Press Release

Sprouts Farmers Market, Inc. Reports Second Quarter 2019 Results

Company Release - 8/1/2019 9:00 AM ET

PHOENIX, Aug. 01, 2019 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week second quarter ended June 30, 2019. 

Second Quarter Highlights:

  • Net sales of $1.4 billion; a 7% increase from the same period in 2018

  • Comparable store sales growth of 0.1% and two-year comparable store sales growth of 2.1%

  • Net income of $35 million, compared to $42 million from the same period in 2018

  • Diluted earnings per share of $0.30; compared to $0.32 from the same period in 2018

“We are grateful to have Jack Sinclair join the Sprouts team as our new chief executive officer and are confident his insightful grocery experience makes him well positioned to strategically advance Sprouts’ unique model and improve its performance as the brand expands its footprint,” said Chip Molloy, interim chief financial officer and board member of Sprouts Farmers Market.  

Second Quarter 2019 Financial Results

Net sales for the second quarter of 2019 were $1.4 billion, a 7% increase compared to the same period in 2018. Net sales growth was driven by strong performance in new stores opened and a 0.1% increase in comparable store sales.

Gross profit for the quarter increased 6% to $465 million, resulting in a gross profit margin of 32.8%, a decrease of 35 basis points compared to the same period in 2018.  This was primarily driven by product cost inflation not fully reflected in retail pricing and slightly higher distribution and transportation costs.

Selling, general and administrative expenses (“SG&A”) for the quarter increased 9% to $383 million, or 27.1% of sales, compared to 26.5% in the same period in 2018. Excluding the 35 basis point impact of the adoption of the new lease accounting standard that went into effect at the beginning of 2019, SG&A deleveraged 20 basis points. This primarily reflects investments in new stores, increased interchange fees and increased costs associated with the expansion of the company’s home delivery program. 

Depreciation and amortization for the quarter increased 12% to $30 million, or 2.1% of sales, compared to 2.0% of sales in the same period in 2018.

Net income for the quarter was $35 million and diluted earnings per share was $0.30, compared with $42 million and $0.32, respectively, in 2018.  This decrease was driven by the impact of the adoption of the new lease accounting standard in 2019 and a challenging sales environment. This was partially offset by fewer shares outstanding due to our repurchase program.

Fiscal Year-to-Date Financial Results

For the 26-week period ended June 30, 2019, net sales were $2.8 billion, an 8% increase compared to the same period in 2018. Growth was driven by strong performance in new stores opened and a 0.8% increase in comparable store sales.  Net income was $92 million compared to $108 million for the same period in 2018.  Diluted earnings per share was $0.76, a decrease of $0.06 or 7%, compared to diluted earnings per share of $0.82 for the same period in 2018.

Growth and Development

During the second quarter of 2019, we opened six new stores, including one each in the new states of Louisiana and New Jersey. As we planned, one lease expired during the second quarter and was not renewed.  Five additional stores have been opened in the third quarter to date, resulting in a total of 331 stores in 21 states as of August 1, 2019.

Leverage and Liquidity

We generated cash from operations of $249 million year-to-date through June 30, 2019 and invested $84 million in capital expenditures net of landlord reimbursement, primarily for new stores. In addition, we repurchased 2.4 million shares of common stock for a total year-to-date investment of $163 million. We ended the quarter with a $515 million balance on our revolving credit facility, $27 million of letters of credit outstanding under the facility, $59 million in cash and cash equivalents, and $55 million available under our current share repurchase authorization.

2019 Outlook

We have adjusted our 2019 guidance, reflecting our year-to-date performance and our expectation for the remainder of the year. The following provides information on our guidance for 2019:

 Full-Year 2019
Current Guidance
Net sales growth7% to 8%
Unit growthApproximately 28 stores
Comparable store sales growthFlat
Diluted earnings per share 1$1.05 to $1.09
Effective tax rateApproximately 24%
Capital expenditures (net of landlord reimbursements)$170M to $175M


1   The adoption of the new lease accounting standard will result in net incremental noncash rent expense of approximately $7 million pre-tax (or approximately $0.04 decrease in diluted earnings per share) for 2019.

Second Quarter 2019 Conference Call

We will hold a conference call at 7 a.m. Pacific Daylight Time (10 a.m. Eastern Daylight Time) on Thursday, August 1, 2019, during which Sprouts executives will further discuss our second quarter 2019 financial results.

A webcast of the conference call will be available through Sprouts’ investor webpage located at Participants should register on the website approximately 10 minutes prior to the start of the webcast.

The conference call will be available via the following dial-in numbers:

  • U.S. Participants: 877-398-9481

  • International Participants: Dial +1-408-337-0130

  • Conference ID: 9091469

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: 9091469.

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 guidance, outlook, growth and opportunities. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this release. These risks and uncertainties include, without limitation, risks associated with the company’s ability to successfully compete in its intensely competitive industry; the company’s ability to successfully open new stores; the company’s ability to manage its rapid growth; the company’s ability to maintain or improve its operating margins; the company’s ability to identify and react to trends in consumer preferences; product supply disruptions; general economic conditions; the company’s ability to manage its transition to a new CEO and a new CFO; accounting standard changes including the new lease accounting guidance; 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. 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 Farmers Market, Inc. specializes in fresh, natural and organic products at prices that appeal to everyday grocery shoppers. Based on the belief that healthy food should be affordable, Sprouts’ welcoming environment and knowledgeable team members continue to drive its growth. Sprouts offers a complete shopping experience that includes an array of fresh produce in the heart of the store, a deli with prepared entrees and side dishes, The Butcher Shop, The Fish Market, an expansive vitamins and supplements department and more. Headquartered in Phoenix, Arizona, Sprouts employs more than 30,000 team members and operates in more than 325 stores in 21 states from coast to coast. Visit for more information.


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 June 30, 2019  July 1, 2018  June 30, 2019  July 1, 2018 
Net sales$1,415,736  $1,321,693  $2,829,623  $2,608,889 
Cost of sales 950,954   883,212   1,880,492   1,725,799 
Gross profit 464,782   438,481   949,131   883,090 
Selling, general and administrative expenses 383,116   350,413   757,942   689,187 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 29,565   26,341   59,024   52,486 
Store closure and other costs 769   26   1,277   36 
Income from operations 51,332   61,701   130,888   141,381 
Interest expense, net (5,438)  (6,544)  (10,440)  (12,609)
Other income    117      325 
Income before income taxes 45,894   55,274   120,448   129,097 
Income tax provision (10,551)  (13,565)  (28,713)  (20,764)
Net income$35,343  $41,709  $91,735  $108,333 
Net income per share:               
Basic$0.30  $0.32  $0.76  $0.83 
Diluted$0.30  $0.32  $0.76  $0.82 
Weighted average shares outstanding:               
Basic 118,251   129,423   120,754   130,924 
Diluted 118,436   130,012   121,231   131,949 



 June 30, 2019  December 30, 2018 
Current assets:       
Cash and cash equivalents$58,639  $1,588 
Accounts receivable, net 13,170   40,564 
Inventories 269,463   264,366 
Prepaid expenses and other current assets 38,776   27,323 
Total current assets 380,048   333,841 
Property and equipment, net of accumulated depreciation 728,441   766,429 
Operating lease assets 1,018,301    
Intangible assets, net of accumulated amortization 185,485   194,803 
Goodwill 368,078   368,078 
Other assets 12,138   12,463 
Total assets$2,692,491  $1,675,614 
Current liabilities:       
Accounts payable and other accrued liabilities$331,299  $253,969 
Accrued salaries and benefits 41,996   48,603 
Current portion of capital and financing lease obligations    7,428 
Current portion of operating lease liabilities 75,700    
Current portion of finance lease obligations 610    
Total current liabilities 449,605   310,000 
Long-term capital and financing lease obligations    119,642 
Long-term operating lease liabilities 1,078,513    
Long-term debt and finance lease liabilities 526,861   453,000 
Other long-term liabilities 40,601   153,377 
Deferred income tax liability 65,262   50,399 
Total liabilities 2,160,842   1,086,418 
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,
  120,436,879 shares issued and outstanding, March 31, 2019;
  124,975,691 shares issued and outstanding, December 30, 2018
 118   124 
Additional paid-in capital 665,454   657,140 
Accumulated other comprehensive (loss) income (4,579)  1,134 
Accumulated deficit (129,344)  (69,202)
Total stockholders' equity 531,649   589,196 
Total liabilities and stockholders' equity$2,692,491  $1,675,614 



 Twenty-six weeks
  Twenty-six weeks
 June 30, 2019  July 1, 2018 
Cash flows from operating activities       
Net income$91,735  $108,333 
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization expense 60,211   53,829 
Operating lease asset amortization 40,477    
Store closure and other costs 824    
Share-based compensation 4,191   8,630 
Deferred income taxes 10,691   17,550 
Other non-cash items 32   900 
Changes in operating assets and liabilities:       
Accounts receivable 20,378   (2,954)
Inventories (5,096)  (21,022)
Prepaid expenses and other current assets (9,644)  (1,312)
Other assets (451)  (6,745)
Accounts payable and other accrued liabilities 86,007   10,379 
Accrued salaries and benefits (6,288)  (7,154)
Operating lease liabilities (40,297)   
Other long-term liabilities (3,585)  10,674 
Cash flows from operating activities 249,185   171,108 
Cash flows used in investing activities       
Purchases of property and equipment (93,414)  (103,935)
Cash flows used in investing activities (93,414)  (103,935)
Cash flows used in financing activities       
Proceeds from revolving credit facilities 122,860   140,000 
Payments on revolving credit facilities (60,860)  (30,000)
Payments on capital and financing lease obligations    (2,135)
Payments on finance lease obligations (325)   
Payments of deferred financing costs    (2,131)
Cash from landlords related to capital and financing lease obligations    2,113 
Repurchase of common stock (163,310)  (178,000)
Proceeds from exercise of stock options 4,118   6,734 
Other (319)  (59)
Cash flows used in financing activities (97,836)  (63,478)
Increase in cash, cash equivalents, and restricted cash 57,935   3,695 
Cash, cash equivalents, and restricted cash at beginning of the period 2,248   19,479 
Cash, cash equivalents, and restricted cash at the end of the period$60,183  $23,174 

Reclassification of Certain Income Statement Items

In the fourth quarter of fiscal 2018, we made a voluntary change to our consolidated statements of income presentation as follows:

  • Reclassified occupancy costs and buying costs from cost of sales to selling, general and administrative expenses (“SG&A”);

  • Reclassified depreciation and amortization (exclusive of depreciation related to supply chain which continues to be included in cost of sales) to a separate financial statement line item; and

  • Combined direct stores expense (“DSE”) and store pre-opening costs with SG&A.

These reclassifications had no impact on sales, income from operations, net income or earnings per share.  We made this voluntary change in presentation because we believe that the exclusion of occupancy and buying costs from cost of sales provides a more meaningful presentation of our gross margin. The changes also enhance the comparability of our financial statements with those of many of our industry peers and align with how we internally manage and review costs and margin. Prior years amounts have been reclassified to reflect this change. Updated financials for the five years prior have been posted on

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 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 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 you should not consider them in isolation or as a substitute for analysis of the company’s results as reported under GAAP.

The following table shows a reconciliation of EBITDA and adjusted EBITDA to net income for the thirteen and twenty-six weeks ended June 30, 2019 and July 1, 2018 and a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share for the thirteen and twenty-six weeks ended June 30, 2019 and July 1, 2018:


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 June 30, 2019  July 1, 2018  June 30, 2019  July 1, 2018 
Net income$35,343  $41,709  $91,735  $108,333 
Income tax provision (1) 10,551   13,565   28,713   20,764 
Interest expense, net 5,438   6,540   10,440   12,604 
Earnings before interest and taxes (EBIT) 51,332   61,814   130,888   141,701 
Depreciation, amortization and accretion 30,139   27,087   60,211   53,976 
Earnings before interest, taxes, depreciation and
  amortization (EBITDA)
$81,471  $88,901  $191,099  $195,677 
Special Items:               
Store closures (2)       508    
Total Special Items - pre-tax       508    
 Adjusted EBITDA$81,471  $88,901  $191,607  $195,677 
Net income$35,343  $41,709  $91,735  $108,333 
Special Items:               
Store closures, net of tax (2)       377    
Adjusted Net income$35,343  $41,709  $92,112  $108,333 
Diluted earnings per share$0.30  $0.32  $0.76  $0.82 
Adjusted diluted earnings per share$0.30  $0.32  $0.76  $0.82 
Diluted weighted average shares outstanding 118,436   130,012   121,231   131,949 

(1) Income tax provision includes approximately an $11 million (or $0.08 per diluted share) benefit during the twenty-six weeks ended July 1, 2018 in excess federal and state tax for share based compensation primarily associated with the exercise of expiring pre-IPO options.
(2) Special items include the direct costs associated with store closures or relocations.  After-tax impact includes the tax benefit on the pre-tax charge.

Source: Sprouts Farmers Market, Inc.

Investor Contact: Media Contact:
Susannah LivingstonDiego Romero
(602) 682-1584(602) 682-3173
[email protected][email protected]


Source: Sprouts Farmers Market