Sprouts Farmers Market, Inc. · NASDAQ:SFM
Sprouts Farmers Market — Investor Presentation (February 2022)
36 slides from Sprouts Farmers Market's investor presentation, Feb 24, 2022
Slide 1: Investor Deck February 2022
INVESTOR DECK February 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, be different) The right assortment
Slide 5: Why Invest in Sprouts? A Powerful Growth Business
Targeted 10%+ annual unit growth beyond 2022 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 Innovative & differentiated products with
Slide 6: ESG Activities are Improving our Bottom Line and the Planet
ESG Activities are Improving our Bottom Line and the Planet! Transitioned 100% of pork supply to be sourced from suppliers that utilize open-pen or group-housed facilities Safe, Healthy Food and Responsible Sourcing Environment & Climate overall landfill diversion rate by repurposing and recycling n
Slide 7: We Put Customers, Team Members, and Local Communities First
We Put Customers, Team Members, and Local Communities First! Awarded $1.6 million in grants and donations to programs supporting youth nutrition education and academic support, and food system equity Supported an estimated 350,000 students with nutrition programs, taught virtually, during school clo
Slide 8: 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 9: 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 10: Continue to Expand Customer Engagement
Continue to Expand Customer Engagement 10 Currently “speaking” to more than 5M customers via multiple digital platforms +26% + 76% +36% (1) Growth rate is 2021 vs. 2020 (1) (1) (1)
Slide 11: Customer Affinity Strong and 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 12: Pivoting Our Marketing Strategy to Drive More Profitable Growth
Pivoting Our Marketing Strategy to Drive More Profitable Growth with a Broader Reach OUR DIGITAL-FIRST MARKETING PLATFORM IS FOCUSED ON CONNECTING WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Experience Seekers Geo-Targeting: Align media investments with our
Slide 13: 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 14: 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 15: Curation of Differentiated Good-For-You Products
15 Sprouts’ Stores are Filled with a Curation of Differentiated Good-For-You Products 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 16: Grow and Establish a Differentiated Private Label
16 Sprouts Aims To Grow and Establish a Differentiated Private Label Private Label Sales Penetration
Slide 17: Unique, Friendly Experience in a Smaller Box with Higher Returns
17 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 18: Small Store Benefits
18 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 19: High Growth Retailer – Annual Unit Growth Target of 10% or More
High Growth Retailer – Annual Unit Growth Target of 10% or More Beyond 2022 Unit growth (1) 300-400 New Stores in Expansion Markets 2019, 2020, 2021 actual unit growth, 2022 outlook, 2023 and beyond represent a 10% unit growth subject to equipment delays Expansion Markets Existing DCs Future DCs Exi
Slide 20: Creating an Advantaged Fresh Supply Chain
20 Creating an Advantaged Fresh Supply Chain within 250 Miles of the Majority of Stores DCs Focused on Fresh, Local and Organic Offerings Meet our Local Farmer Partners
Slide 21: Long-Term Strategic Financial Targets
21 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 (2) Stable to Expanding EBIT Margins These are targets and not projections; they are subject t
Slide 22: New Store Four Wall Box Target Economics
22 New Store Four Wall Box Target Economics Sales EBITDA Margins 20% to 25% sales growth in 4 years $16M - $18M annual Sales per Box in year 4 Blended 8% EBITDA Margins in year 4 Cash on Cash Return ~40% by year 4, continues to grow in year 5 Cash Investment $3.2M average new store build including C
Slide 23: Low Single Digit Comps Target
23 Low Single Digit Comps Target Key Comp Drivers Low Single Digit Comps Brand and marketing Innovative, differentiated products Omnichannel offering Better new store ramp with smarter promotional approach
Slide 24: Stable to Expanding EBIT Margins
24 Stable to Expanding EBIT Margins Stable to Expanding EBIT Margins All Stores New Stores Smarter Promotions Improved Buying Supply Chain Optimization Labor Productivity Improving Shrink Headwinds from Labor & Benefit Costs Reduction in Cost to Build (Improved DA) Lower Rents driven by Smaller Boxe
Slide 25: Net Sales, Cash from Operations and Adjusted EPS
25 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 26: Gross Margin Has Increased and Structurally Changed Since 2019
Gross Margin Has Increased and Structurally Changed Since 2019 Gross Margin Driven By: Promotional strategy changes Differentiated products Operational improvements Addition of two new distribution centers in FL & CO Annual Gross Margin %
Slide 27: Maintained a Structurally Improved Margin Profile
Maintained a Structurally Improved Margin Profile 27 ($ in mm) ADJUSTED EBIT & Adjusted EBIT Margin(1) See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT 2020 is presented on a 53-week basis (2)
Slide 28: Improving ROIC
In-line with Strategic Goals…Improving ROIC 28 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 29: 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 30: Ongoing Share Repurchase Program
From 2015 through 2021: Repurchased 51 million shares Reduced shares outstanding 33% Purchased $1.1B to date $112M remaining on our share repurchase authorization* $0 Total Annual Share Repurchase * As of January 2, 2022 In Addition To Investing In Growth, We Drive Shareholder Value Through An Ongoi
Slide 31: 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 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 Fresh Merchandising Officer since 2020 Dan Sanders Chief Operations Officer since 2016 Gil Phipps Senior VP,
Slide 34: 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 35: Appendix Footnotes
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 36: ROIC Reconciliation to Net Income
Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2018, 2019 , 2020 and 2021 fiscal years. SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS)
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