Sprouts Farmers Market, Inc. · NASDAQ:SFM
Sprouts Farmers Market — Investor Presentation (August 2021)
36 slides from Sprouts Farmers Market's investor presentation, Aug 12, 2021
Slide 1: Investor Deck August 2021
INVESTOR DECK August 2021 Exhibit 99.1
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 The right assortment of healthy alternatives and good-for-
Slide 5: Why Invest in Sprouts? A Powerful Growth Business
Targeted 10%+ annual unit growth beyond 2021 and incredible white space Strong and improving unit economics Sustainable robust cash flows Building an advantaged fresh supply chain Unique farmers market experience Innovative & differentiated products with lifestyle friendly ingredients WHY INVEST IN
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' 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 SELELCT MARKETS CREATING ADVANTAGED SUPPLY CHAIN DIGITAL-FIRST MARKETING PROGRAM CONNECTING WITH TARGET CUSTOME
Slide 9: We Exist for the Health Enthusiasts and Experience Seekers
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: Tremendous Opportunity to Gain Share in Target Customer Segments
Tremendous Opportunity to Gain Share in Winning Target Customer Segments 10 Consumers Spend $1.2T on Food at Home Sprouts’ Share Today >$200B Market We still have Significant Opportunity to Introduce Target Customers to Sprouts
Slide 11: Customer Affinity Very Strong and in-line with Best-in-Class Peers
Once Acquired, Sprouts’ Customer Affinity is Very Strong and in-line with Best-in-Class Peers Net Promoter Score (NPS) – Among Frequent Shoppers Frequent as defined as in Respondent’s Top 3 Most Visited for Grocery +65 +22 +69 NPS +23 +47 +47 +42 +32 +66 +44 +61 +63 +72 +70 +60 Promoters Passives De
Slide 12: Pivoting Our Marketing Strategy to Drive More Profitable Growth
Pivoting Our Marketing Strategy to Drive More Profitable Growth with a Broader Reach OUR DIGITAL-FIRST MARKETING PLATFORM IS FOCUSED ON CONNECTING WITH OUR MOST IMPORTANT CUSTOMERS Target Audience: Connect with Health Enthusiasts and Experience Seekers Geo-Targeting: Align media investments with our
Slide 13: Ecommerce Remains Here to Stay
Ecommerce Remains Here to Stay and Sales Appear to be Settling at New Levels Customers can now shop how they like – In-Store, Pick-up, or Delivery Ecommerce Penetration ($ in mm)
Slide 14: Produce Remains the Heart of the Store
Produce Remains the Heart of the Store 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 customers through spot buys New distribution ch
Slide 15: Curation of Differentiated Good-For-You Products
15 Sprouts’ Stores are Filled with a Curation of Differentiated Good-For-You Products 68% 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: Unique Experience in a Smaller Box with Higher Returns
16 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 From 30K To 23K square foot box
Slide 17: Small Store Benefits
17 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 18: High Growth Retailer – Annual Unit Growth Target of 10% or More
High Growth Retailer – Annual Unit Growth Target of 10% or More Beyond 2021 Unit growth (1) 300 – 400 New Stores in Expansion Markets 2019 & 2020 actual unit growth, 2021 outlook subject to equipment delays, 2022 and beyond represent a range of potential growth Expansion Markets Existing DCs Future
Slide 19: Creating an Advantaged Fresh Supply Chain
19 Creating an Advantaged Fresh Supply Chain within 250 Miles of the Majority of Stores; Focused on Fresh, Local and Organic Offerings Opening of 2 New DCs in FL and CO Will Save Nearly 3000 Metric Tons of Carbon Dioxide Equivalent Meet our Local CO Farmer Partners
Slide 20: Long-Term Strategic Financial Targets
20 Long-Term Strategic Financial Targets Low Double-Digit Earnings Growth and Expansion of ROIC Cost to Build Reduced & Attractive New Store Economics 10+% unit growth or more (1) Low single digit comps (1) Stable to Expanding EBIT Margins (1) Starting in 2022
Slide 21: New Store Four Wall Box Target Economics
21 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 22: Low Single Digit Comps Target
22 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 23: Stable to Expanding EBIT Margins
23 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 Headwinds from ecommerce Reduction in Cost to Build (Improved DA) Lower Ren
Slide 24: Sprouts is on a Stronger Foundation than Beginning of 2020
Sprouts is on a Stronger Foundation than Beginning of 2020 24 NET SALES $6.5B +15% YoY NET CASH PROVIDED by OPERATIONS $494M + 39% YOY ADJUSTED DILUTED Earnings Per Share $2.49 + 99% YOY ($ in mm) ($ in mm) (1) See the Appendix to this presentation for a reconciliation of adjusted diluted EPS to net
Slide 25: Structurally Changed Gross Margin
Structurally Changed Gross Margin Modest Give back from: Buying/cost benefits from abrupt restaurant closures Shrink leverage from faster moving product during COVID Short-term shrink benefit from extreme out-of-stocks early in pandemic Strategic investments In 2021… 2020 GM Improvement
Slide 26: Ongoing Strategic Changes are Producing Solid Financials in 2021
Ongoing Strategic Changes are Producing Solid Financials in 2021 26 See the Appendix to this presentation for a reconciliation of adjusted diluted EPS to net income YTD NET SALES $3.1B YTD ADJUSTED DILUTED Earnings Per Share $1.22 ($ in mm) (1) YTD NET CASH PROVIDED by OPERATIONS $177M ($ in mm)
Slide 27: Structurally Improved Margin Profile
Structurally Improved Margin Profile 27 ($ in mm) YTD ADJUSTED EBIT & Adjusted EBIT Margin(1) See the Appendix to this presentation for a reconciliation of EBIT to adjusted EBIT. For 2017,2018, & 2021 adjustments to EBIT were immaterial; thus only EBIT is presented.
Slide 28: In-line with Strategic Goals…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.
Slide 29: Capital Expense Driven by New Store Growth
Capital Expense Driven by New Store Growth Capex Spend as % of Sales 4.0% 3.0% 1.5% ~2.5% to 3.5% 2.8% Capital Expenditures is net of landlord reimbursement 2021 and beyond are estimates 1.9%
Slide 30: 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 31: Appendix
APPENDIX
Slide 32: Executive Management Team with Leading Grocery & Retail Experience
Executive Management Team with Leading Grocery & Retail Experience Jack Sinclair Chief Executive Officer since 2019 Denise Paulonis Chief Financial Officer since 2020 Scott Neal Chief Fresh Merchandising Officer since 2020 Dan Sanders Chief Operations Officer since 2016 Gil Phipps Senior VP, Chief M
Slide 33: 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 34: 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 and $10 million (or $0.08 per diluted share) in the fifty-two weeks ended December 31, 2017, in excess federal and state tax benefits for share bas
Slide 35: 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 36: Reconciliation of ROIC to Net Income
Appendix The following table shows a reconciliation of ROIC to net income for the Company’s 2017, 2018, 2019 and 2020 fiscal years and second quarter 2021. SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS)
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