Sprouts Farmers Market(US:SFM)2024-05-01 20:11Financial Performance - For the thirteen weeks ended March 31, 2024, net sales were $1,883.8 million, a 8.7% increase from $1,733.3 million for the same period in 2023[72]. - Net sales for the thirteen weeks ended March 31, 2024, were $1.88 billion, an increase of $150.5 million or 9% compared to $1.73 billion for the same period in 2023[102]. - Net income increased by $37.9 million to $114.1 million for the thirteen weeks ended March 31, 2024, representing a 50% increase compared to $76.2 million for the same period in 2023[110]. - Basic net income per share increased to $1.13 for the thirteen weeks ended March 31, 2024, compared to $0.73 for the same period in 2023[68]. - Diluted earnings per share rose to $1.12, up 53% from $0.73 in the prior year, driven by higher net income and fewer diluted shares outstanding[111]. - Gross profit increased by $72.3 million or 11% to $722.3 million, with a gross margin of 38.3%, up from 37.5% in the prior year[104]. - Comparable store sales growth was 4.0% for the thirteen weeks ended March 31, 2024, compared to 3.1% for the same period in 2023[103]. Debt and Financing - As of March 31, 2024, the Company had total outstanding debt of $125.0 million under its Credit Agreement, unchanged from December 31, 2023[52]. - The Company’s long-term debt and finance lease liabilities totaled $133.375 million as of March 31, 2024, compared to $133.685 million as of December 31, 2023[41]. - The Company maintained compliance with all covenants under the Credit Agreement as of March 31, 2024, including a maximum total net leverage ratio of 3.75 to 1.00[56]. - The Company issued letters of credit totaling $21.3 million under its Credit Agreement as of March 31, 2024, primarily to support its insurance programs[44]. - The Company capitalized debt issuance costs of $3.4 million related to its Credit Agreement, which are being amortized over the five-year term[43]. - As of March 31, 2024, the principal outstanding under the Credit Agreement is $125.0 million, with each 100 basis point change in SOFR resulting in a $1.25 million annual change in interest expense[141]. - Total interest expense, net decreased to $0.8 million, a 63% reduction from $2.2 million in the previous year, primarily due to lower average debt outstanding[108]. Cash Flow and Capital Expenditures - Cash flows from operating activities increased by $39.9 million to $219.7 million, attributed to favorable changes in working capital and higher net income adjusted for non-cash items[121]. - Cash flows used in investing activities were $51.2 million, down from $60.1 million in the prior year, reflecting reduced capital expenditures[123]. - Cash flows used in financing activities decreased to $58.0 million from $118.1 million, primarily due to lower stock repurchases[125]. - The company expects capital expenditures to be in the range of $225 - $245 million for 2024, primarily for new stores and remodels[124]. Shareholder Activities - The company repurchased 957,780 shares at an average price of $63.04, totaling $60.4 million during the thirteen weeks ended March 31, 2024[65]. - As of March 31, 2024, the company had $148.4 million remaining under its $600 million share repurchase authorization[62]. - The company repurchased an additional 0.3 million shares for $21.5 million subsequent to March 31, 2024[66]. Tax and Accounting - The Company reported an effective tax rate of 22.6% for the thirteen weeks ended March 31, 2024, down from 23.3% for the same period in 2023, primarily due to increased excess tax benefits from share-based payment awards amounting to $4.5 million[57]. - The effective tax rate decreased to 22.6% from 23.3% year-over-year, mainly due to an increase in excess tax benefits associated with share-based payment awards[109]. - There have been no substantial changes to critical accounting estimates during the thirteen weeks ended March 31, 2024[138]. - The company bases its critical accounting estimates on historical experience and reasonable assumptions, which may differ from actual results[137]. Operational Highlights - The Company recognized revenue from gift cards of $2.532 million during the thirteen weeks ended March 31, 2024, with an ending gift card liability balance of $9.200 million[29]. - The Company’s performance obligations are satisfied at the point of sale, with gift card breakage revenue recognized over time based on actual redemptions, which was not material in any period presented[30]. - The company has one operating segment focused on healthy grocery stores, with a product mix of perishable and non-perishable items[71]. - Perishable products accounted for 56.8% of total net sales, while non-perishable products made up 43.2%[72]. - The company closed 11 underperforming stores in 2023, resulting in a charge of $27.8 million related to impairment losses[90]. - The acquisition of Ronald Cohn, Inc. was completed on March 20, 2023, for a total consideration of $31.1 million, including $18.1 million in common shares and $13.0 million in cash[91]. - The company opened 7 new stores during the thirteen weeks ended March 31, 2024, bringing the total store count to 414[102]. - The company aims for approximately 10% annual unit growth through geographic store expansion and new store placements[99]. - Approximately 80% of the company's stores were within a 250-mile radius of a distribution center as of March 31, 2024[99]. Market Conditions - Inflation and deflation in food prices may periodically affect sales, gross profit, and gross margin, with potential impacts from reduced consumer spending[134]. - The company does not expect inflation or deflation to materially impact its long-term business strategy despite periodic effects on sales and cash flows[135]. - Food inflation and deflation are influenced by various factors, including competitors' pricing strategies[135]. - The company’s pricing and marketing strategies will determine whether to pass on inflation or deflation effects to customers[135]. - The impact of inflation and deflation on profitability is largely dependent on competitive market conditions[134]. - The company continues to monitor market risks related to long-term debt and finance lease liabilities[141].