Sprouts Farmers Market, Inc. · NASDAQ:SFM
Sprouts Farmers Market — Investor Presentation (August 2022)
39 slides from Sprouts Farmers Market's investor presentation, Aug 3, 2022
Slide 1: Investor Deck August 2022
INVESTOR DECK August 2022 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: Sprouts, Where Goodness Grows
SPROUTS, WHERE GOODNESS GROWS
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 Intentional curation of responsibly and locally sourced products A place with happy, helpful team members Culture (care, own it, love being different) The right ass
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 unit economics Sustainable robust cash flows with shareholder friendly capital allocation Building an advantaged fresh supply chain Unique farmers market experience Innovativ
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: Sustainable & Responsible 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 Commitment
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' Five Pillar Long-Term Strategy
Sprouts’ Five Pillar 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 CONNECTING WITH TAR
Slide 11: Focusing on Sprouts' Target Customers
WE EXIST FOR THE HEALTH ENTHUSIASTS WE EXIST FOR THE EXPERIENCE SEEKERS What brings them together is simple: They’re into their food – like, really into it. Cover a wide range of income Age demographics - Gen Z to Baby Boomers Healthy and organic options, better for you, quality products Innovative
Slide 12: Continue to Expand Customer Engagement
Continue to Expand Customer Engagement 12 Currently “speaking” to nearly 6M customers via multiple digital platforms +19% + 70% +35% Growth rate is Q2 2022 vs. Q2 2021 Growth rate is May 2022 vs May 2021 due to data quality issues related to system implementation (2) (1) (1) Mobile App Downloads Act
Slide 13: Customer Affinity Strong, in Line with Best-in-Class Peers
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 2021 +53 +22 +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 CONNECTING WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Experience Seekers Geo-Targeting: Align media investmen
Slide 15: Sprouts Unique Selling Proposition
Sprouts Unique Selling Proposition Promote Sprouts’ unique selling proposition by utilizing the following strategy: Fresh & Value – Drive awareness through broader mass media Healthy Discovery – Increase through influencers, vendor partnerships and the customer experience
Slide 16: Ecommerce Remains Here to Stay
Ecommerce Remains Here to Stay and Sales Appear to be Settling at New Levels 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 17: Produce Remains the Heart of the Store
Produce Remains the Heart of the Store and Priced Well 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 which deliver new varietals and favorable pricing to our c
Slide 18: Curation of Differentiated Good-For-You Products
18 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 19: Grow and Establish a Differentiated Private Label
19 Sprouts Aims To Grow and Establish a Differentiated Private Label Private Label Sales Penetration
Slide 20: Smaller Box with Higher Returns
20 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 New store size to decrease from 30K to 23K squa
Slide 21: Small Store Benefits
21 Small Store Benefits Reduce Operating Cost Lower Cost to Build Reduce Non-Selling Space Decrease Occupancy Cost Sales to Remain Flat Strong Returns & Ability to Accelerate Growth
Slide 22: High Growth Retailer Unit Growth
High Growth Retailer Unit growth (1) 300-400 New Stores in Expansion Markets 2019, 2020, 2021 actual unit growth, 2022 outlook, at least 30 stores in 2023 & 10% unit growth in 2024 and thereafter Expansion Markets Existing DCs Future DCs Existing Markets
Slide 23: Creating an Advantaged Fresh Supply Chain
23 Creating an Advantaged Fresh Supply Chain of DCs within 250 Miles of the Majority of Stores DCs Focused on Fresh, Local and Organic Offerings Meet our Local Farmer Partners
Slide 24: Long-Term Strategic Financial Targets
24 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 25: Low Single Digit Comps Targets with Stable to Expanding EBIT Margins
25 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 Omnich
Slide 26: New Store Four Wall Box Target Economics
26 New Store 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 In
Slide 27: Sprouts on a Stronger Foundation
27 NET SALES $6.1B + 8% vs 2019 NET CASH PROVIDED by OPERATIONS $365M + 3% vs 2019 ADJUSTED DILUTED Earnings Per Share $2.10 + 68% vs 2019 ($ in mm) ($ in mm) (1) (3) (3) (3) See the Appendix to this presentation for a reconciliation of adjusted diluted EPS to net income The Company’s results for FY
Slide 28: Gross Margin Has Increased and Structurally Changed
Gross Margin Has Increased and Structurally Changed Since 2019 Structural Changes Driven By: Promotional strategy changes Differentiated products Operational improvements Addition of two new distribution centers in FL & CO Quarterly Gross Margin %
Slide 29: Maintained a Structurally Improved Margin Profile
Maintained a Structurally Improved Margin Profile 29 ($ in mm) YTD ADJUSTED EBIT & Adjusted EBIT Margin (1) 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.
Slide 30: Improving ROIC
In-line with Strategic Goals…Improving ROIC 30 ROIC (1) ROIC is a non-GAAP measure that we define 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 31: Capital Expense Driven by New Stores
Capital Expense Driven by New Stores Capex Spend as % of Sales 3.0% 1.5% ~2.5% to 3.5% 2.8% Capital Expenditures is net of landlord reimbursement 2022 and beyond are estimates 1.3% 2.4%
Slide 32: Ongoing Share Repurchase Program
From 2015 through Q2, 2022: Repurchased 54 million shares Reduced shares outstanding 35% Purchased $1.3B to date $501M 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 R
Slide 33: Delight in the Goodness of Fresh, Healthy Foods
DELIGHT IN THE GOODNESS OF FRESH, HEALTHY FOODS… Sprouts delivers a unique farmers market experience that brings together passionate, knowledgeable team members and the best assortment of high-quality food that is good for us, and good for the world.
Slide 34: Appendix
APPENDIX
Slide 35: Executive Management Team
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 36: Non-GAAP Measure Reconciliation
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, as well as a reconciliation of net income and diluted earnings per share to adjusted net income and adjuste
Slide 37: Appendix
Appendix Income tax provision includes approximately $12 million (or $0.10 per diluted share) benefit during the fifty-two weeks ended December 30, 2018 in excess federal and state tax benefits for share based compensation primarily associated with the exercise of expiring pre-IPO options. Includes
Slide 38: Non-GAAP Measure Reconciliation
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 39: ROIC Reconciliation
Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2018, 2019 , 2020, 2021 fiscal years and second quarter of 2022. SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS)
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