Sprouts Farmers Market, Inc. · NASDAQ:SFM
Sprouts Farmers Market — Investor Presentation (March 2023)
36 slides from Sprouts Farmers Market's investor presentation, Mar 2, 2023
Slide 1: Investor Deck March 2023
INVESTOR DECK March 2023 Exhibit 99.3
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein (including, but not limited to, statements to the effect that Sprouts Farmers Market, Inc. (the “Company”) or its
Slide 3: Find Your Healthy
FIND YOUR HEALTHY 3
Slide 4: What Defines Sprouts and What Makes Us Different
A farmers market experience – open layout of fresh produce at the heart of the store, community feel, treasure hunt for unique products A differentiated assortment of healthy alternatives and good-for-you options Purposeful curation of responsibly and locally sourced products Happy, helpful team mem
Slide 5: Why Invest in Sprouts? A Powerful Growth Business
Targeting at least 30 stores in 2023 with 10%+ annual unit growth beyond 2023 and incredible white space Strong and improving store unit economics Sustainable, robust cash flows with shareholder-friendly capital allocation Building an advantaged fresh supply chain Innovative & differentiated product
Slide 6: 2021 Environment, Social & Governance Highlights
CO 2021 Environment, Social, & Governance Highlights At the core of our identity is a genuine commitment to environmental sustainability. We are taking steps to reduce our carbon footprint and our natural resource intake while providing our customers with local, organic, and other sustainable food c
Slide 7: 2021 Sustainable Products
Millions of customers choose Sprouts because they can find products that are grown and produced in ways that are healthier for the planet and people. Our stores are stocked with a wide variety of organically grown, non-GMO, and plant-based options that lower the environmental impact of the food cons
Slide 8: Health, Safety and Community Impact
Providing safe and healthy food is at the core of our commitment to health and well-being. We collaborate with our team members, supply chain partners, community organizations, and industry experts to promote food safety, support workers’ rights, source responsibly, and develop a diverse and inclusi
Slide 9: Governance and Risk Management
We pride ourselves on operating with integrity, accountability, and transparency. Our ESG goals and initiatives are integrated throughout our business strategy, and strong oversight by our executive leadership team and Board of Directors ensures that the long-term interests of our stakeholders are f
Slide 10: Sprouts' Long-Term Strategy
Sprouts’ Long- Term Strategy 10+% UNIT GROWTH (1) LOW DOUBLE- DIGIT EARNINGS GROWTH EXPANDING ROIC REFINE BRAND AND MARKETING APPROACH WIN WITH TARGET CUSTOMERS UPDATE FORMAT AND EXPAND IN SELECT MARKETS CREATING ADVANTAGED SUPPLY CHAIN DIGITAL-FIRST MARKETING PROGRAM FOCUSED ON BUILDING RELATIONSHI
Slide 11: Sprouts Shopper: Higher Income Consumer who Craves Health and Wellness
Sprouts Shopper: Higher Income Consumer who Craves Health and Wellness $121K Avg. HHI 49% $100K + 46 Avg. Age 69% College/ Grad 57% Married/ Relationship 2.4 Avg. People in Household Demographics Over Index on Lifestyle Choices 32% committed to buying organic 30% committed to dietary lifestyle (vega
Slide 12: Expanding Customer Engagement Across Digital Platforms
Continuing to Expand Customer Engagement; “Speaking” to more than 6M Customers Across Digital Platforms 12 Digitally connected with 13% more customers in 2022 Active SMS Subscribers Active Email Subscribers Active Push Subscribers Identifiable Customers: 7% of customers can be linked back to a Sprou
Slide 13: Customer Affinity Net Promoter Score
Once Acquired, Sprouts’ Customer Affinity is Very Strong and in-line with Best-in-Class Peers Net Promoter Score (NPS) – Among Frequent Shoppers Frequent as defined as in Respondent’s Top 3 Most Visited for Grocery Promoters Passives Detractors Source: Sprouts NPS study, September 2022 +55 +25 +27 N
Slide 14: Pivoting Our Marketing Strategy
Pivoting Our Marketing Strategy to Drive More Profitable Growth with More Meaningful Connections OUR DIGITAL-FIRST MARKETING PROGRAM IS FOCUSED ON BUILDING RELATIONSHIPS WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Selective Shoppers Personalization: Improve
Slide 15: Ecommerce Slightly Increasing; DoorDash Marketplace Available
Ecommerce Slightly Increasing; DoorDash Marketplace Available in all our Markets In store Pick-up & Delivery available to all customers in all stores & markets Ecommerce Penetration 50% of online orders can be identified to a customer
Slide 16: Produce Remains the Heart of the Store
Produce Remains the Heart of the Store and Priced Below Most in the Marketplace Hybrid produce buying model: centralized and regional teams allow us to be flexible and react to the produce markets quickly Meaningful farmer partnerships: delivers new varietals and favorable pricing to our customers t
Slide 17: Curation of Differentiated Good-For-You Products
17 Sprouts’ Stores are Filled with a Curation of Differentiated Good-For-You Products More than 70% of Products Sold in Sprouts are Attribute Driven: Organics, Paleo, Keto, Plant Based, Non-GMO, Gluten Free, Vegan, Dairy-free, Grass Fed, Raw Includes all produce
Slide 18: Sprouts Aims To Grow a Differentiated Sprouts Brand
18 Sprouts Aims To Grow a Differentiated Sprouts Brand Sprouts Brand Sales Penetration
Slide 19: Unique, Friendly Experience in a Smaller Box
19 Deliver a Unique, Friendly Experience with Healthy, Innovative Products - in a Smaller Box with Higher Returns Format to Stay True to our Fresh-focused Farmers Market Heritage Prioritize Categories For Growth Potential Continue to Offer all Categories More Productive Store New store size to decre
Slide 20: High Growth Retailer Unit Growth
High Growth Retailer Unit growth (1) 300-400 New Stores in Expansion Markets 2019, 2020, 2021, 2022 actual unit growth, 2023 outlook, & 10% unit growth in 2024 and thereafter Expansion Markets Existing DCs Future DCs Existing Markets
Slide 21: Creating an Advantaged Fresh Supply Chain
21 Creating an Advantaged Fresh Supply Chain of DCs within 250 Miles of the Majority of Stores Optimizing our Supply Chain ~100K store deliveries per year: Expand capabilities Connect supply chain to store operations via updated systems – DC replenishment and PI/CAO Set foundation for continued dema
Slide 22: Long-Term Strategic Financial Targets
22 Long-Term Strategic Financial Targets (1) Low Double-Digit Earnings Growth and Expansion of ROIC Cost to Build Reduced & Attractive New Store Economics 10+% unit growth or more (2) Low single digit comps Stable to Expanding EBIT Margins These are targets and not projections; they are subject to s
Slide 23: Low Single Digit Comps Targets with Stable to Expanding EBIT Margins
23 Low Single Digit Comps Targets with Stable to Expanding EBIT Margins(1) All Stores Smarter Promotions Improved Buying Supply Chain Optimization Labor Productivity Improving Shrink Headwinds from Labor & Benefit Costs Key Comp Drivers Brand and marketing Innovative, differentiated products Omnicha
Slide 24: New Stores: Four-Wall Box Target Economics
24 New Stores: Four-Wall Box Target Economics (1) Sales EBITDA Margins Box opens on average at $13M in year 1 annual sales Grows 20% to 25% over next the next 4 years Break even year 1 Grows to a blended ~8% EBITDA Margins over the next 4 years Cash on Cash Return Low to mid thirties by year 5 Cash
Slide 25: Sprouts is on a Stronger Foundation
25 ($ in mm) ($ in mm) (2) (2) (2) See the Appendix to this presentation for a reconciliation of adjusted diluted EPS to net income 2020 is presented on a 52-week basis for Net Sales and Adjusted Diluted Earnings Per Share and on 53-week basis for Net Cash Provided by Operations Sprouts is on a Stro
Slide 26: Gross Margin Has Increased and Structurally Changed
Gross Margin Has Increased and Structurally Changed Structural Changes Driven By: Promotional strategy changes Differentiated products Operational & shrink improvements Addition of two new distribution centers in FL & CO An income statement recast in 2018 moved buying and occupancy from Cost of Sale
Slide 27: Maintained a Structurally Improved Margin Profile
Maintained a Structurally Improved Margin Profile 27 See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT; For 2021 & 2022, adjustments to EBIT were immaterial; thus, only EBIT is presented. 2020 is presented on a 52- week basis ($ in mm) (2) ADJUSTED EBIT & Adjusted E
Slide 28: Improving ROIC
In-line with Strategic Goals…Improving ROIC 28 ROIC (1) ROIC is a non-GAAP measure defined as net operating profit after taxes divided by average invested capital. See the Appendix to this presentation for a reconciliation of ROIC to net income 2020 is presented on a 53-week basis (2)
Slide 29: Capital Expense Driven by New Stores
Capital Expense Driven by New Stores Capex Spend as % of Sales 1.5% ~3.5% 2.8% ~3.5% 2023 and beyond are estimates Capital expenditures are net of landlord reimbursement 1.3% 1.7% 29
Slide 30: Ongoing Share Repurchase Program
From 2015 through 2022: Repurchased 57 million shares Reduced shares outstanding 37% $412M remaining on our share repurchase authorization* $0 Total Annual Share Repurchase ($ in mm) In Addition To Investing In Growth, We Drive Shareholder Value Through An Ongoing Share Repurchase Program * As of Ja
Slide 31: Find Your Healthy in Our Assortment of Fresh, Healthy Foods
FIND YOUR HEALTHY IN OUR ASSORTMENT OF FRESH, HEALTHY FOODS Sprouts delivers a unique farmers market experience: bringing together passionate, knowledgeable team members, and the best assortment of high-quality food that is good for us and good for the world.
Slide 32: Appendix
APPENDIX
Slide 33: Executive Management Team with Leading Grocery & Retail Experience
Executive Management Team with Leading Grocery & Retail Experience Jack Sinclair Chief Executive Officer since 2019 Lawrence “Chip” Molloy Chief Financial Officer since 2021 Scott Neal Chief Merchandising Officer since 2022 (joined SFM in 2020) Dan Sanders Chief Store Operations Officer since 2022 (
Slide 34: Non-GAAP Measure Reconciliation: EBITDA and Adjusted EBITDA
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of EBITDA and adjusted EBITDA to net income for the fifty-two weeks ended Jan 1, 2023, Jan 2, 2022, Jan 3, 2021 (53 weeks), and Dec 29, 2019: Appendix I
Slide 35: Non-GAAP Measure Reconciliation: EBIT and Adjusted EPS
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of EBIT and adjusted EBIT to net income, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjusted di
Slide 36: Appendix: ROIC Reconciliation
Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2019 , 2020, 2021 and 2022 fiscal years SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN MILLIONS)
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