Sprouts Farmers Market(US:SFM)2023-08-01 20:12Financial Performance - For the thirteen weeks ended July 2, 2023, the Company reported net sales of $1,692.2 million, a 6.1% increase from $1,595.5 million for the same period in 2022[93]. - The Company’s net income for the thirteen weeks ended July 2, 2023, was $67.3 million, compared to $62.0 million for the same period in 2022, resulting in a basic net income per share of $0.65, up from $0.57[81]. - Net sales for the twenty-six weeks ended July 2, 2023, totaled $3.4 billion, an increase of $188.9 million, or 6%, compared to the same period last year[143]. - Comparable store sales growth was 3.2% for the thirteen weeks ended July 2, 2023, compared to 2.0% for the same period in 2022[130]. - Gross profit increased by $45,615 or 8% to $625,972 for the thirteen weeks ended July 2, 2023, with a gross margin of 37.0%, up from 36.4% in the prior year[131]. - Net income decreased by $6.8 million, or 5%, to $143.5 million, with a net income margin of 4.2%[151]. Debt and Financing - The Company reported a long-term debt of $175 million as of July 2, 2023, down from $250 million as of January 1, 2023, reflecting a principal payment of $75 million during the period[57]. - The Company has a maximum total net leverage ratio requirement of 3.75 to 1.00 under its Credit Agreement, which it was in compliance with as of July 2, 2023[62][63]. - The Company issued letters of credit totaling $21.5 million under its Credit Agreement as of July 2, 2023, primarily to support its insurance programs[50]. - The Company made no additional borrowings during the thirteen weeks ended July 2, 2023, maintaining total outstanding debt under the Credit Agreement at $175 million[57]. - Interest payments on the Credit Agreement are estimated to be approximately $35.4 million, with $11.0 million payable within the next 12 months[173]. - A 100 basis point change in SOFR would result in a change in interest expense of $1.8 million annually based on the $175.0 million principal outstanding[183]. Share Repurchase and Stock Performance - The Company repurchased 1,437,932 shares of common stock for a total cost of $50.5 million during the thirteen weeks ended July 2, 2023, at an average price of $35.10 per share[78]. - The total cost of common shares acquired during the twenty-six weeks ended July 2, 2023, was $149.6 million, compared to $111.1 million for the same period in 2022[78]. - The Company has a new $600 million share repurchase program authorized on March 2, 2022, replacing the previous $300 million program[74]. - The share repurchase program authorized $600 million, with $336.5 million spent as of July 2, 2023, leaving $263.5 million available for future repurchases[169]. - During the twenty-six weeks ended July 2, 2023, the company repurchased 4,476,343 shares at an average price of $33.43, totaling $149.6 million[170]. Tax and Benefits - The effective tax rate decreased to 24.7% for the thirteen weeks ended July 2, 2023, compared to 26.1% for the same period in 2022, primarily due to increased excess tax benefits from share-based payment awards[64]. - The Company recognized $3.0 million in excess tax benefits from share-based payment awards for the twenty-six weeks ended July 2, 2023, compared to $1.6 million for the same period in 2022[65]. - The effective tax rate decreased to 24.0% from 25.0% in the prior year, mainly due to increased excess tax benefits from share-based payment awards[150]. Store Operations and Growth - The company opened 26 new stores and remodeled one store featuring a new format through July 2, 2023, with plans for at least 10% annual unit growth beginning in 2024[123]. - The company opened 14 new stores and acquired 2 stores during the twenty-six weeks ended July 2, 2023, bringing the total number of stores to 391[142]. - Store closure and other costs increased significantly to $30,704 for the twenty-six weeks ended July 2, 2023, compared to $870 in the same period of 2022[142]. - The company closed 11 underperforming stores in February 2023, resulting in a charge of $27.8 million related to impairment of leasehold improvements and right-of-use assets[112]. Compensation and Stock Awards - The company granted a total of 495,931 RSUs, 172,059 PSAs, and 221,085 options under the 2022 Incentive Plan during the twenty-six weeks ended July 2, 2023[95]. - As of July 2, 2023, the company had 975,236 stock awards outstanding and 5,778,129 shares remaining available for issuance under the 2022 Incentive Plan[97]. - Share-based compensation expense for the twenty-six weeks ended July 2, 2023, was $9.461 million, compared to $7.920 million for the same period in 2022[108]. - As of July 2, 2023, total unrecognized compensation expense related to outstanding share-based awards was $34.444 million[108]. Legal and Regulatory Matters - The Company is exposed to claims and litigation matters, including a lawsuit related to Proposition 65 concerning coffee products[71]. - The appellate court affirmed the trial court's decision regarding the Proposition 65 lawsuit, concluding the matter in February 2023[73]. Cash Flow and Capital Expenditures - Cash flows from operating activities increased by $85.8 million to $294.8 million, primarily due to changes in working capital and higher net income[160]. - Cash flows used in investing activities were $111.7 million for the twenty-six weeks ended July 2, 2023, compared to $53.1 million for the same period in 2022, indicating a significant increase in capital expenditures[162]. - Capital expenditures are expected to be in the range of $190 - $210 million in 2023, primarily for new stores, remodels, and maintenance[164]. - Cash flows used in financing activities were $216.6 million for the twenty-six weeks ended July 2, 2023, compared to $112.1 million for the same period in 2022, with $148.3 million allocated for stock repurchases[165]. Other Financial Metrics - Return on Invested Capital (ROIC) improved to 13.0% for the fiscal period ended July 2, 2023, compared to 12.1% in the prior year[157]. - The Company’s performance obligations are satisfied upon the transfer of goods to customers at the point of sale, with revenue recognized at that time[35]. - The Company’s self-insurance liabilities require significant judgment, and actual claim settlements may differ from current provisions for loss[70]. - The company continues to face inflationary pressures, which may impact sales, gross profit margins, and comparable store sales[175]. - There have been no substantial changes to critical accounting estimates during the thirteen and twenty-six weeks ended July 2, 2023[180].