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

Rhea-AI Summary

Sprouts Farmers Market (SFM) reported a 7% decrease in net sales to $1.49 billion for Q4 2021, influenced by a 2020 extra week. Year-over-year net income fell to $36 million from $68 million, with diluted EPS at $0.32. For FY 2021, net sales totaled $6.1 billion, down 6%, yet up 8% from 2019. SG&A expenses decreased, but increased 12.8% from 2019 levels. Looking ahead, SFM anticipates Q1 2022 net sales growth of 4% to 6% and plans to open 15 to 20 new stores.

Positive

• Net sales increased 9% from the same period in 2019.
• SG&A expenses decreased $15 million compared to the same period in 2020.
• Company plans to open 15 to 20 new stores in 2022.

Negative

• Net sales fell 7% compared to Q4 2020.
• Net income decreased to $36 million from $68 million in Q4 2020.
• Comparable store sales growth of -1.1% in Q4 2021 and -6.7% for FY 2021.

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 53^rd 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

FAQ

What were Sprouts Farmers Market's Q4 2021 net sales?

Sprouts Farmers Market reported net sales of $1.49 billion for Q4 2021.

How did Sprouts Farmers Market's net income change in Q4 2021?

Net income for Q4 2021 decreased to $36 million from $68 million in Q4 2020.

What is the projected net sales growth for Sprouts in Q1 2022?

Sprouts expects net sales growth of 4% to 6% for Q1 2022.

What was the diluted EPS for Sprouts Farmers Market in Q4 2021?

The diluted earnings per share for Sprouts in Q4 2021 was $0.32.

How many new stores does Sprouts plan to open in 2022?

Sprouts plans to open 15 to 20 new stores in 2022.