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What changed in Sprouts Farmers Market, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sprouts Farmers Market, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+245 added−448 removedSource: 10-K (2025-02-20) vs 10-K (2023-03-02)

Top changes in Sprouts Farmers Market, Inc.'s 2024 10-K

245 paragraphs added · 448 removed · 178 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

89 edited+33 added−255 removed40 unchanged
Biggest changeProperties” for additional information with respect to our planned store closures in 2023. 11 Table of Contents The below diagram shows our store footprint, by state, as of January 1, 2023. 12 Table of Contents New Store Development We have an extensive analytics-based process for new store site selection, which includes in-depth analysis of area demographics, competition, growth potential, traffic patterns, grocery spend and other key criteria.
Biggest changeNew Store Development We have an extensive analytics-based process for new store site selection, which includes in-depth analysis of area demographics, competition, growth potential, traffic patterns, grocery spend and other key criteria. We have a dedicated real estate team as well as a real estate committee that includes certain of our executive officers.
We believe our network of fresh distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores.
We believe our network of distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores.
Perishable product categories include produce, meat, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care.
Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care.
The 2018 Farm Bill legalized the production of hemp and products made from hemp, hemp derivatives including CBD oil and extracts, and established that these products are no longer controlled substances, as long as the cannabis plant and products derived from the plant contain no more than 0.3% THC.
CBD Products. The 2018 Farm Bill legalized the production of hemp and products made from hemp, hemp derivatives including CBD oil and extracts, and established that these products are no longer controlled substances, as long as the cannabis plant and products derived from the plant contain no more than 0.3% THC.
This authority applies to all domestic food facilities and, by way of imported food supplier verification requirements, to all foreign facilities that supply food products. The FDA and FSIS also exercise broad jurisdiction over the labeling and promotion of food.
This authority applies to all domestic food facilities and, by way of imported food supplier verification requirements, to all foreign facilities that supply food products. The FDA and FSIS also exercise broad jurisdiction over the labeling and promotion of food and meat products.
For all non-produce products, we use third-party distributors and vendors to distribute products directly to our stores following specifications and quality control standards that are set by us.
For all non-produce products, we use third-party distributors and vendors to distribute products directly to our stores following specifications and ingredient and quality control standards that are set by us.
Labeling is a broad concept that, under certain circumstances, extends even to product-related claims and representations made on a company’s website or similar printed or graphic medium. All foods, including dietary supplements, must bear labeling that provides consumers with essential information with respect to standards of identity, net quantity, nutrition facts labeling, ingredient statement, and allergen disclosures.
Labeling is a broad concept that, under certain circumstances, extends even to product-related claims and representations made on a company’s website, in-store or similar printed or graphic medium. All foods, including dietary supplements, must bear labeling that provides consumers with essential information with respect to standards of identity, net quantity, nutrition facts labeling, ingredient statement, and allergen disclosures.
Since the scholarship program’s inception, we have awarded more than $1.7 million in scholarships. Total Rewards. Because we are a people powered business, we are proud to continuously invest in our workforce by offering competitive salaries and wages, which we regularly assess against the current business environment and labor market.
Since the scholarship program’s inception, we have awarded more than $1.9 million in scholarships. Total Rewards. Because we are a people powered business, we are proud to continuously invest in our workforce by offering competitive salaries and wages, which we regularly assess against the current business environment and labor market.
As we implement our long-term growth strategy, our future stores will deliver a unique and friendly shopping experience that stays true to our farmers market heritage by featuring a smaller box size than our recent vintages, generally between 21,000 and 25,000 square feet.
As we implement our long-term growth strategy, our stores will continue to deliver a unique and friendly shopping experience that stays true to our farmers market heritage by featuring a smaller box size than our recent vintages, generally between 21,000 and 25,000 square feet.
The below diagram shows a sample layout of our new smaller format stores: • Customer Engagement . We are committed to providing, and believe we have, best-in-class customer engagement, which builds trust with our customers and differentiates the Sprouts shopping experience from that of many of our competitors.
The below diagram shows a sample layout of our updated smaller format stores: • Customer Engagement . We are committed to providing, and believe we have, best-in-class customer engagement, which builds trust with our customers and differentiates the Sprouts shopping experience from that of many of our competitors.
To offer the right assortment of healthy alternatives and good-for-you options, we curate our product mix to differentiated fresh, natural and organic foods and healthier options throughout all of our departments, with innovative products that feature lifestyle friendly ingredients. Fresh, Natural and Organic Foods We focus our product offerings on fresh, natural and organic foods.
To offer the right assortment of healthy alternatives and good-for-you options, we curate our product mix to attribute-driven and differentiated fresh, natural and organic foods and healthier options throughout all of our departments, with innovative products that feature lifestyle friendly ingredients. Fresh, Natural and Organic Foods We focus our product offerings on fresh, natural and organic foods.
Such regulations mandate participation in USDA's Hazard Analysis and Critical Control Points (“HACCP”) program or FDA's Hazard Analysis and Risk-Based Prevention Controls (“HARPC”) program, as applicable, which require that risk-based preventive controls be observed by the majority of food producers.
FDA regulations mandate participation in USDA's Hazard Analysis and Critical Control Points (“HACCP”) program or FDA's Hazard Analysis and Risk-Based Prevention Controls (“HARPC”) program, as applicable, which require that risk-based preventive controls be observed by the majority of food producers.
We believe our team members contribute to our consistently high service standards and that this helps us successfully open and operate our stores. Our Product Offering We are a specialty natural and organic food retailer that offers a unique shopping experience for our customers.
We believe our team members contribute to our consistently high service standards and this helps us successfully open and operate our stores. Our Product Offering We are a specialty natural and organic food retailer offering a unique shopping experience for our customers.
See “Risk Factors—Disruption of significant supplier relationships could negatively affect our business.” Our Pricing, Marketing and Advertising Pricing As a farmers market style store, we emphasize competitive prices throughout the entire store, as we are able to pass along the benefits of our scale and purchasing power to our customers, particularly in certain categories such as produce.
See “Risk Factors—Disruption of significant supplier relationships could negatively affect our business.” 5 Table of Contents Our Pricing, Marketing and Advertising Pricing As a farmers market style store, we emphasize competitive prices throughout the entire store, as we are able to pass along the benefits of our scale and purchasing power to our customers, particularly in certain categories such as produce.
Furthermore, we offer comprehensive, relevant and market competitive benefits to all eligible team members: • We offer a variety of medical benefit plans to allow team members the ability to choose the best plan for them and their families. • We offer well-being services and support dedicated to the mental, physical, emotional and financial well-being of our team members. • We have a quarterly bonus plan for which all store team members are eligible. • All team members over 18 can enroll in our 401(k) plan the first of the month following three months of service, and we offer a contribution matching program. • We offer a paid sick time policy for all team members and offer generous leave programs. • All hourly team members are eligible for semi-annual reviews and merit increases. • We offer team members the opportunity to participate in the Western Association of Food Chains’ Retail Management Certificate Program that provides the core skills and knowledge to move into a management role in the retail industry.
Furthermore, we offer comprehensive, relevant and market competitive benefits to all eligible team members: • We offer a variety of medical benefit plans to allow team members the ability to choose the best plan for them and their families. • We offer well-being services and support dedicated to the mental, physical, emotional and financial well-being of our team members. • We have a quarterly bonus plan for which all store team members are eligible. • All team members over 18 can enroll in our 401(k) plan on the first of the month following three months of service, and we offer a contribution matching program. • We offer a paid sick time policy for all team members and offer generous leave programs. 8 Table of Contents • All hourly team members are eligible for semi-annual reviews and merit increases. • We have enhanced our benefits to support mental well-being and counseling services for all team members. • We offer team members the opportunity to participate in the Western Association of Food Chains’ Retail Management Certificate Program that provides the core skills and knowledge to move into a management role in the retail industry.
Our stores are located in a variety of mid-sized and larger shopping centers, lifestyle centers and in certain cases, independent single-unit, stand-alone developments. The size of our stores and our real estate strategy provide us flexibility in site selection. 3 Table of Contents • Team Members. Our stores are typically staffed with 75 to 100 full and part-time team members.
Our stores are located in a variety of mid-sized and larger shopping centers, lifestyle centers and in certain cases, independent single-unit, stand-alone developments. The size of our stores and our real estate strategy provide us flexibility in site selection. • Team Members. Our stores are typically staffed with 75 to 100 full and part-time team members.
The information contained on or accessible through our website and in our ESG reports is not incorporated by reference into this Annual Report on Form 10-K.
The information contained on or accessible through our website and in our impact reports is not incorporated by reference into this Annual Report on Form 10-K.
The FDA has comprehensive authority to regulate the manufacture, labeling, distribution, sale, marketing and safety of food and food ingredients (other than meat, poultry, catfish and certain egg products), as well as dietary supplements under the Federal Food, Drug, and Cosmetic Act (“FDCA”).
The FDA has comprehensive authority to regulate the manufacture, labeling, distribution, sale, marketing and safety of food and food ingredients for humans and pets (other than meat, poultry, catfish and certain egg products), as well as dietary supplements under the Federal Food, Drug, and Cosmetic Act (“FDCA”).
We are committed to sourcing products in a manner that respects people, our communities and the environment, and we seek to partner with suppliers and service providers that share this commitment, as included in our Supplier Code of Conduct, which details our expectations regarding workplace standards and supplier best practices, and Commitment to Human Rights.
We are committed to sourcing products in a manner that respects people, our communities and the environment, and we seek to partner with suppliers and service providers that share this commitment, as included in our Supplier Code of Conduct, which details our expectations regarding workplace standards and supplier best practices, and our Commitment to Human Rights, which details our commitment to respecting human rights in our operations and supply chain.
This overall demand for healthy products is driven by many factors, including increased awareness about the benefits of eating healthy, a greater focus on preventative health measures, and the rising costs of health care. We believe customers are attracted to retailers with comprehensive health and wellness product offerings.
This overall demand for healthy products is driven by many factors, including increased awareness about the benefits of eating healthy, a greater focus on preventative health measures using food as medicine, and the rising costs of health care. We believe customers are attracted to retailers with comprehensive health and wellness product offerings.
Under our long-term growth strategy, our new format stores feature a smaller box size, generally between 21,000 and 25,000 square feet, that stay true to our fresh-focused, farmers market heritage but are less expensive to build, reduce non-selling space, reduce occupancy and operating costs and leverage the strengths of our older, highly productive stores.
Under our long-term growth strategy, our updated format stores feature a smaller box size, generally between 21,000 and 25,000 square feet, that stay true to our fresh-focused, farmers market heritage but are generally less 2 Table of Contents expensive to build, reduce non-selling space, reduce occupancy and operating costs and leverage the strengths of our older, highly productive stores.
FDA has approved one drug product containing CBD as an active ingredient. Consequently, because CBD has been approved as a drug active ingredient, FDA’s current legal position is that CBD cannot be legally contained in a dietary supplement or food product. This restriction only applies to dietary supplements and foods.
FDA has approved one drug product containing CBD as an active ingredient. Consequently, because CBD has been 13 Table of Contents approved as a drug active ingredient, FDA’s current legal position is that CBD cannot be legally contained in a dietary supplement or food product. This restriction only applies to dietary supplements and foods.
Under the FDCA, homeopathic products are subject to the same requirements related to approval, adulteration and misbranding as other drug products. There are no FDA-approved products labeled as homeopathic. Any product labeled as homeopathic is being marketed in the U.S. without FDA evaluation for safety or effectiveness. CBD Products.
Homeopathic Products . The FDA has the authority to regulate homeopathic products. Under the FDCA, homeopathic products are subject to the same requirements related to approval, adulteration and misbranding as other drug products. There are no FDA-approved products labeled as homeopathic. Any product labeled as homeopathic is being marketed in the U.S. without FDA evaluation for safety or effectiveness.
We also use our website as a tool to disclose important information about our company and comply with our disclosure obligations under Regulation Fair Disclosure. Our corporate governance documents, code of ethics and Board committee charters and policies are also posted on http://investors.sprouts.com/ . 17 Table of Contents I tem 1A.
We also use our website as a tool to disclose important information about our company and comply with our disclosure obligations under Regulation Fair Disclosure. Our corporate governance documents, code of ethics and Board committee charters and policies are also posted on http://investors.sprouts.com/ . 14 Table of Contents
The information on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
Our website address is www.sprouts.com . The information on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
The agencies also regulate the use of structure/function claims, health claims and nutrient content claims. Additional in-store labeling requirements, such as disclosure of calories and other nutrient information for frequently sold items are now in effect.
The agencies also regulate the use of structure/function claims, health claims and nutrient content claims for food and dietary supplement products. Additional in-store labeling requirements, such as disclosure of calories and other nutrient information for frequently sold items are now in effect.
In particular, our trademarks, including our registered SPROUTS FARMERS MARKET ® and SPROUTS ® trademarks, are valuable assets that we believe reinforce our customers’ favorable perception of our stores.
In particular, our trademarks, including our registered SPROUTS FARMERS MARKET ® and SPROUTS ® trademarks, are valuable assets that we believe reinforce our customers’ favorable perception of 11 Table of Contents our stores.
We position our prices with everyday value for our customers within our margin structure, with regular promotions that drive traffic and trial. Our brands products offer entry-level price points in certain categories, but also focuses on innovation, treasure hunt experience, wellness or health benefits and quality.
We position our prices with everyday value for our customers within our margin structure, with regular promotions that drive traffic and trial. Our Sprouts Brand products offer entry-level price points in certain categories, but also focus on attributes, innovation, treasure hunt experience, wellness or health benefits and quality.
Our competitors primarily include other specialty food retailers such as Whole Foods, Trader Joe’s, and smaller local or regional operators, conventional supermarkets such as Kroger, Albertsons, Safeway, H-E-B and Publix, as well as mass or discount retailers such as Target and Wal-Mart, warehouse membership clubs, online retailers such as Amazon, specialty stores, restaurants, home delivery and meal solution companies, and any other outlets offering food and similar products as those found in our stores.
Our competitors within the overall grocery industry primarily include other specialty food retailers such as Whole Foods, Trader Joe’s, and smaller local or regional operators, conventional supermarkets such as Kroger, Albertsons, Safeway, H-E-B and Publix, as well as mass or discount retailers such as Target and Walmart, warehouse membership clubs, online retailers such as Amazon, specialty stores, restaurants, home delivery and meal solution companies, and any other outlets offering food and similar products as those found in our stores.
Our regional produce buying teams allow us to form meaningful relationships with farmers to build a path to growing with them as we grow, and our flexibility allows us to react to produce markets quickly in order to purchase produce in smaller quantities than larger chains and to help us bring new and innovative varietals to our customers at favorable pricing.
Our regional produce buying teams allow us to form meaningful relationships with farmers to build a path to growing with them as we grow, and our flexibility allows us to react to produce markets quickly in order to help us bring new and innovative varietals to our customers at favorable pricing.
Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of at least 10% annual unit growth beginning in 2024. • Create an Advantaged Fresh Supply Chain.
Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth. • Create an Advantaged Supply Chain.
Led by our dedicated foraging team, we embrace product innovation, and we believe our stores serve as an incubator for growth across the natural foods industry, highlighting new and differentiated items in our innovation center merchandising displays. In 2022, we launched approximately 8,400 new products.
Led by our dedicated foraging team, we embrace product innovation, and we believe our stores serve as an incubator for growth across the natural foods industry, highlighting new and differentiated items in our innovation center merchandising displays. In 2024, we launched approximately 7,100 new products.
We work closely with our supply chain partners to improve animal welfare standards, sustainable seafood sourcing, support for organic agriculture and the ethical treatment of people. For an overview of our product sourcing policies and programs, please visit: about.sprouts.com/product-sourcing/ .
We work closely with our supply chain partners to improve animal welfare standards, responsible seafood sourcing, support for organic and regenerative agriculture and the ethical treatment of people. For an overview of our product sourcing policies and programs, please visit: https://www.sprouts.com/about/sustainability/.
We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app. • Update Format and Expand in Select Markets.
We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app. • Market Expansion.
We build on our targeted recruitment efforts with robust training on customer engagement and product knowledge to ensure there is friendly, knowledgeable staff in every store. As of January 1, 2023, we had approximately 31,000 team members. None of our team members are subject to collective bargaining agreements.
We build on our targeted recruitment efforts with robust training on customer engagement and product knowledge to ensure there is friendly, knowledgeable staff in every store. As of December 29, 2024, we had approximately 35,000 team members. None of our team members are subject to collective bargaining agreements.
Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work. • Deliver on Financial Targets and Box Economics.
Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work. • Invest in Technology for Growth .
KeHE Distributors, LLC (“KeHE”), is our primary supplier of dry grocery and frozen food products, accounting for approximately 45%, 44% and 42% of our total purchases in fiscal 2022, 2021, and 2020, respectively. Another 3% of our total purchases in each of fiscal 2022, 2021 and 2020 were made through our secondary supplier, United Natural Foods, Inc. (“UNFI”).
KeHE Distributors, LLC (“KeHE”), is our primary supplier of dry grocery and frozen food products, accounting for approximately 50%, 47% and 45% of our total purchases in fiscal 2024, 2023 and 2022, respectively. Another 3% of our total purchases in each of fiscal 2024, 2023 and 2022 were made through our secondary supplier, United Natural Foods, Inc. (“UNFI”).
We intend to continue to focus our growth on areas where we have a large concentration of stores, such as California and Texas, while building out our newer markets, such as Florida, Georgia and the Mid-Atlantic region, to achieve a larger concentration of stores. We have opened 16, 12 and 22 new stores in fiscal 2022, 2021 and 2020, respectively.
We intend to continue to focus our growth on areas where we have a large concentration of stores, such as California and Texas, while building out our newer markets, such as Florida and the Mid-Atlantic region, to achieve a larger concentration of stores. We have opened 33, 30 and 16 new stores in fiscal 2024, 2023 and 2022, respectively.
Marketing and Advertising As part of our long-term growth strategy to refine our brand and marketing approach, we have pivoted our marketing strategy to attempt to drive more profitable growth and create more meaningful connections with our customers.
Marketing and Advertising As part of our long-term growth strategy to refine our brand and marketing approach, we continue to grow our current marketing strategy to drive more profitable growth and create more meaningful connections with our customers.
We believe we only serve a small portion of these target customers at present and have an opportunity to gain a larger proportion of their market share of food-at-home purchases by targeting and identifying those innovative, attribute-driven, quality products and providing the in-store experience and support in living a healthy lifestyle that they are seeking. 8 Table of Contents Environmental, Social and Governance Central to our identity is a genuine commitment to social and environmental responsibility.
We believe we only serve a small portion of these target customers at present and have an opportunity to gain a larger proportion of their market share of food-at-home purchases by targeting and identifying those innovative, attribute-driven, quality products and providing the in-store experience and support in living a healthy lifestyle that they are seeking.
The following is a breakdown of our perishable and non-perishable sales mix: 2022 2021 2020 Perishables 58.0 % 57.7 % 57.2 % Non-Perishables 42.0 % 42.3 % 42.8 % Departments While we focus on providing an abundant and affordable offering of natural and organic produce, our stores also include the following departments that enable customers to have a full grocery shopping experience: packaged groceries, meat and seafood, deli, vitamins and supplements, dairy and dairy alternatives, bulk items, baked goods, frozen foods, natural health and body care, and beer and wine.
The following is a breakdown of our perishable and non-perishable sales mix: 2024 2023 2022 Perishables 57.3 % 57.3 % 58.0 % Non-Perishables 42.7 % 42.7 % 42.0 % Departments While we focus on providing an abundant and affordable offering of natural and organic produce, our stores also include the following departments: packaged groceries, meat and meat alternatives, seafood, deli, vitamins and supplements, dairy and dairy alternatives, bulk items, baked goods, frozen foods, natural health and body care, and beer and wine.
We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. In 2021, we opened three stores and remodeled one store featuring our new format, and in 2022, we opened nine new format stores.
We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through 2024, we have opened 75 new stores and remodeled one store featuring our updated format.
By reducing our store square footage, we expect that our newer stores will have a lower cost to build and decreased occupancy and operating costs, while reducing non-selling space that will result in generally flat sales compared to our larger stores.
By reducing our store square footage, our newer stores generally have a lower cost to build and decreased occupancy and operating costs, while reducing non-selling space that results in generally flat sales compared to our larger 10 Table of Contents stores.
We continue to execute on this strategy, focusing on the following areas: • Win with Target Customers . We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments.
We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments.
In addition, various nutrition initiatives that will impact many actors in our supply chain, such as the elimination of certain partially hydrogenated oils and the adoption of a new nutritional labeling format, began to go into effect in 2020. USDA’s Agricultural Marketing Service (“AMS”) oversees compliance with the National Organic Standards Program and related labeling activity.
In addition, various nutrition initiatives that will impact many actors in our supply chain, such as the elimination of certain partially hydrogenated oils and brominated vegetable oil went into effect in 2023. USDA’s Agricultural Marketing Service (“AMS”) oversees compliance with the National Organic Standards Program and related labeling activity.
Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products by us and our vendors are subject to regulation by various federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the U.S.
Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products by us and our vendors are subject to regulation by various state and federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the U.S. Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”) and the Environmental Protection Agency (“EPA”). Food.
No cosmetic product labeling or marketing may advertise any therapeutic use, such as treating or preventing disease, or claim to affect the structure or function of the body. 15 Table of Contents Homeopathic Products . The FDA has the authority to regulate homeopathic products.
No cosmetic product labeling or marketing may advertise any therapeutic use, such as treating or preventing disease, or claim to affect the structure or function of the body.
The Sprouts Healthy Communities Foundation I n 2015, we formed the Sprouts Healthy Communities Foundation (referred to as our “Foundation”), a registered 501(c)(3) organization focused on promoting nutrition education and increasing access to fresh, nutritious food in communities where Sprouts operates.
The Sprouts Healthy Communities Foundation In 2015, we formed the Sprouts Healthy Communities Foundation (referred to as our “Foundation”), a registered 501(c)(3) organization focused on advancing nutrition education, fresh food access and improved health outcomes for children and adults in the communities where Sprouts operates.
With the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline. 2 Table of Contents Our Stores and Operations We believe our stores represent a blend of farmers markets, natural foods stores, and smaller specialty markets, distinguishing us from other food retailers, while also providing a broad offering of innovative and differentiated products with lifestyle friendly ingredients for our customers. • Store Design and Experience.
Our Stores and Operations We believe our stores represent a blend of farmers markets, natural foods stores, and smaller specialty markets, distinguishing us from other food retailers, while also providing a broad offering of innovative and differentiated products with lifestyle friendly ingredients for our customers. • Store Design and Experience.
We have been successful across a variety of urban, suburban and rural locations in diverse geographies, from coast to coast, which we believe supports the portability of the Sprouts brand and store model into a wide range of markets.
Multiple members of this committee often conduct an on-site inspection prior to approving any new location. We have been successful across a variety of urban, suburban and rural locations in diverse geographies, from coast to coast, which we believe supports the portability of the Sprouts brand and store model into a wide range of markets.
The values will inform our behaviors and actions to create a sense of inclusion and belonging. • We engaged in leadership development sessions across the organization with a focus on behaviors aligned to our values. • As one of the fastest growing specialty retailers of fresh, natural and organic food in the country, we created 1,600 new jobs in 2022 through new store openings. • Additionally, we promoted 7,350 team members and filled 64% of store manager positions with internal candidates. • Team members saved approximately $18.6 million through store discounts. • We awarded 58 scholarships to team members and dependents in 2022.
We reinforced the critical behaviors and actions to create a sense of inclusion and belonging. • We engaged in leadership development sessions across the organization, including a focus on coaching and feedback to develop and grow our team members. • As one of the fastest growing specialty retailers of fresh, natural and organic food in the country, we created approximately 3,300 new jobs in 2024 through new store openings. • Additionally, we promoted over 6,100 team members and filled 54% of store manager positions with internal candidates. • Team members saved approximately $23.4 million through store discounts. • We awarded 50 scholarships to team members and dependents in 2024.
These products become treasure hunt items found at our stores. 5 Table of Contents Given the importance of produce to our stores, we source, warehouse and self-distribute nearly all produce. This ensures our produce meets our high-quality standards.
These products become treasure hunt items found at our stores. Given the importance of produce to our stores, we source, warehouse and self-distribute nearly all produce. This ensures our produce meets our high-quality standards. We have department and product specifications that ensure a consistently high level of quality and freshness across our produce offering.
We feature thousands of responsibly sourced products with certifications and attributes that are desired by our target customer base, including organic, paleo, keto, plant-based, non-GMO, fair trade, gluten-free, vegan, grass-fed, raw and humane certified. We will continue to offer a treasure hunt experience for our customers by sourcing new, innovative and differentiated offerings into every department of our stores.
We feature thousands of responsibly sourced products with certifications and attributes that are desired by our target customer base, including organic, paleo, keto, plant-based, non-GMO, fair trade, gluten-free, vegan, grass-fed, raw and humane certified.
In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products and we have revised certain provisions of our sales and marketing program.
In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products and we have revised certain provisions of our sales and marketing program. Corporate Offices Our principal executive offices are located at 5455 East High Street, Suite 111, Phoenix, Arizona 85054.
During 2022, 64 Sprouts team members enrolled in this program, and 8 team members graduated from the program. 10 Table of Contents • We participated in the McKinsey Connected Leaders Academy, for the second year, engaging high performing leaders in programs designed to develop diverse leaders at Sprouts.
During 2024, 39 Sprouts team members enrolled in this program. • We participated in the McKinsey Connected Leaders Academy, for the fourth year, engaging high performing leaders in programs designed to develop diverse leaders at Sprouts.
We had 39 participants in 2022, which included leaders participating in Hispanic, Black & Asian Executive level and Manager level programs. • We offer The Henry Boney Memorial Scholarship, which is designed to offer team members or their dependents a $3,000 scholarship to achieve their college dreams. • All Sprouts team members can save at our stores, with a 15% Work Perk Discount.
We had 70 participants in 2024, which included leaders participating in Hispanic, Black & Asian Executive level and Manager level programs. • We offer The Henry Boney Memorial Scholarship, which is designed to offer team members or their dependents a $2,000 scholarship to achieve their college dreams. • We also embarked on mentor circles offered as a program created and executed by our Inspiring Women at Sprouts team member resource group. • We offer internal and external coaching to develop our leaders. • All Sprouts team members can save at our stores, with a 15% Work Perk Discount.
We strive to create a strong and unified company culture and develop team members throughout the entire organization, and we assist our store teams with our store support office and regional teams.
We strive to create a strong and unified company culture, rooted in our purpose, with a dedication to developing team members throughout the entire organization. We take pride in caring for and assisting our store teams through our store support office and regional teams.
Item 1. Business Sprouts Farmers Market offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free.
Item 1. Business Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people.
We believe Sprouts offers consumers a compelling value and differentiated products relative to our competitors and will continue to benefit from increasing consumer focus on health, wellness and value, as well as their emphasis on an enhanced shopping experience featuring a broad selection of attribute-driven products along with exceptional customer engagement. 13 Table of Contents Insurance and Risk Management We use a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, general liability, product liability, director and officers’ liability, team member healthcare benefits, and other casualty and property risks.
We believe Sprouts offers consumers a compelling value and differentiated products relative to our competitors and will continue to benefit from increasing consumer focus on health, wellness and value, as well as their emphasis on an enhanced shopping experience featuring a broad selection of attribute-driven products along with exceptional customer engagement.
Similarly, the USDA’s Food Safety Inspection Service (“FSIS”) is the public health agency responsible for ensuring that the nation’s commercial supply of meat, poultry, catfish and certain egg products is safe, wholesome and correctly labeled and packaged under the Federal Meat Inspection Act and the Poultry Products Inspection Act.
Similarly, the USDA’s Food Safety Inspection Service (“FSIS”) is the public health agency responsible for ensuring that the nation’s commercial supply of meat, poultry, catfish and certain egg products is safe, wholesome and correctly labeled and packaged under the Federal Meat Inspection Act and the Poultry Products Inspection Act. 12 Table of Contents Congress amended the FDCA through passage of the Food Safety Modernization Act (“FSMA”), which greatly expanded FDA’s regulatory oversight over all actors in the food product supply chain.
During 2022, we garnered more than 20 million weekly digital flyer impressions, demonstrating that our leverage of digital media to reach customers and share what is new and unique at Sprouts resonates with the habits of today’s shoppers. We experienced a 27% increase in SMS subscribers and a 16% increase in email subscribers in 2022 compared to 2021.
During 2024, we garnered 17 million weekly digital flyer views, demonstrating that our leverage of digital media to reach customers and share what is new and unique at Sprouts resonates with the habits of today’s shoppers.
Based on our ESG accomplishments, we received a rating of AAA in the 2022 MSCI ESG Ratings assessment. The AAA rating represents the highest on the scale and signifies a company leading its industry in managing the most significant ESG risks and opportunities.
Based on our sustainability impacts, we received a rating of AAA in the 2024 MSCI ESG Ratings assessment. The AAA rating represents the highest rating on the scale and signifies a company leading its industry in managing the most significant risks and opportunities. For more information on our efforts and reporting, including our most recent Impact reports, please visit: sprouts.com/about/sustainability/.
We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets.
We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. Since the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline.
We consider our relations with our team members to be good, and we have never experienced a strike or significant work stoppage. 2022 Highlights. We are proud of the following achievements during the year: • We continue to cascade our three core values to intentionally shape our culture and act as a lens to guide the decisions we make.
We consider our relations with our team members to be good, and we have never experienced a strike or significant work stoppage. 2024 Highlights. We are proud of the following achievements during the year: • We solidified our purpose statement and rolled it out across the organization.
We believe our Sprouts Brand products build and enhance the overall Sprouts brand and allow us to distinguish ourselves from our competitors, promoting customer loyalty and creating a destination shopping experience. Product Innovation We believe Sprouts is on the forefront of food innovation and has paved the way for natural food trends for over two decades.
The Sprouts Brand program accounted for just over 23% of our revenue in fiscal 2024. We believe our Sprouts Brand products build and enhance the overall Sprouts brand and allow us to distinguish ourselves from our competitors, promoting customer loyalty and creating a destination shopping experience for products only available at our stores.
To grow the next generation of leaders at Sprouts, we have developed a Leadership Training Model to on-board store managers new to Sprouts. In 2022, we had 37 Leadership graduates totaling more than 8,900 hours in training.
We believe Sprouts is an attractive place to work with significant growth opportunities for our approximately 35,000 team members. To grow the next generation of leaders at Sprouts, we have developed a Leadership Training Model to on-board store managers new to Sprouts. In 2024, we had 81 Leadership graduates totaling more than 33,200 hours in training.
We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage. Trademarks and Other Intellectual Property We believe that our intellectual property has substantial value and has contributed to the success of our business.
We also assess the financial strength of our insurance carriers to minimize the risk of insolvency and ensure stability in our coverage. Trademarks and Other Intellectual Property We believe that our intellectual property has substantial value and has contributed to the success of our business.
Headquartered in Phoenix with 386 stores in 23 states as of January 1, 2023, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States. Our Heritage In 2002, we opened the first Sprouts Farmers Market store in Chandler, Arizona.
Headquartered in Phoenix with 440 stores in 24 states as of December 29, 2024, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.
Our digital-first marketing program is focused on connecting with our most important, higher value target customers via precision geographic targeting, data-driven media and focusing on personal relevance to tap into our target audience’s needs and affinities. 6 Table of Contents We believe our story telling through broadcast and digital media will reach more customers than our prior approach utilizing weekly paper flyers, which we largely discontinued.
Our digital-first marketing strategy is focused on connecting with our most important, higher value target customers via precision geographic targeting, data-driven media and focusing on personal relevance to tap into our target audience’s needs and affinities. We are telling our unique and differentiated story through both traditional channels and digital media, including online video, streaming audio and outdoor media.
Sourcing and Distribution We manage the buying of, and set the standards for, the products we sell, and we source our products from hundreds of vendors and suppliers, both domestically and internationally.
We will continue to offer a treasure hunt experience for our customers by sourcing new, innovative and differentiated offerings into every department of our stores. 4 Table of Contents Sourcing and Distribution We manage the buying of, and set the standards for, the products we sell, and we source our products from hundreds of vendors and suppliers, both domestically and internationally.
Since our founding, Sprouts has carried a wide selection of innovative natural and organic brands that resonate with our target customers and inspire healthy living for everyone. We have nurtured and grown many once-shoestring brands that now serve as category leaders.
Product Innovation We believe Sprouts is on the forefront of food innovation and has paved the way for natural food trends for over two decades. Since our founding, Sprouts has carried a wide selection of innovative natural and organic brands that resonate with our target customers and inspire healthy living for everyone.
We sell a broad assortment of products that are differentiated and fun to explore, offer incredible taste, quality, value and experience, and are only available at Sprouts. We started a program in 2022 to update and redesign all Sprouts branded products, and we are expecting to complete this in 2024.
Sprouts Brand We continue to expand the breadth of our Sprouts branded products with a dedicated product development team focused on continuing this growth. We sell a broad assortment of products that are differentiated, attribute focused and fun to explore, offer incredible taste, quality, value and experience, and are only available at Sprouts.
As a pillar of our long-term growth strategy, we expect to create an advantaged supply chain and aspire to locate our distribution centers within 250 miles of the majority of our stores. We currently have seven distribution centers, with two located in California and one located in each of Arizona, Texas, Georgia, Colorado and Florida.
These specifications are measured at both entry and exit points to our facilities. We manage every aspect of quality control in our produce distribution centers. As a pillar of our long-term growth strategy, we expect to create an advantaged supply chain and aspire to locate our distribution centers within 250 miles of the majority of our stores.
The increased proximity of our distribution centers to our stores has allowed us to deliver on our fresh commitment to our customers, by sourcing more products from local farmers and improving efficiencies in our distribution process. We believe our scale, together with this decentralized purchasing structure and flexibility generates cost savings, which we frequently pass on to our customers.
As of December 29, 2024, approximately 80% of our stores were within 250 miles of a distribution center. The proximity of our distribution centers to our stores has allowed us to deliver on our fresh commitment to our customers, by sourcing more products from local farmers and improving efficiencies in our distribution process.
This year we offered a 30% discount to all team members over the course of six days aligned with our holiday celebrations. Education, Training and Safety. We believe Sprouts is an attractive place to work with significant growth opportunities for our approximately 31,000 team members.
This year we offered a 30% discount to all team members over the course of fourteen days aligned with our holiday celebrations. We also offered team members an additional three days with a 25% discount. • We provided special bonuses to team members in honor of winning Progressive Grocers Retailer of the Year. Education, Training and Safety.
The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. Information Technology Systems We have made significant investments in information technology infrastructure and business systems, including point-of-sale, data warehouse, labor management, purchasing, inventory control, demand forecasting, and financial and reporting systems.
The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. Information Technology Systems We have made significant investments in IT infrastructure and business systems to enhance efficiency, scalability, and customer experience to support our long-term growth and operational resilience.
We are investing savings from largely removing our weekly promotional print ad into increasing engagement and personalization with our target customers through digital and social connections, driving additional sales growth and loyalty. • Inspire and Engage Our Talent to Create a Best Place to Work.
We believe this data-driven intelligence will increase customer engagement through personalization efforts with digital and social connections to drive additional sales growth and loyalty. • Inspire and Engage Our Talent to Create a Best Place to Work.
Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect ultimate settlements of claims.
Various factors, including changes in legal trends and interpretations, inflation rate fluctuations, changes in claims settlement practices, changes in applicable laws affecting benefit levels, insolvency of insurance carriers, risk transfer management, and fluctuations in discount rates, could impact the ultimate settlements of claims and the overall cost of our insurance program.
Growing Our Business As part of our long-term growth plan, we plan to expand our store base with at least 10% annual unit growth beginning in 2024.
These team member resource groups support our values of “care” and “love being different”. 9 Table of Contents Growing Our Business As part of our long-term growth plan, we plan to expand our store base with approximately 10% annual unit growth.
In 2021, Sprouts launched its first team member resource group "Inspiring Women at Sprouts" to continue to build a culture of inclusion and belonging. In 2022, we launched three additional team member resource groups representing affinity team members and allies: “Sabor” our Hispanic & Latin resource group, “Soul” our Black/African American resource group and “Rainbow Alliance” our LBGTQIA+ resource group.
These groups consist of "Inspiring Women at Sprouts" our women's resource group, “Sabor” our Hispanic and Latin resource group, “Soul” our Black/African American resource group, “Rainbow Alliance” our LBGTQIA+ resource group and “Honored to Serve” our veteran’s resource group.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of January 1, 2023, we had 386 stores located in 23 states, as shown in the chart below: State Number of Stores State Number of Stores Alabama 3 New Jersey 1 Arizona 44 New Mexico 9 California 130 North Carolina 5 Colorado 32 Oklahoma 11 Delaware 1 Pennsylvania 2 Florida 35 South Carolina 1 Georgia 18 Tennessee 6 Kansas 4 Texas 51 Louisiana 1 Utah 5 Maryland 5 Virginia 1 Missouri 3 Washington 4 Nevada 14 In fiscal 2022, we opened 16 new stores.
Biggest changeAs of December 29, 2024, we had 440 stores located in 24 states, as shown in the chart below: State Number of Stores State Number of Stores Alabama 3 New Jersey 3 Arizona 47 New Mexico 10 California 149 North Carolina 6 Colorado 33 Oklahoma 11 Delaware 2 Pennsylvania 5 Florida 47 South Carolina 2 Georgia 17 Tennessee 8 Kansas 4 Texas 54 Louisiana 1 Utah 5 Maryland 7 Virginia 3 Missouri 3 Washington 3 Nevada 16 Wyoming 1 In fiscal 2024, we opened 33 new stores.
Item 2. Pr operties We seek to select sites for our store locations in markets with growth potential where our target customers and supply chain capabilities intersect.
Item 2. Properties We seek to select sites for our store locations in markets with growth potential where our target customers and supply chain capabilities intersect.
We believe our portfolio of long-term leases is a valuable asset supporting our retail operations, but we do not believe that any individual store property or distribution center lease is material to our financial condition or results of operations. 34 Table of Contents In February 2023 as part of our real estate portfolio review, we determined to close 11 stores during 2023.
We believe our portfolio of long-term leases is a valuable asset supporting our retail operations, but we do not believe that any individual store property or distribution center lease is material to our financial condition or results of operations. In fiscal 2023 as part of our real estate portfolio review, we closed 11 stores.
Information about such facilities, as well as our current corporate office in Phoenix, Arizona, is set forth in the table below: Facility State Square Footage* Corporate Office Arizona 96,000 Distribution Center Arizona 129,000 Distribution Center California 123,000 Distribution Center California 110,000 Distribution Center Colorado 134,000 Distribution Center Florida 134,000 Distribution Center Georgia 100,000 Distribution Center Texas 117,000 * Rounded to the nearest 1,000 square feet We lease our corporate office and our distribution centers in Arizona, Colorado, Florida and Texas from unaffiliated third parties; our remaining three distribution centers are leased or owned by our third-party logistics providers.
Information about such facilities, as well as our current corporate office in Phoenix, Arizona, is set forth in the table below: Facility State Square Footage* Corporate Office Arizona 96,000 Distribution Center Arizona 129,000 Distribution Center California 337,000 Distribution Center California 108,000 Distribution Center Colorado 134,000 Distribution Center Florida 134,000 Distribution Center Texas 234,000 ________________________________________________ * Rounded to the nearest 1,000 square feet We lease our corporate office and our distribution centers in Arizona, Southern California, Colorado, Florida and Texas from unaffiliated third parties; our Northern California distribution center is leased by a third-party logistics provider.
In fiscal 2021, we opened 12 new stores. We lease all of our stores from unaffiliated third parties. A typical store lease is for an initial 10 to 15 year term with three or four renewal options of five years each. We expect that we will be able to renegotiate these leases or relocate these stores as necessary.
In fiscal 2023, we opened 30 new stores and acquired two stores. We lease all of our stores from unaffiliated third parties. A typical store lease is for an initial 10 to 15 year term with three or four renewal options of five years each.
These stores, on average, are approximately 30% larger than our current prototype format and are underperforming financially. See Note 28, “Subsequent Events” to our Consolidated Financial Statements for additional information regarding these store closures.
These stores, on average, were approximately 30% larger than our current prototype format and were underperforming financially. See Note 26, “Store Closures” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information regarding these store closures.
In addition to new store openings, we remodel or relocate stores periodically in order to improve performance. See “Business – New Store Development” for additional information with respect to our store site selection process. As of January 1, 2023, we utilized seven distribution centers.
See “Business – New Store Development” for additional information with respect to our store site selection process. 30 Table of Contents As of December 29, 2024, we utilized six distribution centers.
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We expect that we will be able to renegotiate these leases or relocate these stores as necessary. In addition to new store openings, we remodel or relocate stores periodically in order to improve performance.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 19, “Commitments and Contingencies ” to our Consolidated Financial Statements for information regarding certain legal proceedings in which we are involved.
Biggest changeSee Note 18, “Commitments and Contingencies ” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for information regarding certain legal proceedings in which we are involved. Item 4. Mine Safety Disclosures Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(2) On March 2, 2022, our board of directors authorized a $600 million share repurchase program of our common stock.
Biggest change(2) Average price paid per share includes costs associated with the purchases, but excludes the excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. (3) On May 22, 2024, our board of directors authorized a new $600 million share repurchase program of our common stock.
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of Sprouts Farmers Market, Inc. under the Securities Act or the Exchange Act. 37 Table of Contents
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of Sprouts Farmers Market, Inc. under the Securities Act or the Exchange Act. 33 Table of Contents Item 6. [Reserved] 34 Table of Contents
The shares may be purchased on a discretionary basis from time to time through December 31, 2023, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. 36 Table of Contents Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2017 and January 1, 2023, with the cumulative total return of (i) the NASDAQ Composite Index and (ii) the S&P Food Retail Index, over the same period.
The shares may be purchased on a discretionary basis from time to time through May 22, 2027, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. 32 Table of Contents Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 29, 2019 and December 29, 2024, with the cumulative total return of (i) the Nasdaq Composite Index and (ii) the S&P Food Retail Index, over the same period.
Our Credit Agreement contains covenants that we must satisfy in order to pay cash dividends. Issuer Purchases of Equity Securities The following table provides information about our share repurchase activity during the thirteen weeks ended January 1, 2023.
Our Credit Agreement contains covenants that we must satisfy in order to pay cash dividends. Issuer Purchases of Equity Securities The following table provides information about our share repurchase activity during the thirteen weeks ended December 29, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began trading on the NASDAQ Global Select Market under the symbol “SFM” on August 1, 2013. The number of stockholders of record of our common stock as of February 28, 2023 was 26.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began trading on the Nasdaq Global Select Market under the symbol “SFM” on August 1, 2013. The number of stockholders of record of our common stock as of February 18, 2025 was 23.
The graph assumes the initial value of our common stock on December 29, 2017 (the last trading day prior to the beginning of fiscal 2018) was the closing sale price on that day of $24.35 per share. The performance shown on the graph below is based on historical results and is not intended to suggest future performance.
The graph assumes the initial value of our common stock on December 27, 2019 (the last trading day prior to the beginning of fiscal 2020) was the closing sale price on that day of $19.51 per share. The performance shown on the graph below is based on historical results and is not intended to suggest future performance.
Period (1) Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs (2) October 3, 2022 - October 30, 2022 516,534 $ 27.61 516,534 $ 442,504,000 October 31, 2022 - November 27, 2022 436,669 $ 31.01 436,669 $ 428,964,000 November 28, 2022 - January 1, 2023 506,825 $ 33.71 506,825 $ 411,877,000 Total 1,460,028 1,460,028 (1) Periodic information is presented by reference to our fiscal periods during the fourth quarter of fiscal year 2022.
Period (1) Total number of shares purchased Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs (3) September 30, 2024 - October 27, 2024 45,647 $ 112.26 45,647 $ 553,773,000 October 28, 2024 - November 24, 2024 210,321 $ 140.45 210,321 $ 524,192,000 November 25, 2024 - December 29, 2024 534,012 $ 137.77 534,012 $ 450,623,000 Total 789,980 789,980 (1) Periodic information is presented by reference to our fiscal periods during the fourth quarter of fiscal year 2024.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Sprouts Farmers Market Inc., the NASDAQ Composite Index and the S&P 500 Food Retail Index *$100 invested on 12/29/19 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis. Copyright© 2025 Standard & Poor's, a division of S&P Global. All rights reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal 2022 Fiscal 2021 Fiscal 2020 (in thousands, except per share data) Consolidated Statement of Income Data: Net sales $ 6,404,223 $ 6,099,869 $ 6,468,759 Cost of sales 4,055,659 3,890,657 4,089,470 Gross profit 2,348,564 2,209,212 2,379,289 Selling, general and administrative expenses 1,855,649 1,748,205 1,863,869 Depreciation and amortization (exclusive of depreciation included in cost of sales) 123,530 122,258 124,124 Store closure and other costs, net 11,025 4,673 (369 ) Income from operations 358,360 334,076 391,665 Interest expense, net 9,047 11,684 14,787 Income before income taxes 349,313 322,392 376,878 Income tax provision 88,149 78,235 89,428 Net income $ 261,164 $ 244,157 $ 287,450 Weighted average shares outstanding - basic 108,232 115,377 117,821 Dilutive effect of equity-based awards 907 700 403 Weighted average shares and equivalent shares outstanding - diluted 109,139 116,077 118,224 Diluted net income per share $ 2.39 $ 2.10 $ 2.43 Fiscal 2022 Fiscal 2021 Fiscal 2020 Other Operating Data: Comparable store sales growth 2.2 % (6.7 )% 6.9 % Stores at beginning of period 374 362 340 Opened (1) 16 12 22 Closed (4 ) — — Stores at end of period 386 374 362 Selling square feet at the end of the period 10,894,396 10,625,686 10,344,669 Average store size at the end of the period (selling square feet) 28,224 28,411 28,576 (1) Stores opened is exclusive of one store relocation during fiscal 2021. 42 Table of Contents Comparison of Fiscal 2022 to 2021 Net sales Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Net sales $ 6,404,223 $ 6,099,869 $ 304,354 5 % Comparable store sales growth 2.2 % (6.7 )% Net sales during 2022 totaled $6.4 billion, increasing 5%, over the prior fiscal year.
Biggest changeFiscal 2024 Fiscal 2023 Fiscal 2022 (in thousands, except per share data) Consolidated Statement of Income Data: Net sales $ 7,719,290 $ 6,837,384 $ 6,404,223 Cost of sales 4,777,799 4,315,543 4,055,659 Gross profit 2,941,491 2,521,841 2,348,564 Selling, general and administrative expenses 2,291,350 2,000,437 1,855,649 Depreciation and amortization (exclusive of depreciation included in cost of sales) 132,748 131,893 123,530 Store closure and other costs, net 12,896 39,280 11,025 Income from operations 504,497 350,231 358,360 Interest (income) expense, net (2,201) 6,491 9,047 Income before income taxes 506,698 343,740 349,313 Income tax provision 126,097 84,884 88,149 Net income $ 380,601 $ 258,856 $ 261,164 Weighted average shares outstanding - basic 100,363 102,479 108,232 Dilutive effect of equity-based awards 1,016 911 907 Weighted average shares and equivalent shares outstanding - diluted 101,379 103,390 109,139 Diluted net income per share $ 3.75 $ 2.50 $ 2.39 Fiscal 2024 Fiscal 2023 Fiscal 2022 Other Operating Data: Comparable store sales growth 7.6 % 3.4 % 2.2 % Stores at beginning of period 407 386 374 Opened (1) 33 30 16 Closed — (11) (4) Acquired — 2 — Stores at end of period 440 407 386 Total square feet at the end of the period (2) 12,123,032 11,322,798 10,894,396 Average square feet per store at the end of the period 27,552 27,820 28,224 (1) Stores opened is exclusive of two store relocations during fiscal 2024.
We believe our network of fresh distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores.
We believe our network of distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores.
Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Our qualitative assessment considers factors including changes in the competitive market, budget-to-actual performance, trends in market capitalization for us and our peers, turnover in key management personnel and overall changes in macroeconomic environment. Our impairment evaluation for our indefinite-lived intangible assets consists of a qualitative assessment similar to that for goodwill.
Our qualitative assessment considers factors including changes in the competitive market, budget-to-actual performance, trends in market capitalization for us and our peers, turnover in key management personnel and overall changes in the macroeconomic environment. Our impairment evaluation for our indefinite-lived intangible assets consists of a qualitative assessment, similar to that for goodwill.
Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” Business Overview Sprouts Farmers Market offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people.
Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” Business Overview Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people.
If our qualitative assessment indicates it is more likely than not that the estimated fair value of an indefinite-lived intangible asset exceeds its carrying value, no further analysis is required, and the asset is not impaired.
If the qualitative assessment indicates it is more likely than not that the estimated fair value of an indefinite-lived intangible asset exceeds its carrying value, no further analysis is required, and the asset is not impaired.
We define ROIC as net operating profit after-tax (“NOPAT”), including the effect of operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease.
We define ROIC as net operating profit after tax (referred to as “NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease.
Management believes that such routine commitments and contractual obligations do not have a material impact on our business, financial condition or results of operations. 50 Table of Contents Impact of Inflation and Deflation Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross margin.
Management believes that such routine commitments and contractual obligations do not have a material impact on our business, financial condition or results of operations. 47 Table of Contents Impact of Inflation and Deflation Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross margin.
We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. With the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline.
We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. Since the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline.
If this qualitative assessment indicates it is more likely than not the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required, and goodwill is not impaired.
If this qualitative assessment indicates it is more likely than not that the estimated fair value of the reporting unit exceeds its carrying value, no further analysis is required, and goodwill is not impaired.
We believe that of our significant accounting policies, which are described in Note 3, “Significant Accounting Policies” to the audited consolidated financial statements included in this Annual Report on Form 10-K, the following accounting policies involve the most difficult, complex or subjective judgments: inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes.
We believe that of our significant accounting policies, which are described in Note 3, “Significant Accounting Policies” to the consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K, the following accounting policies involve the most difficult, complex or subjective judgments: inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes.
We expect capital expenditures to be in the range of $210 - $230 million in 2023, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.
We expect capital expenditures to be in the range of $230 - $250 million in 2025, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.
Accordingly, our assessment of our valuation allowances requires considerable judgment and could have a significant negative or positive impact on our current and future earnings. 54 Table of Contents
Accordingly, our assessment of our valuation allowances requires considerable judgment and could have a significant negative or positive impact on our current and future earnings.
Our Credit Agreement is defined and more fully described in Note 13, “Long-Term Debt and Finance Lease Liabilities” of our audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.
Our Credit Agreement is defined and more fully described in Note 13, “Long-Term Debt and Finance Lease Liabilities” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of at least 10% annual unit growth beginning in 2024. • Create an Advantaged Fresh Supply Chain.
Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth. • Create an Advantaged Supply Chain.
We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app. • Update Format and Expand in Select Markets.
We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app. • Market Expansion.
Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work. • Deliver on Financial Targets and Box Economics.
Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work. • Invest in Technology for Growth .
Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, including pressures we experienced in fiscal 2022 due to product cost inflation which we largely passed along to retail pricing, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy. 51 Table of Contents Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.
Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy. 48 Table of Contents Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Our estimates of cash flows used to assess impairment involve significant judgment and are based upon assumptions on variables such as sales growth rate, gross margin, payroll and other controllable expenses. Application of alternative assumptions and definitions could produce significantly different results.
Fair value is measured using discounted cash flows or independent opinions of value, as appropriate. Our estimates of cash flows used to assess impairment involve significant judgment and are based upon assumptions on variables such as sales growth rate, gross margin, payroll and other controllable expenses. Application of alternative assumptions and definitions could produce significantly different results.
Store closure and other costs, net Store closure and other costs, net primarily reflects impairment charges of long-lived assets and costs incurred related to store closures, including severance and any exit costs associated with closing a store, in addition to occupancy costs associated with closed store locations. One-time disaster recovery and executive severance costs are also included here.
Store closure and other costs, net Store closure and other costs, net primarily reflects impairment charges of long-lived assets and costs incurred related to store closures, including severance and any exit costs associated with closing a store, in addition to occupancy costs associated with closed store locations.
We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. In 2021, we opened three stores and remodeled one store featuring our new format, and in 2022, we opened nine new format stores.
We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through 2024, we have opened 75 new stores and remodeled one store featuring our updated format.
Each of these covenants is subject to customary and other agreed-upon exceptions. 49 Table of Contents In addition, the Credit Agreement requires that we and our subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00.
In addition, the Credit Agreement requires that we and our subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report on Form 10-K.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report on Form 10-K.
We continue to execute on this strategy, focusing on the following areas : • Win with Target Customers . We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments.
We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments.
Our indefinite-lived intangible assets consist of trade names related to “Sprouts Farmers Market” and liquor licenses. Goodwill and indefinite-lived intangible assets are evaluated for impairment on an annual basis during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Goodwill and indefinite-lived intangible assets are evaluated for impairment on an annual basis during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
We monitor our comparable store sales growth to evaluate and identify trends in our sales performance. Our practice is to include sales from a store in comparable store sales beginning on the first day of the 61st week following the store’s opening and to exclude sales from a closed store from comparable store sales on the day of closure.
Our practice is to include sales from a store in comparable store sales beginning on the first day of the 61st week following a store’s opening or date of acquisition and to exclude sales from a closed store from comparable store sales on the day of closure.
The sales increase was primarily due to a 2.2% increase in comparable store sales as well as sales from new stores opened since the prior year. The increase in comparable store sales was due in part to an increase in basket value due to retail price inflation, partially offset by a slight reduction in the number of items per basket.
The sales increase was driven by a 7.6% increase in comparable store sales, in part due to an increase in basket value due to retail price inflation, in addition to sales from new stores opening since the prior year, partially offset by a slight reduction in the number of items per basket and the impact of store closures.
We believe that all inventories are saleable and no allowances or reserves for obsolescence were recorded as of January 1, 2023 and January 2, 2022.
We believe that all inventories are saleable and no allowances or reserves for obsolescence were recorded as of December 29, 2024 and December 31, 2023.
Fiscal 2022 and fiscal 2021 were 52-week years ending on January 1, 2023 and January 2, 2022, respectively. Fiscal 2020 was a 53-week year ending on January 3, 2021. 40 Table of Contents Net Sales We recognize sales revenue at the point of sale, with discounts provided to customers reflected as a reduction in sales revenue.
Fiscal 2024, fiscal 2023 and fiscal 2022 were 52-week years ending on December 29, 2024, December 31, 2023 and January 1, 2023, respectively. Net Sales We recognize sales revenue at the point of sale, with discounts provided to customers reflected as a reduction in sales revenue.
Each of these covenants is tested on the last day of each fiscal quarter, starting with the fiscal quarter ended April 3, 2022. We were in compliance with all applicable covenants under the Credit Agreement as of January 1, 2023.
Each of these covenants is tested on the last day of each fiscal quarter, starting with the fiscal quarter ended March 31, 2024. We were in compliance with all applicable covenants under the Credit Agreement as of December 29, 2024.
Interest payments through the March 25, 2027 maturity date of our Credit Agreement based on the outstanding amounts as of January 1, 2023 and interest rates in effect at the time of this filing, are estimated to be approximately $52.5 million. These payments are estimated to be approximately $15.2 million in 2023 and approximately $37.3 million thereafter.
Interest and fee payments through the March 25, 2027 maturity date of our Credit Agreement based on the outstanding amounts as of December 29, 2024 and interest rates in effect at the time of this filing, are estimated to be approximately $1.9 million. These payments are estimated to be approximately $0.8 million in 2025 and approximately $1.1 million thereafter.
Fair market value of the leased asset —The fair market value of leased retail property is generally estimated based on comparable market data provided by third-party sources and evaluated using the experience of our development staff.
Fair market value of the leased asset —The fair market value of leased retail property is generally estimated based on comparable market data provided by third-party sources and evaluated using the experience of our development staff. Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease.
Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores.
Depreciation and Amortization Depreciation and amortization (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment.
Our purchase commitments under noncancelable service and supply contracts that are enforceable and legally binding totaled $19.8 million as of January 1, 2023, including $9.8 million in 2023 and $10.0 million thereafter through 2027. Obligations under contracts that we can cancel without a significant penalty are not included in purchase commitments.
Our purchase commitments under noncancelable service and supply contracts that are enforceable and legally binding totaled $37.5 million as of December 29, 2024, including $19.6 million in 2025 and $17.9 million thereafter through 2029. Obligations under contracts that we can cancel without a significant penalty are not included in purchase commitments.
Components of Operating Results We report our results of operations on a 52- or 53-week fiscal year ending on the Sunday closest to December 31, with each fiscal quarter generally divided into three periods consisting of two four-week periods and one five-week period.
See “Business—Sourcing and Distribution” and “Risk Factors—Disruption of significant supplier relationships could negatively affect our business.” 36 Table of Contents Components of Operating Results We report our results of operations on a 52- or 53-week fiscal year ending on the Sunday closest to December 31, with each fiscal quarter generally divided into three periods consisting of two four-week periods and one five-week period.
Real estate obligations, consisting of legally binding minimum lease payments for leases executed but not yet commenced, were $504.5 million as of January 1, 2023, including $7.2 million in 2023 and $497.3 million thereafter through 2044.
Real estate obligations, consisting of legally binding minimum lease payments for leases executed but not yet commenced, were $756.9 million as of December 29, 2024, including $9.7 million in 2025 and $747.2 million thereafter through 2044.
Effective date Expiration date Amount authorized Cost of repurchases Authorization available March 3, 2021 March 2, 2022 $ 300,000 $ 200,200 $ — March 2, 2022 December 31, 2023 $ 600,000 $ 188,123 $ 411,877 48 Table of Contents The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans.
The following table outlines the share repurchase programs authorized by our board, and the related repurchase activity and available authorization as of December 29, 2024: Effective date Expiration date Amount authorized Cost of repurchases Authorization available March 2, 2022 December 31, 2024 $ 600,000 $ 480,715 $ — May 22, 2024 May 22, 2027 $ 600,000 $ 149,377 $ 450,623 The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans.
Proceeds from sales of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer. See Note 3, “Significant Accounting Policies” for additional information on revenue recognition related to gift cards. We do not include sales taxes in net sales.
Proceeds from sales of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer. See Note 3, “Significant Accounting Policies” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information on revenue recognition related to gift cards.
Diluted earnings per share Fiscal 2022 Fiscal 2021 Change % Change (shares in thousands) Diluted earnings per share $ 2.39 $ 2.10 $ 0.29 14 % Diluted weighted average shares outstanding 109,139 116,077 (6,938 ) The increase in diluted earnings per share of $0.29 was driven by higher net income, in addition to fewer diluted shares outstanding compared to the prior year, due to our repurchase of approximately 6.9 million shares for a total cost of $200.0 million under our share repurchase program. 45 Table of Contents Return on Invested Capital In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (“ROIC”) as additional information about our operating results.
Diluted earnings per share Fiscal 2024 Fiscal 2023 Change % Change (shares in thousands) Diluted earnings per share $ 3.75 $ 2.50 $ 1.25 50 % Diluted weighted average shares outstanding 101,379 103,390 (2,011) The increase in diluted earnings per share of $1.25 was driven by higher net income as well as fewer diluted shares outstanding compared to the prior year, due to our repurchase of approximately 2.7 million shares for a total cost of $240.6 million, including excise tax of 1%, under our share repurchase program. 42 Table of Contents Return on Invested Capital In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (referred to as “ROIC”) as additional information about our operating results.
We do not have any material contractual commitments for future capital expenditures as of January 1, 2023. Financing Activities Cash flows used in financing activities were $199.1 million for 2022 compared to $186.9 million for 2021.
We do not have any material contractual commitments for future capital expenditures as of December 29, 2024. Financing Activities Cash flows used in financing activities were $351.5 million for 2024 compared to $318.0 million for 2023.
See Note 7, "Leases," Note 13, “Long-Term Debt and Finance Lease Liabilities,” Note 15, "Self-Insurance Programs" and Note 19, "Commitments and Contingencies" to our consolidated financial statements located elsewhere in this Annual Report on Form 10-K for more information on the nature and timing of these obligations.
See Note 7, "Leases," Note 13, “Long-Term Debt and Finance Lease Liabilities,” Note 15, "Self-Insurance Programs" and Note 18, "Commitments and Contingencies" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of these obligations. 46 Table of Contents The future amount and timing of interest payments are expected to vary with the outstanding amounts and then prevailing contractual interest rates.
Liquidity and Capital Resources The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands): Fiscal 2022 Fiscal 2021 Fiscal 2020 Cash, cash equivalents and restricted cash at end of period $ 295,192 $ 247,004 $ 171,441 Cash from operating activities $ 371,329 $ 364,799 $ 494,035 Cash used in investing activities $ (124,010 ) $ (102,378 ) $ (121,968 ) Cash used in financing activities $ (199,131 ) $ (186,858 ) $ (287,411 ) We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities.
Liquidity and Capital Resources The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands): Fiscal 2024 Fiscal 2023 Fiscal 2022 Cash, cash equivalents and restricted cash at end of period $ 267,213 $ 203,870 $ 295,192 Cash from operating activities $ 645,214 $ 465,068 $ 371,329 Cash used in investing activities $ (230,375) $ (238,342) $ (124,010) Cash used in financing activities $ (351,496) $ (318,048) $ (199,131) We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities.
During 2022, cash flows used in financing activities primarily consisted of approximately $200 million for share repurchases and $3.4 million in debt issuance costs in connection with our Credit Agreement, partially offset by $5.0 million in proceeds from the exercise of stock options. During 2021, cash flows used in financing activities primarily consisted of $188.3 million for share repurchases.
During 2024, cash flows used in financing activities primarily consisted of approximately $228.5 million for share repurchases and $125.0 million in payments on our Credit Agreement, $1.8 million for payments of excise tax on share repurchases partially offset by $4.9 million in proceeds from the exercise of stock options.
Inflation and deflation in the prices of food and other products we sell may periodically affect our gross profit and gross margin. The short-term impact of inflation and deflation is largely dependent on whether or not we pass the effects through to our customers, which will largely depend upon competitive market conditions.
While we are still evaluating the potential impact of these tariffs, the short-term impact of tariffs, inflation, and deflation is largely dependent on whether or not we pass the effects through to our customers, which will largely depend upon competitive market conditions. Our cost of sales and gross profit are correlated to sales volumes.
Results of Operations for Fiscal 2022, 2021 and 2020 The following tables set forth our results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. Fiscal 2022 and 2021 consisted of 52 weeks, while Fiscal 2020 consisted of 53 weeks.
One-time disaster recovery costs are also included here. 38 Table of Contents Results of Operations for Fiscal 2024, 2023 and 2022 The following tables set forth our results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
We utilize various techniques, including analysis of historical trends and actuarial valuation methods, to estimate the cost to settle reported claims and claims incurred but not yet reported as of the balance sheet date.
Liabilities for self-insurance reserves are estimated based on 49 Table of Contents independent actuarial estimates, which are based on historical information and assumptions about future events. We utilize various techniques, including analysis of historical trends and actuarial valuation methods, to estimate the cost to settle reported claims and claims incurred but not yet reported as of the balance sheet date.
This evaluation is performed at the lowest level of identifiable cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows from the operation and/or disposition of the assets are less than their carrying amount.
An impairment loss would be recognized when estimated undiscounted future cash flows from the operation and/or disposition of the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value.
Store closure and other costs, net in 2021 of $4.7 million primarily included $4.8 million of impairment losses related to the write-down of leasehold improvements and right-of-use assets.
Store closure and other costs, net in 2023 primarily consisted of $30.5 million of impairment losses related to the write-down of leasehold improvements and right-of-use assets, of which $27.8 million was incurred in association with the decision to close 11 underperforming stores.
As of January 1, 2023, our consolidated goodwill balance was $368.9 million, and our consolidated indefinite-lived intangible assets balance was $185.0 million.
As of December 29, 2024, our consolidated goodwill balance was $381.8 million, and our consolidated indefinite-lived intangible assets balance was $208.1 million.
Share repurchase activity under our repurchase programs for the periods indicated was as follows (total cost in thousands): Year Ended January 1, 2023 January 2, 2022 Number of common shares acquired 6,897,082 7,416,357 Average price per common share acquired $ 28.99 $ 25.40 Total cost of common shares acquired $ 199,980 $ 188,343 Shares purchased under our repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings.
Share repurchase activity under our repurchase programs for the periods indicated was as follows (total cost in thousands): Year Ended December 29, 2024 December 31, 2023 Number of common shares acquired 2,656,058 5,864,246 Average price per common share acquired $ 90.57 $ 35.00 Total cost of common shares acquired $ 240,562 $ 205,262 45 Table of Contents Shares purchased under our repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings.
Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022 filed with the SEC on February 24, 2022, which provides comparisons of fiscal 2021 and fiscal 2020, and which is incorporated by reference herein.
Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 22, 2024, which provides comparisons of fiscal 2023 and fiscal 2022. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.
Cash flows used in investing activities were $124.0 million and $102.4 million for 2022 and 2021, respectively. The increase in cash flows used in investing activities was primarily due to more stores under construction in 2022 as compared to 2021.
Cash flows used in investing activities were $230.4 million and $238.3 million for 2024 and 2023, respectively. The increase in purchases of property and equipment was primarily due to more stores under construction in 2024 as 44 Table of Contents compared to 2023 and heavier investment in upgraded equipment to support our initiatives.
Operating Activities Cash flows from operating activities increased $6.5 million to $371.3 million in 2022 compared to $364.8 million in 2021. The increase in cash flows from operating activities was primarily a result of higher net income, partially offset by changes in working capital. The increase in net income was primarily due to increased net sales and favorable margin impact.
The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $130.3 million and favorable changes in working capital of $80.9 million, partially offset by higher payments on our operating lease liabilities of $29.7 million due to growth.
Selling, general and administrative expenses Selling, general and administrative expenses primarily consist of salaries, wages and benefits costs, share-based compensation, store occupancy costs (including rent, property taxes, utilities, common area maintenance and insurance), advertising costs, buying costs, pre-opening and other administrative costs. 41 Table of Contents Depreciation and Amortization Depreciation and amortization (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment.
As sales increase, gross margin is affected by the relative mix of products sold, pricing and promotional strategies, inventory shrinkage and leverage of fixed costs of sales. 37 Table of Contents Selling, general and administrative expenses Selling, general and administrative expenses primarily consist of salaries, wages and benefits costs, share-based compensation, store occupancy costs (including rent, property taxes, utilities, common area maintenance and insurance), advertising costs, buying costs, pre-opening and other administrative costs.
(5) 2022, 2021 and 2020 estimated interest on operating leases is calculated by multiplying operating leases by the 7.1%, 6.7% and 7.2% discount rate, respectively, for each lease recorded as rent expense within direct store expense. (6) 2022, 2021 and 2020 average operating leases represents the average net present value of outstanding lease obligations over the trailing four quarters.
(3) Net of tax amounts are calculated using the normalized effective tax rate for the periods presented. 43 Table of Contents (4) 2024, 2023 and 2022 estimated interest on operating leases is calculated by multiplying operating leases by the 7.0%, 7.2% and 7.1% discount rate, respectively, for each lease recorded as rent expense within direct store expense.
Share Repurchase Program Our board of directors from time to time authorizes share repurchase programs for our common stock. The following table outlines the share repurchase programs authorized by our board, and the related repurchase activity and available authorization as of January 1, 2023.
Share Repurchase Program Our board of directors from time to time authorizes share repurchase programs for our common stock.
Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease. 52 Table of Contents Self-Insurance Reserves We are self-insured for costs related to workers’ compensation, general liability and employee health benefits up to certain self-insured retentions and stop-loss limits.
Self-Insurance Reserves We are self-insured for costs related to workers’ compensation, general liability and employee health benefits up to certain self-insured retentions and stop-loss limits. As of December 29, 2024, the consolidated self-insurance reserve balance was $53.2 million, of which a majority of the balance related to workers' compensation and general liability reserves.
We are investing savings from largely removing our weekly promotional print ad into increasing engagement and personalization with our target customers through digital and social connections, driving additional sales growth and loyalty. • Inspire and Engage Our Talent to Create a Best Place to Work.
We believe this data-driven intelligence will increase customer engagement through personalization efforts with digital and social connections to drive additional sales growth and loyalty. • Inspire and Engage Our Talent to Create a Best Place to Work.
Selling, general and administrative expenses Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Selling, general and administrative expenses $ 1,855,649 $ 1,748,205 $ 107,444 6 % Percentage of net sales 29.0 % 28.7 % 0.3 % Selling, general and administrative expenses increased $107.4 million, or 6%, compared to 2021 due to the net increase in new stores opened since the prior year as well as inflationary conditions driving increases in store costs including wages, utilities and supplies.
Selling, general and administrative expenses Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Selling, general and administrative expenses $ 2,291,350 $ 2,000,437 $ 290,913 15 % Percentage of net sales 29.7 % 29.3 % 0.4 % Selling, general and administrative expenses increased $290.9 million, or 15%, compared to 2023 due to the net increase in new stores opened since the prior year and higher payroll and incentive compensation costs.
Cash flows used in operating activities from changes in working capital were $28.6 million in 2022, compared to $13.2 million in 2021.
Cash flows provided by operating activities from changes in working capital were $112.3 million in 2024, compared to $31.4 million in 2023.
Long-term Debt and Credit Facilities Long-term debt outstanding was $250.0 million as of January 1, 2023 and January 2, 2022. See Note 13, “Long-Term Debt and Finance Lease Liabilities” for a description of our Credit Agreement and our Former Credit Facility (as defined therein).
Long-term debt outstanding as of December 31, 2023 was $125.0 million. See Note 13, “Long-Term Debt and Finance Lease Liabilities” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for a description of our Credit Agreement.
With the opening of two fresh distribution centers in 2021, we now have more than 85% of our stores within 250 miles of a distribution center. • Refine Brand and Marketing Approach. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation.
We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are increasing our use of data analytics and insights.
The increase was primarily driven by higher inventories impacted by inflationary cost increases on our purchases in the current year and higher prepaid expenses and other current assets primarily due to the timing of marketing spend, partially offset by the higher payout of COVID related incentive compensation amounts earned in 2020 and paid in 2021. 47 Table of Contents Investing Activities Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments.
Investing Activities Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions.
No impairment of goodwill or indefinite-lived intangible assets was recorded during fiscal 2022, 2021 or 2020 because the fair value of those assets was substantially above carrying value. 53 Table of Contents Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. This evaluation is performed at the lowest level of identifiable cash flows independent of other assets.
We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. Headquartered in Phoenix with 386 stores in 23 states as of January 1, 2023, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.
We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability.
Our calculation of ROIC for the fiscal years indicated was as follows: 2022 2021 2020 (1) (dollars in thousands) Net income (2) $ 261,164 $ 244,157 $ 287,450 Special items, net of tax (3), (4) — — 6,565 Interest expense, net of tax (4) 6,764 8,848 11,272 Net operating profit after-tax (NOPAT) $ 267,928 $ 253,005 $ 305,287 Total rent expense, net of tax (4) 154,626 150,047 146,630 Estimated depreciation on operating leases, net of tax (4) (87,775 ) (88,015 ) (80,944 ) Estimated interest on operating leases, net of tax (4), (5) 66,851 62,032 65,686 NOPAT, including effect of operating leases $ 334,779 $ 315,037 $ 370,973 Average working capital 271,604 193,900 101,622 Average property and equipment 704,786 712,496 735,651 Average other assets 568,609 568,744 567,188 Average other liabilities (96,583 ) (101,339 ) (100,531 ) Average invested capital $ 1,448,416 $ 1,373,801 $ 1,303,930 Average operating leases (6) 1,259,362 1,222,513 1,196,822 Average invested capital, including operating leases $ 2,707,778 $ 2,596,314 $ 2,500,752 ROIC, including operating leases 12.4 % 12.1 % 14.8 % 46 Table of Contents (1) Fiscal 2020 includes 53 weeks.
Our calculation of ROIC for the fiscal years indicated was as follows: 2024 2023 2022 (dollars in thousands) Net income (1) $ 380,601 $ 258,856 $ 261,164 Special items, net of tax (2), (3) — 34,272 — Interest expense, net of tax (3) (1,654) 4,882 6,764 Net operating profit after-tax (NOPAT) $ 378,947 $ 298,010 $ 267,928 Total rent expense, net of tax (3) 189,896 175,592 154,626 Estimated depreciation on operating leases, net of tax (3) (105,570) (98,535) (87,775) Estimated interest on operating leases, net of tax (3), (4) 84,326 77,057 66,851 NOPAT, including effect of operating leases $ 463,273 $ 375,067 $ 334,779 Average working capital 184,691 227,375 271,604 Average property and equipment 838,166 749,611 704,786 Average other assets 602,959 595,776 568,609 Average other liabilities (102,539) (97,870) (96,583) Average invested capital $ 1,523,277 $ 1,474,892 $ 1,448,416 Average operating leases (5) 1,603,777 1,423,077 1,259,362 Average invested capital, including operating leases $ 3,127,054 $ 2,897,969 $ 2,707,778 ROIC, including operating leases 14.8 % 12.9 % 12.4 % ___________________________________________ (1) Net income amounts represent total net income for the past four trailing quarters.
Cost of sales and gross profit Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Net sales $ 6,404,223 $ 6,099,869 $ 304,354 5 % Cost of sales 4,055,659 3,890,657 165,002 4 % Gross profit 2,348,564 2,209,212 139,352 6 % Gross margin 36.7 % 36.2 % 0.5 % Gross profit increased during 2022 compared to 2021 by $139.4 million to $2.3 billion driven by increased sales volume for the reasons discussed above.
Cost of sales and gross profit Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Net sales $ 7,719,290 $ 6,837,384 $ 881,906 13 % Cost of sales 4,777,799 4,315,543 462,256 11 % Gross profit 2,941,491 2,521,841 419,650 17 % Gross margin 38.1 % 36.9 % 1.2 % Gross profit increased during 2024 compared to 2023 by $419.7 million to $2.9 billion driven by increased sales volume for the reasons discussed above.
In addition, we experienced the effects of higher credit card fees as more consumers shifted to credit compared to the prior year and higher ecommerce costs resulting from an increase in ecommerce sales compared to the prior year. 43 Table of Contents Depreciation and amortization Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Depreciation and amortization $ 123,530 $ 122,258 $ 1,272 1 % Percentage of net sales 1.9 % 2.0 % (0.1 )% Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $123.5 million in 2022, compared to $122.3 million in 2021.
Depreciation and amortization Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Depreciation and amortization $ 132,748 $ 131,893 $ 855 1 % Percentage of net sales 1.7 % 1.9 % (0.2) 40 Table of Contents Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $132.7 million in 2024, compared to $131.9 million in 2023.
The effective income tax rate increased to 25.2% in 2022 from 24.3% in 2021 primarily due to decreased charitable contribution deductions in 2022 from the lapsing of benefits initially provided for in the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act"). 44 Table of Contents Net income Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Net income $ 261,164 $ 244,157 $ 17,007 7 % Percentage of net sales 4.1 % 4.0 % 0.1 % Net income increased $17.0 million primarily due to increased net sales and favorable margin impact, partially offset by higher selling, general and administrative expenses and a higher effective tax rate for the reasons discussed above.
Income tax provision Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Income tax provision $ 126,097 $ 84,884 $ 41,213 49 % Effective income tax rate 24.9 % 24.7 % 0.2 % Income tax provision increased by $41.2 million to $126.1 million for 2024 from $84.9 million for 2023, and the effective income tax rate increased to 24.9% in 2024 from 24.7% in 2023 primarily due to a reduction in federal credits and reduced impact of other permanent items due to higher pre-tax income, offset by a reduction in state taxes due to a state valuation allowance recorded in the prior year. 41 Table of Contents Net income Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Net income $ 380,601 $ 258,856 $ 121,745 47 % Percentage of net sales 4.9 % 3.8 % 1.1 % Net income increased $121.7 million primarily due to higher gross profit and lower store closure and other costs, partially offset by higher selling, general and administrative expenses for the reasons discussed above.
Interest expense, net Fiscal 2022 Fiscal 2021 Change % Change (dollars in thousands) Long-term debt $ 7,930 $ 4,601 $ 3,329 72 % Capital and financing leases 852 906 (54 ) (6 )% Deferred financing costs 800 564 236 42 % Interest rate hedge and other (535 ) 5,613 (6,148 ) (110 )% Total interest expense, net $ 9,047 $ 11,684 $ (2,637 ) (23 )% The decrease in interest expense, net was primarily due to higher interest income and lower credit facility fees.
Interest (income) expense, net Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Long-term debt $ 4,259 $ 11,815 $ (7,556) (64) % Finance leases 747 816 (69) (8) % Deferred financing costs 772 772 — — % Interest income and other (7,979) (6,912) (1,067) 15 % Total interest expense, net $ (2,201) $ 6,491 $ (8,692) (134) % The decrease in interest (income) expense, net was primarily due to higher interest income earned as a result of higher interest rates and lower credit facility fees due to lower average debt outstanding.
Subsequent to January 1, 2023 and through February 28, 2023, we repurchased an additional 2.0 million shares of common stock for $64.0 million.
The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022. Subsequent to December 29, 2024 and through February 18, 2025, the Company repurchased an additional 0.7 million shares of common stock for $93.7 million, excluding excise tax.
Comparable store sales contributed approximately 97% of total sales for both 2022 and 2021.
See "Impact of Inflation and Deflation." Comparable store sales contributed approximately 94% of total sales in 2024 and 95% of total sales in 2023.
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Our Heritage In 2002, we opened the first Sprouts Farmers Market store in Chandler, Arizona.
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Headquartered in Phoenix with 440 stores in 24 states as of December 29, 2024, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States. 35 Table of Contents Outlook We continue to execute on our long-term growth strategy that we believe is transforming our company and driving profitable growth, focusing on the following areas: • Win with Target Customers .
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From our founding in 2002 through January 1, 2023, we have grown rapidly, significantly increasing our sales, store count and profitability, including successfully rebranding 43 Henry’s Farmers Market and 39 Sunflower Farmers Market stores added in 2011 and 2012, respectively, to the Sprouts banner through acquisitions.
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Following the opening of two fresh distribution centers in fiscal 2021 and the relocation of our Southern California distribution center, closure of our Georgia distribution center and partnership with a third-party fresh distribution center in the Northeast in fiscal 2023, we are better leveraging our existing distribution center capacity, and approximately 80% of our stores were within 250 miles of a distribution center as of December 29, 2024. • Customer Engagement and Personalization.
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These three businesses all trace their lineage back to Henry’s Farmers Market and were built with similar store formats and operations including a strong emphasis on value, produce and service in smaller, convenient locations. 39 Table of Contents Outlook Since 2020, we have focused on our long-term growth strategy that we believe is transforming our company and driving profitable growth.
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We continue to make investments in technology in support of our strategy, with a focus on enhancing efficiency, scalability, and customer experience.
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Our cost of sales and gross profit are correlated to sales volumes. As sales increase, gross margin is affected by the relative mix of products sold, pricing and promotional strategies, inventory shrinkage and leverage of fixed costs of sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitat ive Disclosures about Market Risk Interest Rate Sensitivity As described in Note 13, “Long-Term Debt and Finance Lease Liabilities” to our accompanying audited consolidated financial statements located elsewhere in this Annual Report on Form 10-K, we have a Credit Agreement that bears interest at a rate based in part on SOFR.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity As described in Note 13, “Long-Term Debt and Finance Lease Liabilities” to our accompanying consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K, we have a Credit Agreement that bears interest at a rate based in part on SOFR.
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Accordingly, we could be exposed to fluctuations in interest rates. Based on the $250.0 million principal outstanding under our Credit Agreement as of January 1, 2023, each hundred basis point change in SOFR would result in a corresponding increase or decrease in interest expense by $2.5 million annually.
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Accordingly, we could be exposed to fluctuations in interest rates. As of December 29, 2024, we had no outstanding borrowings under our Credit Agreement. 51 Table of Contents
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This sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the sensitivity analysis and are not necessarily indicative of our future intentions. We do not enter into derivative financial instruments for trading purposes (see Note 22, “Derivative Financial Instruments”). 55 Table of Contents

Other SFM 10-K year-over-year comparisons