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What changed in Sprouts Farmers Market, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sprouts Farmers Market, Inc.'s 2024 and 2025 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 2025 report.

+284 added−290 removedSource: 10-K (2026-02-19) vs 10-K (2025-02-20)

Top changes in Sprouts Farmers Market, Inc.'s 2025 10-K

284 paragraphs added · 290 removed · 235 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

79 edited+23 added−21 removed62 unchanged
Biggest changeOur departments reflect our unique selling proposition featuring intentional curation of responsibly and locally sourced products. We believe each of our departments provides high-quality, 3 Table of Contents differentiated and value-oriented offerings for our customers which we continuously refine with our customers' preferences in mind.
Biggest changeWe believe each of our departments provides high-quality, differentiated and value-oriented offerings for our customers which we continuously refine with our customers' preferences in mind. 3 Table of Contents Sprouts Brand We continue to expand the breadth of our Sprouts‑branded products through a dedicated product development team committed to driving growth with a focus on innovation and quality.
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.
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 expensive to build, reduce non-selling space, reduce occupancy and operating costs and leverage the strengths of 2 Table of Contents our older, highly productive stores.
As is common in our industry, we rely on our suppliers and contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. In general, we seek certifications of compliance, representations and warranties, indemnification and/or insurance from our suppliers and contract manufacturers.
As is common in our industry, we rely on our suppliers and contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. In general, we seek certifications of compliance, representations and warranties, guaranties, indemnification and/or insurance from our suppliers and contract manufacturers.
We have prioritized making investments in training development that we believe enhances our team members’ knowledge, particularly with respect to our expanded and evolving product offerings, so our team members can continue to engage and assist our customers. We also support leadership and career opportunities for our team members at Sprouts.
We have prioritized making investments in training and team member development that we believe enhances our team members’ knowledge, particularly with respect to our expanded and evolving product offerings, so our team members can continue to engage and assist our customers. We also support leadership and career opportunities for our team members at Sprouts.
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.
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. 8 Table of Contents • 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. • All hourly team members are eligible for 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.
We must comply with provisions regulating health, sanitation and food safety standards, food labeling, equal employment, minimum wages, data privacy, environmental protection, licensing for the manufacture, preparation and sale of food and, in many stores, licensing for beer and wine or other alcoholic beverages, and cannabidiol (“CBD”) products.
We must comply with provisions regulating health, sanitation and food safety standards, food labeling, equal employment, minimum wages, data privacy, environmental protection, licensing for the manufacture, preparation and sale of food and, in many stores, licensing for beer and wine or other alcoholic beverages, and cannabidiol and tetrahydrocannabinol (“CBD” and "THC") products.
We engaged in activities connecting each team member’s role to our purpose statement. • 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 continue to engage in activities connecting each team member’s role to our purpose statement. • We continue to cascade our three core values to intentionally shape our culture and act as a lens to guide the decisions we make.
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.
The following is a breakdown of our perishable and non-perishable sales mix: 2025 2024 2023 Perishables 57.0 % 57.3 % 57.3 % Non-Perishables 43.0 % 42.7 % 42.7 % 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.
In addition to our trademarks, we believe that our trade dress, which includes the human-scale design, arrangement, color scheme and other physical characteristics of our stores and product displays, is a large part of the farmers market atmosphere we create in our stores and enables customers to distinguish our stores and products from those of our competitors.
In addition to our trademarks, we believe that our trade dress, which includes the human-scale design, arrangement, color scheme and other physical characteristics of our stores and product displays, is a large part of the farmers 11 Table of Contents market atmosphere we create in our stores and enables customers to distinguish our stores and products from those of our competitors.
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
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/ .
Food, Cosmetics, Homeopathic and CBD Products, and Dietary Supplement Advertising. The FTC exercises jurisdiction over the advertising of foods, cosmetics, homeopathic and CBD products, and dietary supplements. The FTC has the power to institute monetary sanctions and the imposition of consent decrees and penalties that can severely limit a company’s business practices.
The FTC exercises jurisdiction over the advertising of foods, cosmetics, homeopathic and CBD and THC products, and dietary supplements. The FTC has the power to institute monetary sanctions and the imposition of consent decrees and penalties that can severely limit a company’s business practices.
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.
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 37, 33 and 30 new stores in fiscal 2025, 2024 and 2023, respectively.
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.
Since the scholarship program’s inception, we have awarded more than $2.0 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.
Insurance and Risk Management We use a combination of insurance and self-insurance to manage potential liabilities related to workers’ compensation, general liability, product liability, cybersecurity, directors' and officers' liability, team member healthcare benefits, and other casualty and property risks.
Insurance and Risk Management We use a combination of insurance and self‑insurance to manage potential liabilities associated with workers’ compensation, general liability, product liability, cybersecurity, directors’ and officers’ liability, team member healthcare benefits, and other casualty and property risks.
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.
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 2025, we have opened 112 new stores and remodeled one store featuring our updated format.
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.
As of December 28, 2025, 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.
We expect these cost reductions will allow us to deliver higher returns than our larger stores and continue to accelerate our growth. See “Item 2. Properties” for additional information with respect to our store locations. Seasonality Our business is subject to modest seasonality.
We expect these cost reductions will allow us to deliver higher returns than our larger stores and continue to accelerate our growth. 10 Table of Contents See “Item 2. Properties” for additional information with respect to our store locations. Seasonality Our business is subject to modest seasonality.
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.
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 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.
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.
We currently have six produce distribution centers, with two located in California and one located in each of Arizona, Texas, Colorado and Florida. In 2023, we entered into a partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores.
We currently have six fresh distribution centers, with two located in California and one located in each of Arizona, Texas, Colorado and Florida. In 2025, we extended our partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores.
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.
Although many retailers have significantly increased their health and wellness offerings, 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.
In 2024, Sprouts and Angel City held 9 garden work days and contributed over 1,400 collective service hours into the local Los Angeles community. 6 Table of Contents Our Customers We have employed deep research to understand our target customer, what occasions drive purchases, what they buy and where they buy it.
In 2025, Sprouts and Angel City held garden work days and contributed service hours into the local Los Angeles community. 6 Table of Contents Our Customers We have employed deep research to understand our target customer, what occasions drive purchases, what they buy and where they buy it.
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.
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 2025, we launched more than 7,000 new products.
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.
We reinforced the critical behaviors and actions to create a sense of 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 3,700 new jobs in 2025 through new store openings. • Additionally, we promoted approximately 6,000 team members and filled 61% of store manager positions with internal candidates. • Team members saved approximately $26.0 million through store discounts. • We awarded 50 scholarships to team members and dependents in 2025.
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.
The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. Information Technology Systems We have continued to invest in IT infrastructure and business systems designed to support operating efficiency, scalability, and customer experience to support our long-term growth and operational resilience.
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.
Headquartered in Phoenix with 477 stores in 24 states as of December 28, 2025, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.
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 consider our relations with our team members to be good, and we have never experienced a strike or significant work stoppage. 2025 Highlights. We are proud of the following achievements during the year: • We have reinforced our purpose statement and values across the organization.
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.
We build on our targeted recruitment efforts with robust training on customer engagement and product knowledge to ensure there is friendly, approachable and knowledgeable staff in every store. As of December 28, 2025, we had more than 36,000 team members. None of our team members are subject to collective bargaining agreements.
Since its inception, our Foundation has awarded more than $35 million in donations to nonprofits and schools with programs that bring its mission to life.
Since its inception, our Foundation 7 Table of Contents has awarded more than $50 million in donations to nonprofits and schools with programs that bring its mission to life.
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.
We are intentional about our company culture, rooted in our purpose, with a dedication to developing team members throughout the organization. We take pride in caring for and assisting our store teams through our store support office and regional teams.
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 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. These products become treasure hunt items found at our stores.
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.
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.
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.
We also monitor the financial strength and stability of our insurance carriers to minimize counterparty risk and support continuity 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 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.
During 2025, 44 Sprouts team members enrolled in this program. • 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.
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.
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. These specifications are measured at both entry and exit points to our facilities.
We have five team member resource groups that provide input on our recruiting efforts and insight into team member sentiment and culture survey data to better inform our business and people planning efforts.
We have five team member resource groups that provide input on our recruiting efforts, community involvement, career development, and insight into team member sentiment and culture survey data to better inform our business and people planning efforts, and enhance our sense of belonging at Sprouts.
We work collaboratively with our supply chain partners, community organizations, and industry experts to understand our material impacts and prioritize our efforts to maximize our positive influence on the people and communities that we serve. Our sustainability initiatives emphasize responsible sourcing, food waste diversion, and carbon emissions reduction.
We work collaboratively with our supply chain partners, community organizations, and industry experts to understand our material impacts and prioritize our efforts to maximize our positive influence on the people and communities that we serve.
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.
Our operations, including the manufacturing, processing, formulating, packaging, labeling, transportation and storage, 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.
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.
Homeopathic Products . The FDA has the authority to regulate homeopathic products as drug products. There are no FDA-approved products labeled as homeopathic, and as such, any product labeled as homeopathic is being marketed in the U.S. without FDA evaluation for safety or effectiveness. CBD Products.
In 2024, our stores reported a 10% reduction in worker compensation claim frequency rate and a 9% reduction in general liability claim frequency rate over the prior year. Team Member Resource Groups . We pride ourselves on supporting an inclusive, respectful, and caring culture throughout our organization.
In 2025, our stores reported workers’ compensation claim frequency consistent with the prior year and an 8% reduction in general liability claim frequency compared to 2024. Team Member Resource Groups . We pride ourselves on supporting a respectful and caring culture throughout our organization.
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.
For all non-produce products and the remaining meat and seafood products in geographies that have not yet transitioned to self-distribution, 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.
Distributors and farmers recognize the volume of goods we sell through our stores and our flexible purchasing and supply chain model allows us to opportunistically acquire produce at great value which we will frequently pass along to our customers.
We believe our scale, together with this decentralized purchasing structure and flexibility generates cost savings, which we frequently pass on to our customers. Distributors and farmers recognize the volume of goods we sell through our stores and our flexible purchasing and supply chain model allows us to opportunistically acquire produce at great value.
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.
We are increasing our use of data analytics and insights, including through the nationwide launch of our Sprouts Rewards loyalty program in 2025. 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.
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.
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.
Sprouts continues to educate and reach shoppers through social partnerships, special content and sponsorships. Among our 2024 highlights: • We continued our long-term commitment to and investment in collegiate women’s athletics through partnerships with the Big 12 and SEC conferences.
Among our 2025 highlights: • We continued our long-term commitment to and investment in collegiate women’s athletics through partnerships with the Big 12 and SEC conferences.
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 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.
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 Growth Strategy We continue to execute on our long-term growth strategy that we believe is driving profitable growth, 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.
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 FDA has comprehensive authority to regulate cosmetics under the FDCA and the Fair Packaging and Labeling Act (“FPLA”). 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.
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.
Additionally, we experienced a 10% increase in email subscribers in 2025 compared to 2024. During 2025, our CRM platforms and weekly digital flyers generated over 17 million 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.
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”).
KeHE Distributors, LLC (“KeHE”), is our primary supplier of dry grocery and frozen food products, accounting for approximately 52%, 50% and 47% of our total purchases in fiscal 2025, 2024 and 2023, respectively.
However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in products we sell. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from our stores.
In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from our stores.
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. We have a dedicated real estate team as well as a real estate committee that includes certain of our executive officers.
The below diagram shows our store footprint, by state, as of December 28, 2025 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.
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.
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.
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.
For an overview of our product sourcing policies and programs, please visit: sprouts.com/about/sustainability/ . 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.
These investments include enterprise data management, labor and shrink optimization, store replenishment, demand forecasting, and in-store technologies, all aimed at streamlining operations and improving decision-making. Our IT initiatives focus on maintaining high in-stock availability, optimizing demand forecasting, automating supply chain processes, enhancing the customer experience, and increasing workforce productivity. These enhancements drive greater operational efficiency, cost control, and business agility.
These investments include enterprise data management, labor and shrink optimization, store replenishment, demand forecasting, and in-store technologies, which are intended to streamline operations and support improved decision-making. Our IT initiatives are focused on supporting high in-stock availability, optimizing demand forecasting, automating elements of our supply chain processes, enhancing the customer experience, and increasing workforce productivity.
In conjunction these partnerships as well as individual agreements with Arizona State University, University of Southern California and University of Texas, we expanded our NIL portfolio and partnered with over 150 female collegiate athletes. • Sprouts also became the title partner of the ESPN Sprouts Farmers Market Collegiate Quad which features schools from top 25 collegiate gymnastics programs, All-Americans, and current and future Olympians.
Through our PowHERed by Sprouts program, we expanded our NIL portfolio and partnered with over 175 female collegiate athletes. • For the second year, Sprouts was the title partner of the ESPN Sprouts Farmers Market Collegiate Quad which features schools from top 25 collegiate gymnastics programs, All-Americans, and current and future Olympians.
We graduated 20 leaders from our college fast-track program which trains college graduates for assistant store management roles. In addition, our Assistant Store Manager training program to accelerate internal promotions supported 39 team members. These development programs support our store growth and workforce plan. In 2024, we rolled out bite-sized training through our new learning management system.
In addition, our Assistant Store Manager training program to accelerate internal promotions supported 73 team members. These development programs support our store growth and workforce plan. In 2024, we rolled out bite-sized training through our new learning management system. This enables daily learning through mobile devices. Our store team members completed over 1,129,000 hours of in-store training in 2025.
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.
This year we offered a 30% discount to all team members over the course of five days aligned with our holiday celebrations. We also offered team members an additional three days with a 25% discount. Education, Training and Safety. We believe Sprouts is an attractive place to work with significant growth opportunities for our more than 36,000 team members.
Connecting with our customers via owned CRM channels like email and text messages continues to be a significant priority. We focus our efforts on personalizing content that is relevant to our customers. We experienced an 8.6% increase in email subscribers in 2024 compared to 2023.
Connecting with our customers via owned customer relationship management ("CRM") channels like email and text messages continues to be a significant priority. We focus our efforts on personalizing content that is relevant to our customers. In 2025, we launched our Sprouts Rewards loyalty program nationwide which we believe will allow us to enhance our customer engagement.
Our centralized buyers are supported by dedicated regional procurement teams that provide us flexibility to procure produce on local, regional and national levels.
We believe, based on our industry experience, that our strong relationships in the produce business provide us a competitive advantage and enable us to offer differentiated varieties of high-quality produce. Our centralized buyers are supported by dedicated regional procurement teams that provide us flexibility to procure produce on local, regional and national levels.
As a portion of this partnership, funds are allocated to support local causes that provide fresh food access and further children’s nutrition education throughout Los Angeles.
In 2025, this Collegiate Quad became the most watched NCAA gymnastics meet in ESPN history. • Sprouts continued its back-of-jersey sponsorship with the Angel City Football Club in 2025. As a portion of this partnership, funds are allocated to support local causes that provide fresh food access and further children’s nutrition education throughout Los Angeles.
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.
The ultimate cost of our insurance program can be influenced by several factors, including changes in legal trends and interpretations, inflation, claim frequency and severity, settlement practices, evolving regulations affecting benefit levels, the solvency and creditworthiness of insurance carriers, the effectiveness of risk‑transfer strategies, and fluctuations in discount rates.
Our Foundation's 2024 highlights included: • Invested over $4 million in hyper-local grants to 578 nonprofit organizations and schools focused on school garden education, and health and wellness programs for children and adults; • Awarded $10 million in high-impact capacity grants to empower nonprofit organizations to expand their program operations; 7 Table of Contents • Contributed $1 million to the Florida Disaster Relief Fund to aid in relief and recovery efforts following Hurricane Milton; and • Hosted the second national Growing School Gardens Summit, uniting over 450 educators and organizations responsible for educating an estimated 5 million students nationwide.
Our Foundation's 2025 highlights included: • Invested over $3.3 million in hyper-local grants to 550 nonprofit organizations and schools focused on school garden education, and health and wellness programs for children and adults; • Awarded $10 million in high-impact capacity grants to empower nonprofit organizations to expand their program operations; • Contributed $0.8 million to the California Wildfire Relief Fund and $0.2 million to California Fire Foundation to aid in relief and recovery efforts following the Palisades and Eaton Fires; and • Hosted over 50 volunteer projects coast-to-coast for Annual Day of Service.
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 contents of the websites mentioned above and elsewhere in this report are not incorporated into and should not be considered a part of this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
Regulatory Compliance Our stores and online retail operations are subject to various local, state and federal laws, regulations and administrative practices affecting our business.
With respect to payment security, we maintain practices intended to be consistent with the Payment Card Industry Data Security Standard (PCI DSS) to support the protection of cardholder data and transaction processing. Regulatory Compliance Our stores and online retail operations are subject to various local, state and federal laws, regulations and administrative practices affecting our business.
As such, there is no guarantee that our insurance coverage will fully mitigate all potential risks or claims. We continuously evaluate our insurance program to ensure that our coverage levels are appropriate considering evolving risks, claims experience, and the regulatory environment.
As a result, there can be no assurance that our insurance coverage will fully mitigate all potential risks or claims. We continually evaluate the structure and adequacy of our coverage to ensure it appropriately reflects our risk profile, historical claims experience, and the external regulatory environment.
This platform ensures operational consistency across our business, enabling seamless adaptation to changing conditions while positioning us for future expansion. To mitigate risks such as cybersecurity threats, system disruptions, and data breaches, we have implemented a multi-layered security strategy, including advanced threat detection, continuous monitoring, third-party security audits, employee cybersecurity training, and robust disaster recovery and incident response protocols.
To address risks such as cybersecurity threats, system disruptions, and data breaches, we have implemented a multi-layered security program that includes threat detection tools, monitoring processes, third-party security assessments, employee cybersecurity training, and disaster recovery and incident response protocols.
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.
In fiscal 2025, Sprouts Brand products represented just over 25% of our revenue. We believe this portfolio strengthens and elevates the overall Sprouts shopping experience, differentiates us within the marketplace, fosters customer loyalty, and reinforces Sprouts as a destination for unique products available only in our stores.
We expect to continue to expand our store base with at least 35 store openings planned for fiscal 2025, all of which will be in our updated format. See “Item 2. Properties” for additional information with respect to our store closures in 2023. The below diagram shows our store footprint, by state, as of December 29, 2024.
We expect to continue to expand our store base with more than 40 store openings planned for fiscal 2026. See “Item 2. Properties” for additional information with respect to our store closures in 2023.
In addition, AMS has responsibility for newly enacted requirements surrounding the disclosure of the presence of bioengineered ingredients in food. AMS also enforces the Perishable Agricultural Commodities Act ("PACA") which imposes fair business practices on parties engaged in the sale of perishable fruits, vegetables and some nuts.
AMS also enforces the Perishable Agricultural Commodities Act ("PACA") which imposes fair business practices on parties engaged in the sale of perishable fruits, vegetables and some nuts. Entities that buy and sell perishable commodities require a PACA license and disputes about sales of produce are subject to rules and regulations under PACA. Cosmetics.
We offer home deliveries from our stores through delivery service providers, including Instacart, DoorDash and Uber Eats, in all of our markets nationwide. In 2024, we also piloted our Sprouts Rewards loyalty program in select markets. We will continue to explore mobile and digital opportunities to further connect with our customers and leverage data for better customer insights.
We offer home deliveries from our stores through delivery service providers, including Instacart, DoorDash and Uber Eats, in all of our markets nationwide. Sprouts continues to educate and reach shoppers through social partnerships, special content and sponsorships.
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.
As a result, 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 28, 2025. • Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation.
To further strengthen our capabilities, we continue to integrate emerging technologies such as artificial intelligence, machine learning, and cloud computing to advance automation, generate real-time insights, and improve scalability. We operate on an integrated IT platform that provides the agility and scalability necessary to support business growth and evolving market demands.
These initiatives are intended to contribute to greater operational efficiency, cost management, and business agility. To further develop our capabilities, we continue to evaluate and integrate emerging technologies such as artificial intelligence, machine learning, and cloud computing to support automation, generate more timely insights, and enhance scalability.
This enables daily learning through mobile devices. Our store team members completed over 1,046,000 hours of in-store training in 2024. We are committed to maintaining a safe environment for our team members and customers. Our stores implement various programs to reduce and eliminate hazards, resulting in a safer workplace and improved shopping experience.
We are committed to maintaining a safe environment for our team members and customers. Our stores employ a variety of safety programs and operational controls designed to reduce and mitigate workplace hazards, supporting a safer work environment and enhanced shopping experience.
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.
To grow the next generation of leaders at Sprouts, we have developed Leadership Training Programs to on-board store managers and assistant store managers new to Sprouts. In 2025, we had 116 Leadership graduates totaling more than 42,800 hours in training. We graduated 20 leaders from our college fast-track program which trains college graduates for assistant store management roles.
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.
The Food Safety Modernization Act (“FSMA”) and related FDA regulations govern the control and quality of food manufacturing and distribution. This authority applies to all domestic food facilities and to all foreign facilities that supply food products under the Foreign Supplier Verification Program.
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/.
In 2025, we rescued 36 million pounds of food, providing the equivalent of approximately 30 million meals through our Food Rescue partners. For more information on our efforts and reporting, including our most recent Impact reports, please visit: sprouts.com/about/sustainability/.
Our cybersecurity program aligns with industry standards such as the NIST Cybersecurity Framework (CSF), while our data protection practices comply with privacy regulations, including the California Privacy Rights Act (CPRA). For payment security, we adhere to the Payment Card Industry Data Security Standard (PCI DSS) to ensure the protection of cardholder data and transaction integrity.
Our cybersecurity program is informed by recognized industry frameworks, including the NIST Cybersecurity Framework (CSF), and our data protection practices are designed to address applicable privacy requirements, including the California Privacy Rights Act (CPRA).
Our primary meat and seafood distributor accounted for approximately 14% of our total purchases in each of fiscal 2024 and 2023 and 13% of our total purchases in fiscal 2022. As a step to improve our fresh supply chain, we are currently in the process of transitioning from our primary meat and seafood distributor.
As a step to improve our fresh supply chain, in 2025 we began the transition to a self-distribution model for meat and seafood through our fresh distribution centers.
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Our Growth Strategy 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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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs with complex transitions of this magnitude, there are associated short-term risks, including in particular, potential product supply disruptions resulting in lost sales at our stores and transition-related expenses that exceed our expectations. Another 3% of our total purchases in both fiscal 2024 and 2023 were made through our secondary supplier of dry grocery and frozen food products, UNFI.
Biggest changeIn addition, in 2025 we began the process of transitioning to a self-distribution model for meat and seafood. As with complex transitions of this magnitude, we experienced and may continue to experience short-term challenges, including in particular, potential product supply disruptions resulting in lost sales at our stores and customer disruption and transition-related expenses that exceed our expectations.
Successful implementation of our long-term growth strategy depends upon a number of factors, including our ability to effectively achieve a level of cash flow or obtain necessary financing to support our expansion; find suitable sites for new store locations; manage supply chain constraints to obtain necessary equipment; negotiate and execute leases on acceptable terms; secure and manage the inventory necessary for the launch and operation of our new stores; hire, train and retain skilled team members; promote and market 17 Table of Contents new stores; successfully execute and gain customer acceptance of our store format; and address competitive merchandising, distribution, operational and other challenges encountered in connection with expansion into new geographic areas and markets.
Successful implementation of our long-term growth strategy depends upon a number of 17 Table of Contents factors, including our ability to effectively achieve a level of cash flow or obtain necessary financing to support our expansion; find suitable sites for new store locations; manage supply chain constraints to obtain necessary equipment; negotiate and execute leases on acceptable terms; secure and manage the inventory necessary for the launch and operation of our new stores; hire, train and retain skilled team members; promote and market new stores; successfully execute and gain customer acceptance of our store format; and address competitive merchandising, distribution, operational and other challenges encountered in connection with expansion into new geographic areas and markets.
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.
Various third parties, such as our service providers and suppliers, including our most significant suppliers, and payment processors and their suppliers ( i.e. , our fourth parties), also rely heavily on information technology systems, and any failure of these systems for any reason ( e.g. , cybersecurity attack, software glitch, human or system error or omission), could also cause loss of sales, transactional or other data, compromise of customer or team member data and significant interruptions to our business.
Various third parties, such as our service providers and suppliers, including our most significant distributors, and payment processors and their suppliers ( i.e. , our fourth parties), also rely heavily on information technology systems, and any failure of these systems for any reason ( e.g. , cybersecurity attack, software glitch, human or system error or omission), could also cause loss of sales, transactional or other data, compromise of customer or team member data and significant interruptions to our business.
Our operations, which are characterized by a high volume of customer traffic and data collection for transactions involving a wide variety of product selections, carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in some other industries.
Our operations, which are characterized by a high volume of customer traffic and data collection for transactions involving a wide variety of product selections, carry a higher exposure to litigation risk when compared to the operations of companies operating in some other industries.
We may require additional capital to fund the expansion of our business, and our inability to obtain such capital could harm our business. To support our growth strategy, we must have sufficient capital to continue to make significant investments in our new and existing stores and advertising.
We may require additional capital to fund the expansion of our business, and our inability to obtain such capital could harm our business. To support our growth strategy, we must have sufficient capital to continue to make significant investments in our new and existing stores.
Both FDA and USDA have broad authority to enforce their applicable statutes and regulations relating to the safety, labeling, manufacturing, distribution and promotion of foods, cosmetics, homeopathic and CBD products, and dietary supplements, including powers to issue a public warning letter to a company, publicize information about adulterated or misbranded products, institute an administrative detention of products, request or order a recall from the market, impose import restrictions and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution.
Both FDA and USDA have broad authority to enforce their applicable statutes and regulations relating to the registration and listing of products, safety, labeling, manufacturing, distribution and promotion of foods, cosmetics, homeopathic and CBD products, and dietary supplements, including powers to issue a public warning letter to a company, publicize information about adulterated or misbranded products, institute an administrative detention of products, request or order a recall from the market, impose import restrictions and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution.
Due to this concentration of purchases from a small number of third-party suppliers, the cancellation or interruption of our distribution arrangements or the disruption, delay or inability of our suppliers to timely deliver product to our stores in quantities or within service parameters that meet our requirements may materially and adversely affect our operating results while we establish alternative supply chain channels due to lost sales, as well as increased costs from alternative distribution arrangements.
Due to this concentration of purchases from a small number of third-party distributors, the cancellation or interruption of our distribution arrangements or the disruption, delay or inability of our distributors to timely deliver product to our stores in quantities or within service parameters that meet our requirements may materially and adversely affect our operating results while we establish alternative supply chain channels due to lost sales, as well as increased costs from alternative distribution arrangements.
If our systems are improperly implemented, breached, damaged, cease to function properly, do not function as anticipated or are perceived to have failed, we may have to make significant investments to fix or replace them; suffer interruptions in our operations; experience data loss; incur liability to our customers, team members and others; face costly litigation, enforcement actions and penalties; and our brand and reputation with our customers may be harmed.
If our systems are improperly implemented, breached, damaged, cease to function properly, do not function or provide benefits as anticipated or are perceived to have failed, we may have to make significant investments to fix or replace them; suffer interruptions in our operations; experience data loss; incur liability to our customers, team members and others; face costly litigation, enforcement actions and penalties; and our brand and reputation with our customers may be harmed.
These factors include, among other things, changes in demographics, population and employee bases; regulation; wage increases; changes in economic conditions; floods, prolonged droughts, diminished water resources, windstorms such as tornados, cyclones, hurricanes and tropical storms, winter storms or other severe weather conditions, which may be caused or exacerbated by climate change; and other catastrophic occurrences, such as pandemics, earthquakes or wildfires.
These factors include, among other things, changes in demographics, population and employee bases; workforce availability, regulation; wage increases; changes in economic conditions; floods, prolonged droughts, diminished water resources, windstorms such as tornados, cyclones, hurricanes and tropical storms, winter storms or other severe weather conditions, which may be caused or exacerbated by climate change; and other catastrophic occurrences, such as pandemics, earthquakes or wildfires.
For example, a California law that became effective in 2023 bans intentionally added PFAS in fiber-based food packaging, mandates online chemical disclosures, and limits claims about PFAS-free and other hazard groups. As more states impose similar restrictions, it is possible that additional states in which we operate will also implement bans on PFAS.
For example, a California law that became effective in 2023 bans intentionally added PFAS in fiber-based food packaging, mandates online chemical disclosures, and limits claims about PFAS-free and other hazard groups. As more states impose similar restrictions, it is possible that additional states in which we operate will also implement bans on PFAS. Ecommerce Platform.
Labor shortages, work stoppages or wage increases in the transportation or other industries, long-term disruptions to the national and international transportation infrastructure, reduction in capacity and industry-specific regulations such as hours-of-service rules that lead to delays or interruptions of deliveries or increased costs could negatively affect our business. Disruption of significant supplier relationships could negatively affect our business.
Labor shortages, work stoppages or wage increases in the transportation or other industries, long-term disruptions to the national and international transportation infrastructure, reduction in capacity and industry-specific regulations such as hours-of-service rules that lead to delays or interruptions of deliveries or increased costs could negatively affect our business. Disruption of significant distributor relationships could negatively affect our business.
Any unanticipated or unusual expenses or significant interruption or failure in the operation of our distribution center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, cyberattacks, network or power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers or product categories into our supply chain network, inability of our new distribution centers to perform as 18 Table of Contents expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute produce and other products to our stores.
Any unanticipated or unusual expenses or significant interruption or failure in the operation of our distribution center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, cyberattacks, network or power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers or product categories into our supply chain network, inability of our new distribution centers to perform as expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute produce and other products to our stores.
If our ESG-related reporting is incomplete or inaccurate or fails to comply with regulatory requirements, or if we fail to achieve significant progress with respect to our ESG goals on a timely basis, or at all, our business, financial performance, growth and reputation with our investors, customers and other stakeholders could be adversely affected.
If our sustainability-related reporting is incomplete or inaccurate or fails to comply with regulatory requirements, or if we fail to achieve significant progress with respect to our goals on a timely basis, or at all, our business, financial performance, growth and reputation with our investors, customers and other stakeholders could be adversely affected.
Execution against these ESG initiatives may be costly, and we may be unable to achieve our goals due to factors outside of our control.
Execution against these initiatives may be costly, and we may be unable to achieve our goals due to factors outside of our control.
If we are unable to mitigate these fluctuations by passing the effects through to our customers, which will largely depend upon competitive market conditions, our profitability may be impacted either through increased costs to us or lower prices and 16 Table of Contents loss of customers due to competitive conditions, which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.
If we are unable to mitigate these fluctuations by passing the effects through to our customers, which will largely depend upon competitive market conditions, our profitability may be impacted either through increased costs to us or lower prices and loss of customers due to competitive conditions, which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.
As a fresh, natural and organic specialty retailer, we believe that many stakeholders hold us to higher standards with respect to ESG matters. As a result, we disclose certain ESG-related metrics, initiatives and goals in our SEC filings and other public disclosures.
As a fresh, natural and organic specialty retailer, we believe that many stakeholders hold us to higher standards with respect to sustainability matters. As a result, we disclose certain sustainability-related metrics, initiatives and goals in our SEC filings and other public disclosures.
In addition, some competitors are aggressively expanding their number of stores or their product offerings, increasing the space allocated to fresh, natural and organic foods, and enhancing options of engaging with and delivering their products to customers.
In addition, some competitors are aggressively expanding their number of stores or their health and wellness product offerings, increasing the space allocated to fresh, natural and organic foods, and enhancing options of engaging with and delivering their products to customers.
Our Credit Agreement contains usual and customary restrictive covenants relating to our management and the operation of our business, including incurring additional indebtedness; making certain investments; merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of our assets; paying dividends, making distributions, or redeeming capital stock; entering into transactions with our affiliates; and granting liens on our assets.
Our Credit Agreement contains usual and customary restrictive covenants relating to our management and the operation of our business, including incurring additional indebtedness; making certain investments; merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of our assets; paying 23 Table of Contents dividends, making distributions, or redeeming capital stock; entering into transactions with our affiliates; and granting liens on our assets.
It is possible that new laws, regulations or executive orders may be enacted or enforced differently than they were before, which may expose us to additional uncertainty and require the 25 Table of Contents expenditure of additional resources to ensure that we are able to comply. Such actions could also adversely restrict our business and operations.
It is possible that new laws, regulations or executive orders may be enacted or enforced differently than they were before, which may expose us to additional uncertainty and require the expenditure of additional resources to ensure that we are able to comply. Such actions could also adversely restrict our business and operations.
In addition, there also exists certain “anti-ESG” sentiment among some individuals and government institutions, and we may also face scrutiny and reputational harm from these parties regarding our ESG initiatives or goals.
In addition, there also exists certain “anti-ESG” sentiment among some individuals and government institutions, and we may also face scrutiny and reputational harm from these parties regarding our sustainability initiatives or goals.
Changes in these rules or their interpretation may necessitate changes to our financial statement presentation and significantly change or add significant volatility to our reported earnings without a comparable underlying change in cash flow from operations. As a result, changes in accounting standards may materially impact our reported financial condition and results of operations.
Changes in these rules or their interpretation may necessitate changes to our financial statement presentation and significantly change or add significant volatility to our reported earnings without a comparable 26 Table of Contents underlying change in cash flow from operations. As a result, changes in accounting standards may materially impact our reported financial condition and results of operations.
Additionally, compliance with current and future 19 Table of Contents applicable federal and state privacy, cybersecurity and related laws, including for example the California Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), can be costly and time-consuming, and we could be subject to enforcement actions or penalties for non-compliance.
Additionally, compliance with current and future applicable federal and state privacy, cybersecurity and related laws, including for example the California Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), can be costly and time-consuming, and we could be subject to enforcement actions or penalties for non-compliance.
We may not be able to find replacement suppliers on commercially reasonable terms, which would have a material adverse effect on our financial condition, results of operations and cash flows. Disruptions to, security breaches or non-compliance involving, our information technology systems could harm our ability to run our business and expose us to potential liability and loss of revenues.
We may not be able to find replacement distributors or suppliers on commercially reasonable terms, which would have a material adverse effect on our financial condition, results of operations and cash flows. 19 Table of Contents Disruptions to, security breaches or non-compliance involving, our information technology systems could harm our ability to run our business and expose us to potential liability and loss of revenues.
If we are not able to make the required payments under the leases, the lenders or owners of 22 Table of Contents the relevant stores, distribution centers or administrative offices may, among other things, repossess those assets, which could adversely affect our ability to conduct our operations.
If we are not able to make the required payments under the leases, the lenders or owners of the relevant stores, distribution centers or administrative offices may, among other things, repossess those assets, which could adversely affect our ability to conduct our operations.
As competition in certain areas or platforms intensifies or competitors open stores or expand delivery options within close proximity to our stores, our results of operations and cash flows may be negatively impacted through a loss of sales, decrease in customer traffic and market share, reduction in margin from competitive price changes or greater operating costs.
As competition in certain areas or platforms intensifies or competitors open stores or expand health and wellness product offerings and delivery options within close proximity to our stores, our results of operations and cash flows may be negatively impacted through a loss of sales, decrease in customer traffic and market share, reduction in margin from competitive price changes or greater operating costs.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could adversely impact our business. As of December 29, 2024, the Company had no long-term debt outstanding debt under our credit agreement (referred to as the “Credit Agreement”). We may incur indebtedness in the future, including borrowings under our Credit Agreement.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could adversely impact our business. As of December 28, 2025, the Company had no long-term debt outstanding debt under our credit agreement (referred to as the “Credit Agreement”). We may incur indebtedness in the future, including borrowings under our Credit Agreement.
We have historically experienced loss of inventory (also called shrink) due to damage, theft, spoilage, inventory management and 21 Table of Contents other causes. Sustained elevated levels of inventory shrink could adversely affect our results of operations and financial condition.
We have historically experienced loss of inventory (also called shrink) due to damage, theft, spoilage, inventory management and other causes. Sustained elevated levels of inventory shrink could adversely affect our results of operations and financial condition.
Our online order ecommerce platform is subject to the same laws and regulations as our retail operations. Product statements made on our website must be in accordance with labeling requirements.
Our online order ecommerce platform is subject to the same laws and regulations as our retail operations. Product statements made on our website must be in accordance with labeling requirements. Third-Party Risks.
There can be no assurance that our intellectual property rights can be successfully asserted against such third parties or will not be invalidated, circumvented or challenged. Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and 26 Table of Contents resources.
There can be no assurance that our intellectual property rights can be successfully asserted against such third parties or will not be invalidated, circumvented or challenged. Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and resources.
Higher wage and benefit costs could adversely affect our business. Changes in federal and state minimum wage laws and other laws relating to employee compensation and benefits could cause us to incur additional wage and benefit costs, as well as increased contractual costs associated with our service providers.
Changes in federal and state minimum wage laws and other laws relating to employee compensation and benefits could cause us to incur additional wage and benefit costs, as well as increased contractual costs associated with our service providers.
Consequently, we may be a party to individual personal injury, product liability, intellectual property, data security and privacy, accessibility and other legal actions in the ordinary course of our business, including litigation arising from food-related illness or product labeling.
Consequently, we have been and may in the future be a party to individual personal injury, product liability, intellectual property, data security and privacy, accessibility and other legal actions in the ordinary course of our business, including litigation arising from food-related illness, product labeling or marketing and advertising claims.
As a result, consumers may be more cautious and could reduce their spending in our stores or shift their spending to lower-priced competition, such as warehouse membership clubs, dollar stores, online retailers or extreme value formats, which could have a material and adverse effect on our operating results and financial condition.
As a result, consumers have been and may continue to be more cautious about product affordability and reduce their spending in our stores or shift their spending to lower-priced competition, such as warehouse membership clubs, conventional supermarkets, dollar stores, online retailers or extreme value formats, which could have a material and adverse effect on our operating results and financial condition.
These include, without limitation, the following provisions: • a classified board of directors (referred to as the “Board”) whose members serve staggered three-year terms; • “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock; • inability of our stockholders to call special meetings of stockholders, which may delay the ability of our stockholders to force consideration of a proposal or the ability of holders controlling a majority of our capital stock to take action, including the removal of directors; and • required advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to the board.
These include, without limitation, the following provisions: • a classified board of directors (referred to as the “Board”) whose members serve staggered three-year terms until our classified board structure is fully phased out at our 2028 annual meeting of stockholders pursuant to a measure adopted by our stockholders at our 2025 annual meeting of stockholders; • “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock; • inability of our stockholders to call special meetings of stockholders, which may delay the ability of our stockholders to force consideration of a proposal or the ability of holders controlling a majority of our capital stock to take action, including the removal of directors; and • required advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to the board.
In addition, we are subject to environmental laws pursuant to which we could be held responsible for all of the costs or liabilities relating to any contamination at our or our predecessors’ past or present facilities and at third-party waste disposal sites, regardless of our knowledge of, or responsibility for, such contamination, and such costs may exceed our environmental liability insurance coverage.
In addition, we are subject to federal, state and local environmental laws, including those pursuant to which we could be held responsible for all of the costs or liabilities relating to any contamination at our or our 25 Table of Contents predecessors’ past or present facilities and at third-party waste disposal sites, regardless of our knowledge of, or responsibility for, such contamination, and such costs may exceed our environmental liability insurance coverage.
If our team members 27 Table of Contents or third parties we engage to provide this information do not act in accordance with regulatory requirements, we may become subject to penalties or litigation that could have a material adverse effect on our business. Our business and reputation may be adversely impacted by evolving environmental, social and governance matters.
If our team members or third parties we engage to provide this information do not act in accordance with regulatory requirements, we may become subject to penalties or litigation that could have a material adverse effect on our business. Our business and reputation may be adversely impacted by evolving sustainability matters.
The availability of such products at competitive prices depends on many factors beyond our control, including the number and size of farms that grow natural or organic crops or raise livestock that meet our quality, welfare and production standards, tariffs 15 Table of Contents and import regulations or restrictions on foreign-sourced products, stability of the global supply chain and the ability of our vendors to maintain required attributes or organic, non-genetically modified or other applicable third-party certifications for such products.
The availability of such products at competitive prices depends on many factors beyond our control, including the number and size of farms that grow natural or organic crops or raise livestock that meet our quality, welfare and production standards, animal disease outbreaks (such as avian flu), agricultural workforce availability, tariffs and import regulations or restrictions on foreign-sourced products, stability of the global supply chain and the ability of our vendors to maintain required attributes or organic, non-genetically modified or other applicable third-party certifications for such products.
If we are ineffective in performing these activities, then our efforts to open and operate new stores may be unsuccessful or unprofitable, and we may be unable to execute our growth strategy. In fiscal 2024, we opened 33 new stores. In fiscal 2023, we opened 30 new stores and acquired two stores.
If we are ineffective in performing these activities, then our efforts to open and operate new stores may be unsuccessful or unprofitable, and we may be unable to execute our growth strategy. In fiscal 2025, we opened 37 new stores. In fiscal 2024, we opened 33 new stores.
We currently expect to achieve approximately 10% annual unit growth and to open at least 35 new stores in 2025, including penetration of new markets with a greater concentration of new stores. However, we may not achieve this expected level of new store growth due to inability to find suitable sites, supply chain disruptions or otherwise.
We currently expect to achieve approximately 10% annual unit growth and to open more than 40 new stores in 2026, including penetration of new markets with a greater concentration of new stores. However, we may not achieve this expected level of new store growth due to inability to find suitable sites, supply chain disruptions or otherwise.
Sales of produce accounted for approximately 18% and 19% of our net sales in fiscal 2024 and 2023, respectively. We have generally not experienced significant difficulty to date in maintaining the supply of our produce and fresh, natural and organic products that meet our quality standards.
Sales of produce accounted for approximately 17% and 18% of our net sales in fiscal 2025 and 2024, 15 Table of Contents respectively. We have generally not experienced significant difficulty to date in maintaining the supply of our produce and fresh, natural and organic products that meet our quality standards.
In addition, our Credit Agreement contains covenants that we must satisfy in order to pay cash dividends. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
In addition, our Credit Agreement contains covenants that we must satisfy in order to pay cash dividends. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any 28 Table of Contents return on their investment.
KeHE is our primary supplier of dry grocery and frozen food products, accounting for approximately 50% and 47% of our total purchases in fiscal 2024 and 2023, respectively. Our current primary contractual relationship with KeHE continues through July 18, 2025 and provides that KeHE will be our primary supplier for all of our stores.
KeHE is our primary distributor of dry grocery and frozen food products, accounting for approximately 52% and 50% of our total purchases in fiscal 2025 and 2024, respectively. Our current primary contractual relationship with KeHE continues through July 31, 2035 and provides that KeHE will be our primary distributor for all of our stores.
Our continued success and ability to grow through new store openings is dependent upon our ability to attract, develop and retain qualified team members in our stores and at our store support offices who understand and appreciate our culture and are able to represent our brand effectively and establish credibility with our business partners and customers.
Our continued success and ability to grow through new store openings is dependent upon our ability to attract, develop and retain qualified team members in our stores and at our store support office who understand and appreciate our culture and values and are able to represent our brand effectively and establish credibility with our business partners and customers, particularly as we expand into new markets.
The current geographic concentration of our stores creates an exposure to local or regional downturns or catastrophic occurrences and the impact of climate change. As of December 29, 2024, we operated 149 stores in California, making California our largest market representing 34% of our total stores in fiscal 2024.
The current geographic concentration of our stores creates an exposure to local or regional downturns or catastrophic occurrences and the impact of climate change. As of December 28, 2025, we operated 156 stores in California, making California our largest market representing 33% of our total stores in fiscal 2025.
We face intense competition for qualified team members, many of whom are subject to offers from competing employers. Due to a tight labor market, availability of talent and other factors, we have experienced, and could continue to experience, a shortage of labor for store positions.
We face intense competition for qualified team members. Due to a tight labor market, availability of talent and other factors, we have experienced, and could continue to experience, a shortage of labor for store positions.
We believe our success depends, in substantial part, on our ability to: • anticipate, identify and react to fresh, natural and organic grocery and dietary supplement trends and changing consumer preferences and demographics in a timely manner; • translate market trends into appropriate, innovative product and service offerings in our stores before our competitors and effectively market these trends to our target customers; and • develop and maintain vendor and service provider relationships that provide us access to the newest on-trend merchandise and customer engagement options on reasonable terms.
We believe our success depends, in substantial part, on our ability to: • anticipate, identify and react to fresh, natural and organic grocery and dietary supplement trends and changing consumer preferences and demographics in a timely manner; • translate market trends into appropriate, innovative product and service offerings in our stores before our competitors and effectively market these trends to our target customers; and • develop and maintain vendor and service provider relationships that provide us access to the newest on-trend merchandise and customer engagement options on reasonable terms. 20 Table of Contents Consumer preferences often change rapidly and without warning, moving from one trend to another among many product or retail concepts.
Our business could be impacted as a result of actions by activist stockholders or others. We may be subject, from time to time, to legal and business challenges in the operation of our company due to actions instituted by activist shareholders or others.
As a result, investors seeking cash dividends should not purchase our common stock. Our business could be impacted as a result of actions by activist stockholders or others. We may be subject, from time to time, to legal and business challenges in the operation of our company due to actions instituted by activist shareholders or others.
We believe our continued success depends on our ability to maintain and grow the value of the Sprouts brand. Maintaining, promoting and positioning our brand and reputation will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality customer experience.
Maintaining, promoting and positioning our brand and reputation will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality customer experience.
New store openings may negatively impact our financial results in the short-term due to the effect of store opening costs and lower sales and contribution to overall profitability during the initial period following opening.
Our new store openings may not be as successful or reach the sales and profitability levels of our existing stores. New store openings may negatively impact our financial results in the short-term due to the effect of store opening costs and lower sales and contribution to overall profitability during the initial period following opening.
In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs defending the lawsuit or paying for settlements or damages.
In addition, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. Any current or future stockholder suits against us could cause us to incur substantial costs defending the lawsuit or paying for settlements or damages.
Our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated “critical” violations, closure of the store until a re-inspection demonstrates that we have remediated the problem.
If violations are found, it could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated “critical” violations, closure of the store until a re-inspection demonstrates that we have remediated the problem.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the price or liquidity of our common stock.
These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the price of our common stock.
While the FDCA provides FDA with the authority to remove products from the market that are adulterated or misbranded, state actors, and the Plaintiffs’ Bar have been targeting retailers and manufacturers of dietary supplements for failing to adhere to current good manufacturing practices and for false or misleading product statements.
While the FDCA provides FDA with the authority to remove products from the market that are adulterated or misbranded, state governments and the Plaintiffs’ Bar have been targeting retailers and manufacturers of these products for failing to adhere to current good manufacturing practices and for false or misleading product claims 24 Table of Contents relating to nutritional or therapeutic value or structure or function claims.
Consumer preferences towards vitamins, supplements or fresh, natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, scientific research or findings regarding the benefits or efficacy of such products, national media attention and the cost, attributes or sustainability of these products.
Consumer preferences towards our offering of vitamins, supplements and fresh, natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, consumption patterns (including changes in behavior arising from the increased use of prescription weight-loss therapies such as GLP-1), scientific research or findings regarding the benefits or efficacy of such products, national media attention and the cost, attributes or sustainability of these products.
Both our inability to capture the efficiencies from scale and competition could have a material adverse effect on our business, financial condition, results of operations and cash flows and adversely affect the price of our common stock. If we fail to maintain our reputation and the value of our brand, our sales may decline.
Both our inability to capture the efficiencies from scale and the impact of competition could have a material adverse effect on our 21 Table of Contents business, financial condition, results of operations and cash flows and adversely affect the price of our common stock.
As of December 29, 2024, we had goodwill and intangible assets of approximately $381.8 million and $208.1 million, respectively, which represented approximately 10.5% and 5.7% of our total assets as of such date, respectively.
As of December 28, 2025, we had goodwill and intangible assets of approximately $381.8 million and $208.2 million, respectively, which represented approximately 9.2% and 5.0% of our total assets as of such date, respectively.
Item 1A. Risk Factors Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.
Enforcement actions may also lead to follow-on consumer class action litigation. Dietary Supplement, CBD and Homeopathic Product Risks. Our sales of dietary supplements are regulated by FDA. However, other public and private actors are increasingly targeting dietary supplement retailers and manufacturers for selling products that fail to adhere to requirements under the FDCA, as amended by DSHEA.
Foods, Dietary Supplements, CBD and Homeopathic Product Risks. Our sales of these products are regulated by FDA. However, other public and private actors are increasingly targeting food and dietary supplement retailers and manufacturers for selling products that fail to adhere to requirements under the FDCA.
In addition, we source a large portion of our produce from California, ranging from approximately 40% to approximately 70% depending on the time of year. As a result, our business is currently more susceptible to regional conditions than the operations of more geographically diversified competitors, and we are vulnerable to economic downturns and natural disasters in those regions.
As a result, our business is currently more susceptible to regional conditions than the operations of more geographically diversified competitors, and we are vulnerable to economic downturns and natural disasters in those regions.
These factors may cause our comparable store sales results to be materially lower than in recent periods, which could harm our business and result in a decline in the price of our common stock. We may be unable to maintain or improve our operating margins, which could adversely affect our financial condition and ability to grow.
These factors have caused and may continue to cause our comparable store sales results to be materially lower than in recent periods, which could harm our business and result in a decline in the price of our common stock.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock. 28 Table of Contents If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Any of the following risks could materially and adversely affect our business, results of operations, cash flows, financial condition, or prospects and cause the value of our common stock to decline. Market and Other External Risks General economic conditions that impact consumer spending or result in competitive responses could adversely affect our business.
Any of the following risks could materially and adversely affect our business, results of operations, cash flows, financial condition, or prospects and cause the value of our common stock to decline.
The availability of many products we sell, including produce, or products with ingredients such as wheat, corn, oils, milk, sugar, cocoa, nuts and other key commodities, may be impacted by weather events and catastrophic occurrences. These products and commodities are also subject to significant price fluctuations and may be impacted by economic factors such as tariffs and inflation.
The availability of many products we sell, including produce and proteins, or products with ingredients such as wheat, corn, oils, milk, sugar, cocoa, nuts and other key commodities, may be impacted by weather events, animal disease outbreaks (such as avian flu) and other catastrophic occurrences.
Inflation, recessionary economic cycles, increases in interest rates, higher prices for commodities, raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other macroeconomic factors that affect consumer spending and confidence or buying habits may materially adversely affect the demand for and prices of products we sell in our stores.
Our operating results have been, and will continue to be, impacted by a number of macroeconomic factors, including inflation, recessionary economic cycles, increases in interest rates, higher prices for commodities, raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other factors that affect consumer spending and confidence or buying habits.
Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to deliver our produce and other products in a timely manner. We self-distribute our produce through six distribution centers located in Arizona, Texas, northern California, southern California, Colorado and Florida.
Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to deliver our produce, meat and seafood, and other products in a timely manner.
If we are unable to successfully manage the potential difficulties associated with store growth, we may not be able to capture the efficiencies of scale that we expect from expansion.
We may be unable to maintain or improve our operating margins, which could adversely affect our financial condition and ability to grow. If we are unable to successfully manage the potential difficulties associated with store growth, we may not be able to capture the efficiencies of scale that we expect from expansion.
We expect to extend our current contractual relationship with UNFI through December 31, 2025. There is no assurance UNFI or other distributors will be able to fulfill our needs on favorable terms or at all.
There is no assurance KeHE, UNFI or other distributors will be able to fulfill our needs on favorable terms or at all.
As we continue to grow and enter different regions, unions may attempt to organize all or part of our team member base at certain stores or within certain regions. Responding to such organization attempts may distract management and team members and may have a negative financial impact on individual stores, or on our business as a whole.
As we continue to grow and enter different regions, unions may attempt to organize all or part of our team member base at certain stores or within certain regions.
If we are unable to anticipate and satisfy consumer preferences with respect to product offerings and customer engagement options, our sales may decrease, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. 20 Table of Contents Our newly opened stores may negatively impact our financial results in the short-term, and may not achieve sales and operating levels consistent with our more mature stores on a timely basis or at all.
If we are unable to anticipate and satisfy consumer preferences with respect to product offerings and customer engagement options, our sales may decrease, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we fail to successfully implement our growth strategy, including by opening new stores, our financial condition, results of operations and cash flows may be adversely affected.
If we experience a decline in performance, we may slow or discontinue store openings, or we may decide to close stores that we are unable to operate in a profitable manner. If we fail to successfully implement our growth strategy, including by opening new stores, our financial condition, results of operations and cash flows may be adversely affected.
Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. While we maintain insurance against many types of claims, insurance coverage may not be adequate, and the cost to defend against future litigation may be significant.
The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.
We have actively pursued new store growth as part of our long-term strategy and plan to continue doing so in the future. Our new store openings may not be as successful or reach the sales and profitability levels of our existing stores.
Our newly opened stores may negatively impact our financial results in the short-term, and may not achieve sales and operating levels consistent with our more mature stores on a timely basis or at all. We have actively pursued new store growth as part of our long-term strategy and plan to continue doing so in the future.
We also have entered into a partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores. As we further expand our geographic footprint or self-distribute additional product categories, we may require additional distribution centers or expansion of our existing distribution centers.
As we further expand our geographic footprint or self-distribute additional product categories, we may require additional distribution centers or expansion of our existing distribution centers.
Although certain of these tariffs were subsequently paused, any increase in prices of such products or key ingredients as a result of tariffs or otherwise may cause our vendors to seek price increases from us. Price decreases may result in our competitors reducing retail prices on products or items containing such ingredients.
These products and commodities are also subject to significant price fluctuations and may be impacted by economic factors such as tariffs and inflation. Any increase in prices of such products or key ingredients as a result of tariffs, inflation or 16 Table of Contents otherwise may cause our vendors to seek price increases from us.
The trading price of our common stock may be volatile and subject to wide price fluctuations in response to various factors, many of which are beyond our control. Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.
Significant expenditures could be required to remedy future cybersecurity problems and protect against future breaches.
Significant expenditures could be required to remedy future cybersecurity problems and protect against future breaches, and such threats may continue to increase and evolve with the rapid evolution of artificial intelligence and machine learning technologies.
In addition, our team members may, from time to time, bring lawsuits against us 23 Table of Contents regarding injury, hostile work environment, discrimination, wage and hour disputes, sexual harassment, or other employment issues. In recent years, there has been an increase in the number of discrimination and harassment claims across the United States generally.
In addition, our team members may, from time to time, bring lawsuits against us regarding injury, hostile work environment, discrimination, wage and hour disputes, sexual harassment, or other employment issues. Additionally, we could be exposed to industry-wide or class-action claims or governmental enforcement actions arising from products we carry or industry-specific business or employment practices.
We also have store concentration in Texas, Arizona, Florida and Colorado, operating 54, 47, 47 and 33 stores in those states, respectively, and representing 12%, 11%, 11% and 8% of our total stores in fiscal 2024, respectively. As we execute our long-term growth strategy, we may become even more concentrated in these markets, as well as other identified expansion markets.
We also have store concentration in Texas, Florida, Arizona, and Colorado, operating 60, 58, 48 and 34 stores in those states, respectively, and representing 13%, 12%, 10% and 7% of our total stores in fiscal 2025, respectively.
Such a lawsuit could also divert the time and attention of our management. Anti-takeover provisions could impair a takeover attempt and adversely affect existing stockholders.
Such a lawsuit could also divert the time and attention of our management. See Note 17, “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. Anti-takeover provisions could impair a takeover attempt and adversely affect existing stockholders.
Financial Reporting, Legal and Other Regulatory Risks Legal proceedings could materially impact our business, financial condition, results of operations and cash flows.
Financial Reporting, Legal and Other Regulatory Risks Legal proceedings could materially impact our business, financial condition, results of operations and cash flows. We have been and will continue to be subject to litigation and other legal proceedings that may adversely affect our business, including claims brought by team members, customers, government agencies, suppliers, distributors, stockholders, job applicants or others.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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.
Biggest changeSee “Business – Sourcing and Distribution” for additional information with respect to our distribution centers. 30 Table of Contents 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.
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 fiscal 2023 as part of our real estate portfolio review, we closed 11 stores. These stores, on average, were approximately 30% larger than our current prototype format and were underperforming financially. See Note 23, “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.
As 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.
As of December 28, 2025, we had 477 stores located in 24 states, as shown in the chart below: State Number of Stores State Number of Stores Alabama 3 New Jersey 5 Arizona 48 New Mexico 10 California 156 North Carolina 7 Colorado 34 Oklahoma 11 Delaware 2 Pennsylvania 7 Florida 58 South Carolina 2 Georgia 17 Tennessee 10 Kansas 4 Texas 60 Louisiana 1 Utah 7 Maryland 8 Virginia 3 Missouri 3 Washington 3 Nevada 17 Wyoming 1 In fiscal 2025, we opened 37 new stores.
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.
In fiscal 2024, we opened 33 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.
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.
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 December 28, 2025, we utilized six distribution centers.
We expect to expand our distribution center network to support our growth. See “Business – Sourcing and Distribution” for additional information with respect to our distribution centers.
We expect to expand our distribution center network to support our growth.
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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 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
Biggest changeSee Note 17, “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 changePeriod (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.
Biggest changePeriod (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 29, 2025 - October 26, 2025 91,484 $ 109.33 91,484 $ 956,004,000 October 27, 2025 - November 23, 2025 871,457 $ 80.32 871,457 $ 886,005,000 November 24, 2025 - December 28, 2025 593,094 $ 84.30 593,094 $ 836,005,000 Total 1,556,035 1,556,035 (1) Periodic information is presented by reference to our fiscal periods during the fourth quarter of fiscal year 2025.
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.
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 28, 2025.
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.
The shares may be purchased on a discretionary basis from time to time, 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 January 3, 2021 and December 28, 2025, with the cumulative total return of (i) the Nasdaq Composite Index and (ii) the S&P Food Retail Index, over the same period.
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.
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 17, 2026 was 24.
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.
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 1/3/21 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis. Copyright© 2026 Standard & Poor's, a division of S&P Global. All rights reserved.
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.
The graph assumes the initial value of our common stock on December 31, 2020 (the last trading day prior to the beginning of fiscal 2021) was the closing sale price on that day of $20.10 per share. The performance shown on the graph below is based on historical results and is not intended to suggest future performance.
(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.
(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 August 13, 2025, our board of directors authorized a new $1 billion share repurchase program of our common stock.
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The new repurchase authorization does not have an expiration date.

Item 7. Management's Discussion & Analysis

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

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Biggest changeDiluted 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.
Biggest changeNet income Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Net income $ 523,670 $ 380,601 $ 143,069 38 % Percentage of net sales 5.9 % 4.9 % 1.0 % Net income increased $143.1 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. 41 Table of Contents Diluted earnings per share Fiscal 2025 Fiscal 2024 Change % Change (shares in thousands) Diluted earnings per share $ 5.31 $ 3.75 $ 1.56 42 % Diluted weighted average shares outstanding 98,704 101,379 (2,675) The increase in diluted earnings per share of $1.56 was driven by higher net income as well as fewer diluted shares outstanding compared to the prior year due to our repurchase of approximately 4.0 million shares for a total cost of $476.2 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.
Our indefinite-lived intangible assets consist of trade names related to “Sprouts Farmers Market,” liquor licenses and reacquired rights recognized in connection with the acquisition of Ronald Cohn, Inc. in fiscal 2023. See Note 27, “Business Combination” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information regarding this acquisition.
Our indefinite-lived intangible assets consist of trade names related to “Sprouts Farmers Market,” liquor licenses and reacquired rights recognized in connection with the acquisition of Ronald Cohn, Inc. in fiscal 2023. See Note 24, “Business Combination” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information regarding this acquisition.
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.
One-time disaster recovery costs are also included here. 38 Table of Contents Results of Operations for Fiscal 2025, 2024 and 2023 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.
Store closure and other costs, net in 2024 was primarily related to ongoing occupancy costs incurred in connection with our closed store locations.
Store closure and other costs, net in 2025 and 2024 was primarily related to ongoing occupancy costs incurred in connection with our closed store locations.
No impairment of goodwill or indefinite-lived intangible assets was recorded during fiscal 2024, 2023 and 2022 because our qualitative assessments indicated that it was more likely than not that the estimated fair values of the reporting unit and the indefinite-lived intangible assets exceeded their carrying value.
No impairment of goodwill or indefinite-lived intangible assets was recorded during fiscal 2025, 2024 and 2023 because our qualitative assessments indicated that it was more likely than not that the estimated fair values of the reporting unit and the indefinite-lived intangible assets exceeded their carrying value.
(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.
(3) Net of tax amounts are calculated using the normalized effective tax rate for the periods presented. 43 Table of Contents (4) 2025, 2024 and 2023 estimated interest on operating leases is calculated by multiplying operating leases by the 7.0%, 7.0% and 7.2% discount rate, respectively, for each lease recorded as rent expense within direct store expense.
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.
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 Former Credit Facility, $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.
(5) 2024, 2023 and 2022 average operating leases represents the average net present value of outstanding lease obligations over the trailing four quarters.
(5) 2025, 2024 and 2023 average operating leases represents the average net present value of outstanding lease obligations over the trailing four quarters.
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.
Cash flows used in investing activities were $248.3 million and $230.4 million for 2025 and 2024, respectively. The increase 44 Table of Contents in purchases of property and equipment was primarily due to more stores under construction in 2025 as compared to 2024 and heavier investment in upgraded equipment to support our initiatives.
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.
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 2025, we have opened 112 new stores and remodeled one store featuring our updated format.
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 .
Headquartered in Phoenix with 477 stores in 24 states as of December 28, 2025, 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 .
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.
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 29, 2024 filed with the SEC on February 20, 2025, which provides comparisons of fiscal 2024 and fiscal 2023. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.
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.
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.
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.
Share repurchase activity under our repurchase programs for the periods indicated was as follows (total cost in thousands): Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Number of common shares acquired 3,955,324 2,656,058 5,864,246 Average price per common share acquired $ 120.39 $ 90.57 $ 35.00 Total cost of common shares acquired $ 476,198 $ 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.
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.
Fiscal 2025, fiscal 2024 and fiscal 2023 were 52-week years ending on December 28, 2025, December 29, 2024 and December 31, 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.
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.
See Note 7, "Leases," Note 12, “Long-Term Debt and Other Finance Obligations,” Note 14, "Self-Insurance Programs" and Note 17, "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.
We recorded an impairment loss of $0.4 million, $30.5 million and $8.1 million in fiscal 2024, 2023 and 2022, respectively. See Note 3, “Significant Accounting Policies,” Note 6, “Property and Equipment" and Note 50 Table of Contents 26, "Store Closures" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
No impairment was recorded during fiscal 2025. We recorded an impairment loss of $0.4 million and $30.5 million in fiscal 2024 and 2023, respectively. See Note 3, “Significant Accounting Policies,” Note 6, 50 Table of Contents “Property and Equipment" and Note 23, "Store Closures" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
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.
We expect capital expenditures to be in the range of $280 million to $310 million in 2026, 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.
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 Credit Agreement is defined and more fully described in Note 12, “Long-Term Debt and Other Finance Obligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
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.
The following table outlines the share repurchase programs authorized by our board, and the related repurchase activity and available authorization as of December 28, 2025: 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 $ 457,408 $ — August 13, 2025 N/A $ 1,000,000 $ 163,995 $ 836,005 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.
Each of fiscal 2024, 2023 and 2022 consisted of 52 weeks.
Each of fiscal 2025, 2024 and 2023 consisted of 52 weeks.
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.
Each of these covenants is tested on the last day of each fiscal quarter, starting with the fiscal quarter ended March 30, 2025. We were in compliance with all applicable covenants under the Credit Agreement as of December 28, 2025.
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.
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 28, 2025, the consolidated self-insurance reserve balance was $57.0 million, of which a majority of the balance related to workers' compensation and general liability reserves.
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.
See Note 12, “Long-Term Debt and Other Finance Obligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
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.
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 2025 Fiscal 2024 Fiscal 2023 Cash, cash equivalents and restricted cash at end of period $ 260,894 $ 267,213 $ 203,870 Cash from operating activities $ 715,998 $ 645,214 $ 465,068 Cash used in investing activities $ (248,267) $ (230,375) $ (238,342) Cash used in financing activities $ (474,050) $ (351,496) $ (318,048) We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities.
(2) Total square feet at the end of the period includes the square footage for all stores that were open as of the end of the fiscal year presented and excludes any vacant or subleased space. 39 Table of Contents Comparison of Fiscal 2024 to 2023 Net sales Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Net sales $ 7,719,290 $ 6,837,384 $ 881,906 13 % Comparable store sales growth 7.6 % 3.4 % Net sales during 2024 totaled $7.7 billion, increasing 13%, over the prior fiscal year.
(2) Total square feet at the end of the period includes the square footage for all stores that were open as of the end of the fiscal year presented and excludes any vacant or subleased space. 39 Table of Contents Comparison of Fiscal 2025 to 2024 Net sales Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Net sales $ 8,806,159 $ 7,719,290 $ 1,086,869 14 % Comparable store sales growth 7.3 % 7.6 % Net sales during 2025 totaled $8.8 billion, increasing 14%, over the prior fiscal year.
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.
We do not have any material contractual commitments for future capital expenditures as of December 28, 2025. Financing Activities Cash flows used in financing activities were $474.1 million for 2025 compared to $351.5 million for 2024.
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.
We believe that all inventories are sellable and no allowances or reserves for obsolescence were recorded as of December 28, 2025 and December 29, 2024.
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.
The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022. Subsequent to December 28, 2025 and through February 17, 2026, the Company repurchased an additional 1.3 million shares of common stock for $100.0 million, excluding excise tax.
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.
Our purchase commitments under noncancelable service and supply contracts that are enforceable and legally binding totaled $41.0 million as of December 28, 2025, including $21.1 million in 2026 and $19.9 million thereafter through 2029. Obligations under contracts that we can cancel without a significant penalty are not included in purchase commitments.
Cash flows provided by operating activities from changes in working capital were $112.3 million in 2024, compared to $31.4 million in 2023.
Cash flows provided by operating activities from changes in working capital were $14.6 million in 2025, compared to $112.3 million in 2024.
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.
Interest and fee payments through the July 25, 2030 maturity date of our Credit Agreement based on the outstanding amounts as of December 28, 2025 and interest rates in effect at the time of this filing, are estimated to be approximately $3.6 million. These payments are estimated to be approximately $0.8 million in 2026 and approximately $2.8 million thereafter.
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.
As of December 28, 2025, our consolidated goodwill balance was $381.8 million, and our consolidated indefinite-lived intangible assets balance was $208.2 million.
We do not include sales taxes in net sales. We monitor our comparable store sales growth to evaluate and identify trends in our sales performance.
We monitor our comparable store sales growth to evaluate and identify trends in our sales performance.
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.
The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $171.4 million and a $2.3 million reduction in payments on our operating lease liabilities partially offset by changes in working capital of $97.7 million.
Factors Affecting Liquidity We can currently borrow under our Credit Agreement, up to an initial aggregate commitment of $700.0 million, which may be increased from time to time pursuant to an expansion feature set forth in the Credit Agreement. We have previously utilized borrowings under our Credit Agreement to fund our share repurchase program as described above.
Factors Affecting Liquidity We can currently borrow under our Credit Agreement up to an initial aggregate commitment of $600.0 million, which may be increased from time to time pursuant to an expansion feature set forth in the Credit Agreement.
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.
Real estate obligations, consisting of legally binding minimum lease payments for leases executed but not yet commenced, were $1,175.9 million as of December 28, 2025, including $14.2 million in 2026 and $1,161.7 million thereafter through 2048.
Fiscal 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.
Fiscal 2025 Fiscal 2024 Fiscal 2023 (in thousands, except per share data) Consolidated Statement of Income Data: Net sales $ 8,806,159 $ 7,719,290 $ 6,837,384 Cost of sales 5,389,770 4,777,799 4,315,543 Gross profit 3,416,389 2,941,491 2,521,841 Selling, general and administrative expenses 2,574,687 2,291,350 2,000,437 Depreciation and amortization (exclusive of depreciation included in cost of sales) 149,969 132,748 131,893 Store closure and other costs, net 5,575 12,896 39,280 Income from operations 686,158 504,497 350,231 Interest (income) expense, net (2,626) (2,201) 6,491 Income before income taxes 688,784 506,698 343,740 Income tax provision 165,114 126,097 84,884 Net income $ 523,670 $ 380,601 $ 258,856 Weighted average shares outstanding - basic 97,687 100,363 102,479 Dilutive effect of equity-based awards 1,017 1,016 911 Weighted average shares and equivalent shares outstanding - diluted 98,704 101,379 103,390 Diluted net income per share $ 5.31 $ 3.75 $ 2.50 Fiscal 2025 Fiscal 2024 Fiscal 2023 Other Operating Data: Comparable store sales growth 7.3 % 7.6 % 3.4 % Stores at beginning of period 440 407 386 Opened (1) 37 33 30 Closed — — (11) Acquired — — 2 Stores at end of period 477 440 407 Total square feet at the end of the period (2) 12,992,097 12,123,032 11,322,798 Average square feet per store at the end of the period 27,237 27,552 27,820 (1) Stores opened is exclusive of two store relocations during fiscal 2024.
(2) Special items related to store closure, supply chain transition costs related to our new and recently expanded distribution centers and acquisition related charges net of tax.
(2) Special items related to store closure, supply chain transition and acquisition related charges net of tax.
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.
We are increasing our use of data analytics and insights, including through the nationwide launch of our Sprouts Rewards loyalty program in 2025. 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.
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.
Our calculation of ROIC for the fiscal years indicated was as follows: 2025 2024 2023 (dollars in thousands) Net income (1) $ 523,670 $ 380,601 $ 258,856 Special items, net of tax (2), (3) — — 34,272 Interest (income) expense, net of tax (3) (1,997) (1,654) 4,882 Net operating profit after-tax (NOPAT) $ 521,673 $ 378,947 $ 298,010 Total rent expense, net of tax (3) 208,442 189,896 175,592 Estimated depreciation on operating leases, net of tax (3) (114,851) (105,570) (98,535) Estimated interest on operating leases, net of tax (3), (4) 93,591 84,326 77,057 NOPAT, including effect of operating leases $ 615,264 $ 463,273 $ 375,067 Average working capital 148,262 184,691 227,375 Average property and equipment 958,386 838,166 749,611 Average other assets 607,176 602,959 595,776 Average other liabilities (114,074) (102,539) (97,870) Average invested capital $ 1,599,750 $ 1,523,277 $ 1,474,892 Average operating leases (5) 1,758,577 1,603,777 1,423,077 Average invested capital, including operating leases $ 3,358,327 $ 3,127,054 $ 2,897,969 ROIC, including operating leases 18.3 % 14.8 % 12.9 % ___________________________________________ (1) Net income amounts represent total net income for the past four trailing quarters.
This $80.9 million increase in cash flow from changes in working capital was primarily attributable to the following factors, each of which had a positive impact on working capital: (i) a $26.8 million change in accounts receivable driven by the timing of collections as well as a $43.3 million change in accounts payable and accrued liabilities, primarily due to timing differences of payments for goods and services (ii) a $9.7 million change in prepaid expenses and other current assets primarily due to timing differences of tax payments; and (iii) a $10.4 million change in accrued salaries and benefits due to increased incentive compensation accruals in the current year.
This $97.7 million decrease in cash flow from changes in working capital was primarily attributable to the following factors, each of which had a negative impact on working capital: (i) a $63.6 million change in inventories primarily due to improving on-shelf availability in certain departments; (ii) a $30.9 million change in accounts payable and accrued liabilities, primarily due to timing differences of payments for goods and services; (iii) a $25.2 million change in accrued salaries and benefits due to decreased incentive compensation accruals in the current year and (iv) a $2.8 million change in accounts receivable driven by the timing of collections.
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.
Depreciation and amortization Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Depreciation and amortization $ 149,969 $ 132,748 $ 17,221 13 % Percentage of net sales 1.7 % 1.7 % — Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $150.0 million in 2025, compared to $132.7 million in 2024.
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.
Long-term Debt and Credit Facilities The Company had no long-term debt outstanding as of December 28, 2025 and December 29, 2024. See Note 12, “Long-Term Debt and Other Finance Obligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for a description of our Credit Agreement.
Operating Activities Cash flows from operating activities increased $180.1 million to $645.2 million in 2024 compared to $465.1 million in 2023.
Operating Activities Cash flows from operating activities increased $70.8 million to $716.0 million in 2025 compared to $645.2 million in 2024.
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.
Since the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline. 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.
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 are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets.
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.
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 and our loyalty program. We do not include sales taxes in net sales.
Inflation and deflation in the prices of food and other products we sell may periodically affect our gross profit and gross margin.
Inflation and deflation in the prices of food and other products we sell may periodically affect our gross profit and gross margin. Tariffs may result in cost increases on products such as produce that we import from impacted countries, as well as products containing ingredients imported from these countries.
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.
Selling, general and administrative expenses Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Selling, general and administrative expenses $ 2,574,687 $ 2,291,350 $ 283,337 12 % Percentage of net sales 29.2 % 29.7 % (0.5) % Selling, general and administrative expenses increased $283.3 million, or 12%, compared to 2024.
During 2023, cash flows used in financing activities primarily consisted of approximately $203.5 million for share repurchases and $125.0 million in payments on our Credit Agreement, partially offset by $11.5 million in proceeds from the exercise of stock options. Long-term Debt and Credit Facilities The Company had no long-term debt outstanding as of December 29, 2024.
During 2025, cash flows used in financing activities primarily consisted of approximately $471.9 million for share repurchases and $2.1 million for payments of excise tax on share repurchases partially offset by $2.6 million in proceeds from the exercise of stock options.
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.
Cost of sales and gross profit Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Net sales $ 8,806,159 $ 7,719,290 $ 1,086,869 14 % Cost of sales 5,389,770 4,777,799 611,971 13 % Gross profit 3,416,389 2,941,491 474,898 16 % Gross margin 38.8 % 38.1 % 0.7 % Gross profit increased during 2025 compared to 2024 by $474.9 million to $3.4 billion driven by increased sales volume.
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.
Interest (income) expense, net Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Long-term debt interest expense $ 826 $ 4,259 $ (3,433) (81) % Finance lease interest expense 943 747 196 26 % Deferred financing costs 890 772 118 15 % Interest income and other (5,285) (7,979) 2,694 34 % Total interest income, net $ (2,626) $ (2,201) $ (425) (19) % The increase in interest income, net was primarily due to lower average debt outstanding.
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.
As a result, 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 28, 2025. • Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation.
Store closure and other costs, net Fiscal 2024 Fiscal 2023 Change % Change (dollars in thousands) Store closure and other costs, net $ 12,896 $ 39,280 $ (26,384) (67) % Percentage of net sales 0.2 % 0.6 % (0.4) % Store closure and other costs, net decreased by $26.4 million to $12.9 million in 2024 compared to $39.3 million in 2023.
Depreciation and amortization expense (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. 40 Table of Contents Store closure and other costs, net Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Store closure and other costs, net $ 5,575 $ 12,896 $ (7,321) (57) % Percentage of net sales 0.1 % 0.2 % (0.1) % Store closure and other costs, net decreased by $7.3 million to $5.6 million in 2025 compared to $12.9 million in 2024.
Gross margin increased by 1.2% to 38.1% compared to 36.9%. The increase was a result of favorable shrink, continued promotional optimization, and positive results from our selling, general and administrative expense investments we have made over the past few years.
Gross margin increased by 0.7% to 38.8% compared to 38.1%. The increase was a result of improved shrink and our investments in inventory management.
As a step to improve our fresh supply chain, we are currently in the process of transitioning from our primary meat and seafood distributor that accounted for approximately 14% of our total purchases in each of fiscal 2024 and 2023.
As a step to improve our fresh supply chain, in 2025 we began the transition to a self-distribution model for meat and seafood through our fresh distribution centers.
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.
The sales increase was primarily due to new stores opened since the prior year and a 7.3% increase in comparable store sales. Comparable store sales contributed approximately 93% of total sales in 2025 and 94% of total sales in 2024.
Removed
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.
Added
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. During 2025, we implemented a customer loyalty program. As a customer earns points, we allocate a portion of the transaction price to a deferred loyalty liability.
Removed
We expect to initially transition to an intermediary third-party distributor and ultimately to a self-distribution model under which we will deal directly with our suppliers. As with complex transitions of this magnitude, there are associated short-term risks, including in particular, potential product supply disruptions resulting in lost sales at our stores and transition-related expenses that exceed our expectations.
Added
The increase was primarily driven by the increase in new stores opened since the prior year. As a percentage of net sales, selling, general, and administrative expenses improved as a result of sales leverage from strong performance early in the year as well as lower incentive compensation.
Removed
Tariffs, such as those recently proposed by the U.S. government on goods imported from Mexico, Canada, China and certain other countries, may result in cost increases on products such as produce that we import from impacted countries, as well as products containing ingredients imported from these countries.
Added
Income tax provision Fiscal 2025 Fiscal 2024 Change % Change (dollars in thousands) Income tax provision $ 165,114 $ 126,097 $ 39,017 31 % Effective income tax rate 24.0 % 24.9 % (0.9) % Income tax provision increased by $39.0 million to $165.1 million for 2025 from $126.1 million for 2024, and the effective income tax rate decreased to 24.0% in 2025 from 24.9% in 2024.
Removed
See "Impact of Inflation and Deflation." Comparable store sales contributed approximately 94% of total sales in 2024 and 95% of total sales in 2023.
Added
The decrease in the effective tax rate was primarily due to an increase in the benefit for stock-based compensation and benefit for purchase discount for transferable tax credits in the current year, partially offset by an increase in the rate detriment in the current year for nondeductible executive compensation.
Removed
In addition, we experienced the effects of higher credit card and ecommerce fees resulting from an increase in sales compared to the prior year.
Added
These decreases were partially offset by a $24.8 million change in prepaid expenses and other current assets primarily due our timing of tax payments and purchased federal tax credits.
Removed
Depreciation and amortization expense (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 in 2023 was inclusive of $5.9 million in accelerated depreciation in connection with the closing of certain underperforming stores during 2023.
Removed
See Note 26, “Store Closures” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
Removed
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.
Removed
See Note 26, "Store Closures" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
Removed
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.
Removed
These increases were partially offset by a a $9.3 million change in inventories primarily due to inflationary cost increases in the prior year.
Removed
Cash flows used in investing activities in 2023 also included our acquisition of Ronald Cohn, Inc. See Note 27, "Business Combination" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

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 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.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity As described in Note 12, “Long-Term Debt and Other Finance Obligations” 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.
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
Accordingly, we could be exposed to fluctuations in interest rates. As of December 28, 2025, we had no outstanding borrowings under our Credit Agreement. 51 Table of Contents

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