Sprouts Farmers Market(SFM) - 2025 Q4 - Annual Report

Financial Performance - Net sales for fiscal 2025 reached $8.8 billion, a 14% increase from $7.7 billion in fiscal 2024, driven by new store openings and a 7.3% increase in comparable store sales[234] - Gross profit increased by $474.9 million to $3.4 billion in fiscal 2025, with a gross margin improvement to 38.8% from 38.1% in fiscal 2024[238] - Net income rose by 38% to $523.7 million in fiscal 2025 compared to $380.6 million in fiscal 2024[244] - Diluted earnings per share increased by 42% to $5.31 in fiscal 2025 from $3.75 in fiscal 2024, driven by higher net income and fewer shares outstanding[245] - Return on Invested Capital (ROIC) improved to 18.3% in fiscal 2025 from 14.8% in fiscal 2024[250] Expenses and Costs - Selling, general and administrative expenses rose by $283.3 million, or 12%, to $2.6 billion in fiscal 2025, while the percentage of net sales improved to 29.2% from 29.7%[239] - Depreciation and amortization expense increased to $150.0 million in fiscal 2025 from $132.7 million in fiscal 2024, representing a 13% increase[240] - Store closure and other costs, net decreased by 57% to $5.6 million in fiscal 2025 from $12.9 million in fiscal 2024[241] - The effective income tax provision increased by 31% to $165.1 million in fiscal 2025 from $126.1 million in fiscal 2024[243] Cash Flow and Investments - Cash flows from operating activities increased by $70.8 million to $716.0 million in fiscal 2025 compared to $645.2 million in fiscal 2024[255] - Cash used in investing activities rose to $248.3 million in fiscal 2025 from $230.4 million in fiscal 2024, primarily due to more stores under construction[257] - Cash flows used in financing activities increased to $474.1 million in fiscal 2025 from $351.5 million in fiscal 2024, mainly for share repurchases[261] - The company expects capital expenditures to be in the range of $280 million to $310 million in fiscal 2026, primarily for new stores and remodels[260] Store Operations and Growth - The company opened 37 new stores in fiscal 2025, bringing the total to 477 stores, up from 440 stores at the end of fiscal 2024[234] - Comparable store sales growth was 7.3% in fiscal 2025, contributing approximately 93% of total sales[237] - The company aims for approximately 10% annual unit growth through strategic market expansion and new store placements[221] - Total square footage at the end of fiscal 2025 was 12,992,097, an increase from 12,123,032 in fiscal 2024[234] Strategic Initiatives - The transition to a self-distribution model for meat and seafood began in 2025, enhancing supply chain efficiency[221] - The Sprouts Rewards loyalty program was launched in 2025 to increase customer engagement and drive sales growth[221] - The company has improved its margin structure significantly since implementing its long-term growth strategy in 2020[221] Share Repurchase and Debt - As of December 28, 2025, the company authorized share repurchase programs totaling $2.2 billion, with $836,005 available for future repurchases[263] - The company repurchased 3,955,324 shares at an average price of $120.39, totaling $476.2 million for the year ended December 28, 2025[264] - An additional 1.3 million shares were repurchased for $100 million from December 28, 2025, to February 17, 2026, excluding excise tax[265] - The company has a Credit Agreement allowing borrowing up to $600 million, with interest rates linked to the net leverage ratio[266] - As of December 28, 2025, the company maintained a maximum total net leverage ratio of 3.75 to 1.00 and a minimum interest coverage ratio of 3.00 to 1.00[268] Obligations and Reserves - Real estate obligations totaled $1.1759 billion, with $14.2 million due in 2026 and $1.1617 billion thereafter through 2048[273] - Purchase commitments under noncancelable service and supply contracts amounted to $41 million, including $21.1 million in 2026[274] - The consolidated self-insurance reserve balance was $57 million as of December 28, 2025, primarily related to workers' compensation and general liability[290] Goodwill and Tax Assets - The company reported no impairment of goodwill or indefinite-lived intangible assets during fiscal years 2025, 2024, and 2023, with goodwill at $381.8 million and intangible assets at $208.2 million[296] - The company recorded an impairment loss of $0.4 million in fiscal 2024 and $30.5 million in fiscal 2023[298] - The realization of deferred tax assets is dependent on future earnings, requiring a valuation allowance if it is more likely than not that these assets will not be realized due to insufficient taxable income[301] - A pattern of sustained profitability is considered significant positive evidence for reversing a valuation allowance, which could positively impact current and future earnings[301] - As of December 28, 2025, the company had no outstanding borrowings under its Credit Agreement, indicating no current exposure to interest rate fluctuations[302]