Accrued salaries and benefits     (17,951 )     28,116  
Accrued income tax           (2,005 )
Operating lease liabilities     (120,483 )     (120,085 )
Other long-term liabilities     401       1,578  
     Cash flows from operating activities     364,799       494,035  
Investing activities            
Purchases of property and equipment     (102,378 )     (121,968 )
     Cash flows used in investing activities     (102,378 )     (121,968 )
Financing activities            
Payments on revolving credit facilities           (288,000 )
Payments on finance lease obligations     (685 )     (754 )
Repurchase of common stock     (188,343 )      
Proceeds from exercise of stock options     2,170       1,343  
     Cash flows used in financing activities     (186,858 )     (287,411 )
     Increase in cash, cash equivalents, and restricted cash     75,563       84,656  
Cash, cash equivalents, and restricted cash at beginning of the period     171,441       86,785  
Cash, cash equivalents, and restricted cash at the end of the period   $ 247,004     $ 171,441  

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States (“GAAP”), the company presents EBITDA, adjusted EBITDA, adjusted EBIT, adjusted net income and adjusted diluted earnings per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP. The company's management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the company, and certain of these measures may be used as components of incentive compensation.

The company defines EBITDA as net income before interest expense, provision for income tax, and depreciation, amortization and accretion and adjusted EBITDA as EBITDA excluding the impact of special items. The company defines adjusted EBIT, adjusted net income and adjusted diluted earnings per share by adjusting the applicable GAAP measure to remove the impact of special items.

Non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, non-GAAP measures should not be considered as a measure of discretionary cash available to use to reinvest in the growth of the company’s business, or as a measure of cash that will be available to meet the company’s obligations. Each non-GAAP measure has its limitations as an analytical tool, and they should not be considered in isolation or as a substitute for analysis of the company’s results as reported under GAAP.

The following table shows a reconciliation of adjusted EBITDA to net income for the thirteen and fifty-two weeks ended January 2, 2022 and for the fourteen and fifty-three weeks ended January 3, 2021 and a reconciliation of EBIT, net income and diluted earnings per share to adjusted EBIT, adjusted net income and adjusted diluted earnings per share for the thirteen and fifty-two weeks ended January 2, 2022 and for the fourteen and fifty-three weeks ended January 3, 2021:

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
NON-GAAP MEASURE RECONCILIATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

    Thirteen
weeks ended
    Fourteen
weeks ended
    Fifty-two
weeks ended
    Fifty-three
weeks ended
 
    January 2,
2022
    January 3,
2021
    January 2,
2022
    January 3,
2021
 
Net income   $ 36,228     $ 68,397     $ 244,157     $ 287,450  
Income tax provision     12,311       21,429       78,235       89,428  
Interest expense, net     2,844       3,106       11,684       14,787  
Earnings before interest and taxes (EBIT)     51,383       92,932       334,076       391,665  
Special Items:                        
Strategic initiatives (1)           1,802             8,835  
Adjusted EBIT     51,383       94,734       334,076       400,500  
                         
Depreciation, amortization and accretion     31,119       32,080       125,541       126,508  
Adjusted EBITDA   $ 82,502     $ 126,814     $ 459,617     $ 527,008  
                         
Net income     36,228       68,397       244,157       287,450  
Special Items:                        
Strategic initiatives, net of tax (1)           1,339             6,565  
Adjusted Net income   $ 36,228     $ 69,736     $ 244,157     $ 294,015  
Diluted earnings per share   $ 0.32     $ 0.58     $ 2.10     $ 2.43  
Adjusted diluted earnings per share   $ 0.32     $ 0.59     $ 2.10     $ 2.49  
                         
Diluted weighted average shares outstanding     112,786       118,315       116,077       118,224  

(1) Includes professional fees related to strategic initiatives. After-tax impact includes the tax benefit on the pre-tax charge.

Source: Sprouts Farmers Market, Inc
Phoenix, AZ
2/24/22


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Source: SFM, LLC d/b/a Sprouts Farmers Market

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