Sprouts Farmers Market (NasdaqGS:SFM) Q4 2025 Earnings call February 19, 2026 05:00 PM ET Company ParticipantsCurtis Valentine - CFOJack Sinclair - CEONick Konat - President and COOSusannah Livingston - VP of Investor RelationsConference Call ParticipantsChuck Cerankosky - Managing Director, Principal, and Research AnalystEdward Kelly - Managing Director and Senior Equity Research AnalystJohn Heinbockel - Managing Director and Senior Research AnalystKelly Bania - Managing Director and Senior Equity Research ...

Sprouts Farmers Market (NasdaqGS:SFM) Q4 2025 Earnings call February 19, 2026 05:00 PM ET Speaker10Good day, everyone, and welcome to Sprouts' fourth quarter and full year 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one ...

Company Performance - The turnaround plans for the company are showing positive results, with systemwide same-store sales rising by 4% and U.S. same-store sales increasing by 4%, while China saw a 7% increase [1] - Improved operations, including the rollout of new operating standards, have boosted service speed and customer satisfaction, leading to increased customer return rates [1] Cost Management - The company has identified $2 billion in annual costs to target over the next 1 to 2 years, as margins have been impacted despite increased same-store sales and traffic [4] - The strategy of reallocating labor into stores has been effective in driving customer traffic but has also led to margin compression [5] Competitive Landscape - The competitive environment is described as being tougher than ever, with younger chains like Dutch Bros and Seven Brew gaining popularity among Gen Z [6] - High-end coffee shops are also increasing competition by offering quality coffee and elevated food experiences, prompting the company to make strategic changes [7] Innovation and Marketing - The company is focusing on food innovation, including new protein and cold foam offerings, which have positively impacted same-store sales [2] - There is an emphasis on improving food quality and introducing innovative drink offerings to enhance the customer experience throughout the day [8]

Core Insights - Happy Belly Food Group Inc. announces the expansion of its Heal Wellness brand with the acquisition of a second U.S. location in Lubbock, Texas, as part of its strategy to grow Heal into a leading smoothie and açaí bowl brand across North America [1][3] Company Expansion - Heal Wellness has secured its second U.S. real estate location in Texas, following the announcement of its first site just two months prior [3] - The new location in Lubbock is set to open in 2026 and is part of a 10-unit development agreement for Heal Wellness [3] - Texas is identified as an ideal market for expansion due to its warm climate, population growth, and active lifestyle demographics [3] Market Positioning - Heal Wellness is positioned to cater to families, students, professionals, and fitness-oriented consumers seeking healthy food options in a warm-weather market [3] - Lubbock has a population of over 270,000, with a broader metropolitan area exceeding 360,000, providing a strong customer base [3] Growth Metrics - Heal Wellness currently operates 30 locations and has more than 178 in development, contributing to Happy Belly's portfolio of 666 contractually committed retail franchise locations across various brands [4] - The company's disciplined growth strategy aims to create long-term value for shareholders [4][7]

Financial Data and Key Metrics Changes - The company reported fourth quarter net sales of $336.1 million, a 4.2% increase from the prior year period [11] - Diluted earnings per share for fiscal year 2025 reached a record $2.00, up 36.1% from $1.47 in fiscal year 2024 [13] - Adjusted EBITDA increased 7.7% to $24.4 million in the fourth quarter and 17.5% to $97.9 million for the full year [12][13] Business Line Data and Key Metrics Changes - Daily average comparable store sales increased 4.2% in the fourth quarter and 7.3% for the full year [11][13] - The penetration of Natural Grocers branded products rose to 8.8% of total sales, up from 8.4% a year ago [8] - The company opened two new stores, relocated two stores, and remodeled one store during fiscal 2025, with plans to open six to eight new stores in fiscal 2026 [8][9] Market Data and Key Metrics Changes - The company experienced a modest decline in SNAP EBT transactions, which represent approximately 2% of net sales, but this was deemed immaterial to overall sales [12] - Consumer behavior showed a shift towards more cautious retail spending, impacting sales growth [5][11] Company Strategy and Development Direction - The company aims for 4%-5% annual new store unit growth and is committed to enhancing shareholder value through a balanced capital allocation approach [9] - The focus remains on operational execution, targeted promotions, and enhancing the NPower Rewards program, which had a net sales penetration of 82% [7][8] - The company plans to invest $50-$55 million in capital expenditures to support growth initiatives in fiscal 2026 [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty and a cautious consumer environment, with expectations for daily average comparable store sales growth between 1.5% and 4% for fiscal 2026 [14][15] - The company remains confident in its value proposition and the resilience of its core customer base, despite macro pressures affecting the broader retail landscape [6][30] - Management expects year-over-year gross margin to be relatively flat, depending on promotional activity [15] Other Important Information - The company ended the fourth quarter with $17.1 million in cash and cash equivalents and no outstanding borrowings [13] - A quarterly cash dividend was increased by 25% to $0.15 per common share, reflecting strong fiscal performance [9] Q&A Session Summary Question: Is this a good time to increase the penetration of Natural Grocers brands? - Management confirmed they are actively marketing their own brand and aim to increase penetration by one percentage point per year, targeting 10.8% to 11% in two years [20][22] Question: What challenges does the company face in the current economy? - Management noted that less loyal customers have pulled back on spending, leading to a cautious growth outlook, but they expect new marketing initiatives to drive growth in the upcoming quarters [27][28] Question: How does the company differentiate itself from traditional supermarkets? - Management emphasized their authentic brand story and high product standards, which foster customer loyalty and differentiate them from competitors [25][26] Question: What is the outlook for free cash flow in fiscal 2026? - Management expects positive free cash flow in fiscal 2026, supported by increased capital expenditures for new store openings and relocations [33]

Financial Data and Key Metrics Changes - In Q4, net sales increased by 4.2% year-over-year to $336.1 million, with diluted earnings per share reaching $0.51, a 31% increase [11][12] - For fiscal year 2025, total revenue rose by 7.2% to $1.33 billion, with diluted earnings per share increasing by 36.1% to $2.00 [13] - Adjusted EBITDA for Q4 increased by 7.7% to $24.4 million, while for the full year, it rose by 17.5% to $97.9 million [12][13] Business Line Data and Key Metrics Changes - Daily average comparable store sales increased by 4.2% in Q4 and 7.3% for the full year, with a two-year growth of 11.3% and 14.3% respectively [11][13] - The penetration of Natural Grocers branded products in total sales rose to 8.8% from 8.4% a year ago, reflecting strong growth in house-branded offerings [8] Market Data and Key Metrics Changes - The company noted a shift in consumer behavior towards more cautious retail spending, influenced by macroeconomic pressures [5][11] - A modest decline in SNAP EBT transactions was observed, representing approximately 2% of net sales, but it was deemed immaterial to overall sales [12] Company Strategy and Development Direction - The company plans to open six to eight new stores in fiscal 2026, maintaining a commitment to 4%-5% annual new store unit growth [9][14] - The focus remains on enhancing the NPower Rewards program and expanding the Natural Grocers branded products to drive long-term success [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumer prioritization of health and wellness, despite macroeconomic challenges [6][30] - The outlook for fiscal 2026 includes expectations for daily average comparable store sales growth between 1.5% and 4%, with diluted earnings per share projected between $2 and $2.15 [14][15] Other Important Information - The company announced a 25% increase in the quarterly cash dividend to $0.15 per common share, reflecting strong operating performance [9] - The company ended Q4 with $17.1 million in cash and cash equivalents and no outstanding borrowings, indicating a strong liquidity position [13] Q&A Session Summary Question: Is it a good time to increase the penetration of Natural Grocers brands? - Management confirmed that they are actively marketing their own brand and aim to increase penetration by one percentage point per year, targeting 10.8% to 11% in two years [20][22] Question: What challenges does the company face in the current economic environment? - Management acknowledged a pullback from less loyal customers and noted that economic uncertainty is affecting consumer sentiment, but they remain confident in their core customer base [27][30] Question: What is the expectation for free cash flow in 2026? - Management expects positive free cash flow in 2026, with significant investments in capital expenditures to support growth initiatives [33]

Summary of SunOpta FY Conference Call (November 18, 2025) Company Overview - **Company**: SunOpta (NasdaqGS:STKL) - **Industry**: Packaged Food and Beverage Key Points Industry and Market Dynamics - The consumer packaged goods (CPG) industry, including restaurants, faced challenges in 2025, with volume and traffic pressures [3][4] - SunOpta operates in growing categories, particularly plant-based beverages and fruit snacks, with the latter growing over 20% [4][5] - The plant-based beverage segment is experiencing high single-digit growth, supported by health and wellness trends [4][20] Demand and Capacity - SunOpta has pulled forward capital investments to meet increased demand, with fruit snack lines fully subscribed and aseptic processing lines 50% subscribed [5][14] - The company anticipates a 25% increase in fruit snack capacity, translating to approximately $40 million in annualized revenue [14] - Aseptic facility improvements are expected to yield a 10% capacity increase, equating to about $65 million in revenue potential [14] Operational Challenges - The company faced a $10 million headwind to EBITDA in Q4 due to operational complexities from increased volume and maintenance issues [6][11] - Wastewater system constraints at the Midlothian facility have impacted operations, but a solution is expected to be implemented by Q2 2026 [11][13] Financial Performance and Projections - SunOpta aims to achieve gross margins of over 20% by the second half of 2027, with expected improvements in Q3 and Q4 of 2026 [57] - The company maintains a leverage ratio of 2.8 times and prioritizes deleveraging while investing in capital projects [40][41] - Long-term ROIC targets are set at 16-18%, with both new projects expected to contribute positively [59] Customer and Market Position - SunOpta's customer base is diversified, with only one customer exceeding 10% of total revenue, indicating low customer concentration risk [26] - The company is well-positioned in the private label market, benefiting from a shift towards value among consumers [20][21] Innovation and R&D - SunOpta has a robust R&D team, with 21 food scientists dedicated to developing solutions for customer needs, including low-sugar and protein-infused products [51][30] - Continuous innovation is a key strategy for maintaining market share and meeting evolving consumer demands [30][32] Future Outlook - The company expects to see incremental progress in revenue and EBITDA growth, with a CAGR of 8-10% for revenue and 13-17% for EBITDA over the long term [65] - Key milestones include the resolution of wastewater issues, the ramp-up of new capital projects, and sustained revenue growth [62][64] Risks and Concerns - Potential risks include the competitive landscape and the possibility of new capacity from competitors, although current market conditions suggest limited new entrants [42][45] - The company is cautious about pricing strategies, ensuring that they maintain value while managing costs associated with tariffs and raw materials [48][60] Conclusion - SunOpta is positioned for growth in the packaged food and beverage industry, with strong demand in plant-based products and fruit snacks, supported by strategic investments and operational improvements [67]

Financial Data and Key Metrics Changes - Net sales for Q3 2025 increased by 10% year-over-year to $12.9 million, with year-to-date sales up 15% to $36.5 million [3][12] - Gross profit for Q3 was $4.7 million, down 7% from the prior year, with gross margin contracting to 36.5% from 43% last year [5][14] - Net loss for Q3 was $1.0 million compared to a loss of $0.2 million in the prior year, primarily due to a $0.7 million impairment charge related to Picky Bars [16] Business Line Data and Key Metrics Changes - The Wholesale channel saw net sales increase by 39% in Q3 and 40% year-to-date, contributing 53% of net sales in Q3 [4][12] - E-commerce sales represented 47% of total net sales in Q3 but experienced an 11% decline year-over-year, primarily due to softness in the direct-to-consumer platform [5][14] Market Data and Key Metrics Changes - The company reported strong consumer demand for core products like Coffee Creamers and Functional Beverages, aligning with healthier lifestyle trends [4][6] - The Wholesale channel's growth reflects successful distribution expansion in grocery and club stores [3][4] Company Strategy and Development Direction - The company aims to transition to a Wholesale-led model, focusing on expanding distribution and product innovation [4][6] - A new Protein Coffee product is set to launch, marking the company's first entry into the dairy market, which is significantly larger than the plant-based market [8][49] - The decision to discontinue the Picky Bars brand will allow for a redirection of investments towards the core Laird Superfood brand [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating macroeconomic challenges and maintaining double-digit growth despite headwinds in the consumer economy [10][70] - The company expects to hold gross margins in the upper 30% range and achieve breakeven adjusted EBITDA for the full year [18][65] Other Important Information - The company recorded a $661,000 impairment charge related to Picky Bars intangible assets in Q3 [9] - Inventory was reduced by over $1 million in Q3, with expectations for improved cash flows as inventory continues to sell through [9][17] Q&A Session Summary Question: Impact of timing on Q3 and Q4 results - Management confirmed that timing issues related to large wholesale customer orders impacted both Q3 and Q4, but long-term business health remains unaffected [20][24] Question: Trends in limited time offer products - Management noted a successful year for Pumpkin Spice Creamer, with strong sales despite a late start in distribution [38][39] Question: Strategy for Amazon sales to replace lost DTC sales - The company plans to focus on Amazon for online growth while maintaining DTC as a platform for broader product offerings and consumer education [40][44] Question: Future dairy product launches - Management confirmed plans for additional dairy products within the next 15 months, expanding the product line beyond Protein Coffee [54][55] Question: Tariff impacts and Club promotions - Tariffs have had a dynamic impact, with some key raw materials excluded from tariffs, and the company plans to continue executing its strategy in the Club channel [64][65]

Financial Data and Key Metrics Changes - In Q3 2025, total sales reached $2.2 billion, an increase of $255 million or 13% year-on-year, driven by a 5.9% rise in comparable store sales [8][10] - Gross margin improved to 38.7%, up 60 basis points compared to the same period last year, primarily due to better shrink management [9][10] - Net income was $120 million, with diluted earnings per share of $1.22, reflecting a 34% increase year-on-year [10] Business Line Data and Key Metrics Changes - E-commerce sales grew by 21%, accounting for approximately 15.5% of total sales for the quarter [8] - Sprouts Brand sales now represent over 25% of total sales, indicating strong customer resonance with the brand [8][16] Market Data and Key Metrics Changes - Customer traffic remained positive, contributing approximately 40% to the third quarter comparable sales [8] - The company opened nine new stores, ending the quarter with a total of 464 stores across 24 states [10] Company Strategy and Development Direction - The company aims to expand its store footprint, planning to open 37 new stores in 2025, exceeding the original target of 35 [11][21] - Focus on health and wellness trends continues, with over one-third of sales coming from organic products [15][16] - The loyalty program has been fully launched, with early indications of increased shopping frequency and sales per customer [18][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a softening consumer backdrop and the challenges of lapping strong prior year comparisons [7][9] - For the full year, total sales growth is expected to be approximately 14%, with comparable sales around 7% [12] - The company remains confident in its ability to deliver stable earnings growth despite current pressures [14] Other Important Information - The company generated $577 million in operating cash flow year-to-date, allowing for self-funded capital expenditures of $194 million [11] - A $600 million revolving credit facility was closed, providing financial flexibility for growth [12] Q&A Session Summary Question: Concerns about competition affecting core consumers - Management noted that while there are competitive pressures, their strategy of launching innovative products and expanding store presence positions them well against competitors [25][26] Question: Unique drivers of business performance and customer spending behavior - Management acknowledged pockets of outsized growth but indicated that they do not see structural issues affecting customer retention or spending behavior [30][31] Question: Details on comp slowdown and regional differences - Management confirmed that the slowdown is primarily due to tough year-over-year comparisons and some softness in middle-income demographics [32][36] Question: Impact of loyalty program and future marketing strategies - Management expressed optimism about the loyalty program's potential to drive customer engagement and sales, emphasizing the importance of personalized marketing [56][58] Question: Competitive pricing dynamics in fresh produce - Management is closely monitoring pricing in competitive markets like Texas and believes their produce pricing remains a competitive advantage [93][94] Question: Supply chain and in-stock opportunities - Management highlighted ongoing efforts to improve supply chain efficiency and in-stock levels, particularly in the meat category [77][78]

Financial Data and Key Metrics Changes - In Q3 2025, total sales reached $2.2 billion, an increase of $255 million or 13% year-on-year, driven by a 5.9% rise in comparable store sales [8][10] - Gross margin improved to 38.7%, up 60 basis points compared to the same period last year, primarily due to better shrink management [9][10] - Net income was $120 million, with diluted earnings per share of $1.22, reflecting a 34% increase year-on-year [10] Business Line Data and Key Metrics Changes - E-commerce sales grew by 21%, accounting for approximately 15.5% of total sales for the quarter [8] - Sprouts Brand sales now represent over 25% of total sales, indicating strong customer resonance with the brand [8][16] Market Data and Key Metrics Changes - Customer traffic remained positive, contributing approximately 40% to the third quarter comparable store sales [8] - The company opened nine new stores, ending the quarter with a total of 464 stores across 24 states [10] Company Strategy and Development Direction - The company plans to open 37 new stores in 2025, exceeding the original target of 35, and aims for 10% unit growth by 2027 [11][21] - The focus remains on health and wellness trends, with over one-third of sales coming from organic products [15][16] - The loyalty program has been fully launched, aiming to enhance customer engagement and personalization [18][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a softening consumer backdrop and the challenges of lapping strong prior year comparisons [7][9] - For the full year, total sales growth is expected to be approximately 14%, with comparable sales around 7% [12] - The company remains confident in its ability to manage costs and maintain stable margins despite consumer pressures [14][35] Other Important Information - The company generated $577 million in operating cash flow year-to-date, allowing for self-funded capital expenditures of $194 million [11] - A $600 million revolving credit facility was closed, providing financial flexibility for growth [12] Q&A Session Summary Question: Concerns about competition affecting core consumers - Management noted that while there are competitive pressures, their strategy of launching innovative products and expanding store presence positions them well against competitors [24][25] Question: Unique drivers of business performance and customer spending behavior - Management acknowledged pockets of outsized growth but indicated that they do not see structural issues affecting customer retention or spending behavior [28][30] Question: Details on comp slowdown and regional differences - Management highlighted that the slowdown is more pronounced in middle-income and younger demographics, with traffic still positive but basket sizes decreasing [32][62] Question: Fourth quarter comp expectations and loyalty program impact - Management indicated cautious optimism regarding the loyalty program's potential to drive customer engagement and sales, with ongoing monitoring of consumer behavior [54][56] Question: Competitive pricing dynamics in fresh produce - Management confirmed that they closely monitor pricing in competitive markets like Texas and maintain a significant price gap over most grocery competitors [92][93]