Sprouts Farmers Market, Inc. · NASDAQ:SFM
Sprouts Farmers Market — Investor Presentation (October 2023)
39 slides from Sprouts Farmers Market's investor presentation, Oct 31, 2023
Slide 1: Investor Deck October 2023
INVESTOR DECK October 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
Incredible white space - targeting at least 30 stores in 2023 with approximately 10% annual unit growth beyond 2023 Strong new store economics Sustainable, robust cash flows with shareholder-friendly capital allocation Innovative & differentiated products with lifestyle-friendly ingredients Unique f
Slide 6: 2022 Environment, Social & Governance Highlights
2022 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 choic
Slide 7: Sustainable and responsible products for customers
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: Food safety, team member 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, risk management and data privacy
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 Approximately 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 CUSTOMER
Slide 11: Investing in our Team Members Over the Years
Investing in our Team Members Over the Years 11 ~$400M Investments in our team members since 2019* 2.2M Team Member Training hours since 2019 $19.18 Average pay rate for store team members(2) (1) Includes merit, bonus, market adjustments, promotions, statutory minimum wage adjustments, and training
Slide 12: Focused on Innovation & Differentiation
Sprouts is Focused on Innovation & Differentiation - over 70% of Products Sold at Sprouts are Attribute-Based and 15% of our Products Turn over Each Year Back of House Entrance Receiving & Back of House Bakery: 30% non-GMO Produce: >40% organic 20% of total sales Bulk: 20% organic Deli: 20% gluten-f
Slide 13: 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 14: Why Customers Shop with Sprouts
Natural/ Organic/ Specific Diet Organic/natural food or food for a special diet Most prevalent Sprouts trip Retailer Specific Items Purchase specific items that can only be bought at that retailer Why Customers Shop with Sprouts – We Win on Selection-Oriented Trips 14 Source: Sprouts/Numerator study
Slide 15: Continuing to Expand Customer Engagement
Continuing to Expand Customer Engagement 15 Digitally connecting with customers Active SMS Subscribers Active Email Subscribers Active Push Subscribers 80% of our media is spent on digital marketing YTD ~15% ecommerce sales growth Successfully driving incremental sales through personalization, lever
Slide 16: Customer Affinity and 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 Source: Sprouts NPS study, September 2023 Promoters Detractors Passives +57 +37 NPS +
Slide 17: 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 CUSTOMER ENGAGEMENT WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Selective Shoppers Personalization: Improve cu
Slide 18: Ecommerce and DoorDash Marketplace
Ecommerce Slightly Increasing; DoorDash Marketplace Available in all our Markets Majority of ecommerce customers are omnichannel with higher share of wallet Ecommerce Penetration ~45% of online orders can be identified to a customer
Slide 19: 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 20: Curation of Differentiated Good-For-You Products
20 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 21: Growing a Differentiated Sprouts Brand
21 Sprouts Aims To Grow a Differentiated Sprouts Brand Sprouts Brand Sales Penetration(1) (1) Sprouts Brand Sales Penetration represents sales of Sprouts Brand products, as a percentage of total company sales.
Slide 22: Unique Experience in a Smaller Box with Higher Returns
22 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 decreasi
Slide 23: 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, & approximately 10% unit growth in 2024 and thereafter Expansion Markets Existing DCs Future DCs Existing Markets
Slide 24: Advantaged Fresh Supply Chain of DCs
24 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 25: Long-Term Strategic Financial Targets
25 Long-Term Strategic Financial Targets (1) Low Double-Digit Earnings Growth and Expansion of ROIC Cost to Build Reduced & Attractive New Store Economics Low single digit comps Stable EBIT Margins off a Higher Base These are targets and not projections; they are subject to significant business, eco
Slide 26: Low Single Digit Comps with Stable to Expanding EBIT Margins
26 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 27: New Stores: Four-Wall Box Target Economics
27 New Stores: Four-Wall Box Target Economics (1) Sales EBITDA Margins Box opens on average at $13M in year 1 annual sales Grows 20% to 25% over next the next 4 years Break even year 1 Grows to a blended ~8% EBITDA Margins over the next 4 years Cash on Cash Return Low to mid thirties by year 5 Cash
Slide 28: Stronger Foundation: Strategic Initiatives Taking Hold
28 ($ 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 29: Gross Margin Has Increased and Structurally Changed
Gross Margin Has Increased and Structurally Changed Structural Changes Driven By: Promotional strategy changes Differentiated products/Mix Operational & shrink improvements An income statement recast in 2018 moved buying and occupancy from Cost of Sales to SG&A – revising gross margin up more than 4
Slide 30: Maintaining a Structurally Improved Margin Profile
Maintaining a Structurally Improved Margin Profile 30 See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT. For Q3 YTD’2021 & Q3 YTD’2022, adjustments to EBIT were immaterial; thus, only EBIT is presented. ($ in mm) ADJUSTED EBIT & Adjusted EBIT Margin (1)
Slide 31: Improving ROIC
In-line with Strategic Goals…Improving ROIC 31 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 32: 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% 32
Slide 33: Ongoing Share Repurchase Program
From 2015 through Q3 2023: Repurchased 63 million shares Reduced shares outstanding by 41% $231M remaining on our share repurchase authorization* Total Share Repurchase Driving Shareholder Value Through An Ongoing Share Repurchase Program ($ in mm) * As of October 1, 2023 $0
Slide 34: 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 35: Appendix
APPENDIX
Slide 36: 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 37: Non-GAAP Measure Reconciliation (Fiscal Years)
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 38: Non-GAAP Measure Reconciliation (Thirty-Nine Weeks)
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS) The following table shows a reconciliation of adjusted gross margin to gross margin, EBIT and adjusted EBIT to net income, adjusted EBIT margin to EBIT margin, as well as a reconciliation of net
Slide 39: ROIC Reconciliation to Net Income
Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2019 , 2020, 2021 and 2022 fiscal years and third quarter of 2023 SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN MILLIONS)
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