SFM - Earnings call transcript Q4 2021 | Sprouts Farmers Market, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Sprouts Farmers Market Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Susannah Livingston, Vice President, Investor Relations and Treasury. Please go ahead.

Susannah Livingston

afternoon, good and you everyone. Thank

Executive webcast earnings be the you accessed We our with join earnings me Investor section the this The through XXXX our release website quarter Molloy, Chief to quarterly of taken announcing our on are call. Financial and our are today. Sinclair, call XXXX pleased at year Sprouts and year fourth full time full Chip have quarter Officer, and Officer; fourth results, Jack of Chief can investors.sprouts.com. slides Relations and

from including management regarding beyond. statements. forward-looking During make number uncertainties to this call, those may involve materially cause statements expectations certain of and described forward-looking XXXX in could statements, factors and results that statements the for risk a our actual These differ

please refer forward-looking commentary the the earnings release to along discussed issued end our risk on filings SEC in of more today. For information, our with statements the at factors

today include remarks Our references non-GAAP measures. to

to please our of reconciliation our tables GAAP release. see the non-GAAP a earnings in the For measures figures,

our because COVID-XX will addition, presentation this comparisons results include the were impacted certain pandemic, results also in for to XXXX. by XXXX In

Additional our hand under simple two me periods. of to investors.sprouts.com Jack. be if to reminder, XXXX, shifted More thereby the that, addition year be purposes. comparison week XXrd account week this, we XXXX two the week, week in will ignoring can found comp over align back fiscal the one at of not first for holidays for each stack the fiscal needed. it information let a better As Reports to With Because of

Jack Sinclair

comp good anticipated encouraged turned for the quarter that positive. accomplishments was sales earnings. for and year were fact quarterly afternoon, better a XXXX transactions we're We're everyone. Thank report for we meaningful pleased fourth the our And Sprouts our of both the and that than team. by results you, to Susannah

challenging a the environment. While retail successfully we same navigated time, very at

launched encouraged initial stores, openings, significant new towards new were XX We two we their with centers, a store from where of year, remodeled During in to are store the MSCI, the one I'm filling and which excited XXXX rating of ESG which four smaller made one it results. future products report name over and opened distribution X,XXX platform our in we're issued AAA and beyond. in a fulsome take relocated just opened pipeline resulted we a few. and our new and about can progress building format

March areas merchandising our in in Nick's operations. wealth customers markets retail to deep, meaningful thrilled looking us brings marketing, knowledge about I'm customer and deep markets from as more extending a experience of to Nick that creating and end, forward established store Konat forward, Nick will President over of team messaging reach companies our to in our new that grow. COO. Target To and base to join the Going densifying such these as announce new leadership Petco. profitably I'm continue in and with proposition, industry-leading our to help will areas

move year living XXth for to less forward us bolstering options providing mission the specialty as our people. enter our a allows healthy team our of we As to grocer, more fulfill our of and strategy

the will well strategic quarter's XXXX year as details Chip, more review relating quarter outlook. to turn our and providing full it like provide Before who financial as the and our activities to performance, I'd Chip? over for to results

Chip Molloy

everyone. good Thanks, Jack and afternoon,

and a I XX-week quarter-over-quarter reiterate year Before XX fact year-over-year year be I'd XX to the respectively. XX fiscal to XXXX like to get XX comparisons was will started, and and that weeks,

$X.XX positive share. Fourth million in X.X%, sales two billion, $XX $X.XX tax up $XX a before earnings $XXX in million sales in interest down week sales, extra and million in the million and store the resulting Comparable comp. were same purposes, reference XXXX. period X.X% included in For $XX per XXXX were year earnings in SG&A, quarter from in total

first same cost rate. what period offset a be by moved points As months increases. were same the and for run with higher margin million the Encouraging prices. the $XXX stable in relative SG&A of per positive Average larger pressures pace were the increases Fourth were by to a as E-commerce quarter lower COVID the cycle during compensation transactions SG&A XXXX Jack period higher first compared million to even prices narrowing XXXX. of of positive. were retail XX-week increases that on were The of of units mentioned, sales, continue $XXX quarter million fact they gross to comp lag passed price totaled and per the we dollars been into while for comp transactions quarter to approximately occurred due settling the year. gap was slight new $XX to incentive by that relatively year. the totaled response when were has our basket gross XX.X%. It the total first during we've quarter baskets stores, basis up pandemic. higher primarily the quarter since costs. was is predominantly were units the last That XX margin as for still our with consumer, inflationary quarter the slightly or cost down sales this XX.X% driven predominantly to the margin decline rate driven than in basket was XXX to appears

rate our $X For per the quarter, expense were interest share effective were $XX million earnings and diluted taxes and Fourth $X.XX. our earnings before was quarter tax XX%. was Interest million.

expenditures new shares. eight landlord million $XX net of repurchased stores, and opened two we quarter, reimbursements million the in spent During capital

billion. which comparable was in For fiscal sales COVID year XXXX, from X% the growth in decrease the pandemic XXXX. to from $X.X total declined store sales primarily cycling The demand X.X%

of XX deleverage during basis were points was warehouse approximately down result Our and for half down points. gross points basis margin distribution first XX.X%, XX the basis the Merch the year. and XX remaining the year was a of approximately margins

margin XX-week basis to than points the XXX million beginning and the decreased slightly compared up XXXX. expenses or we better significantly from for Increases by a of approximately with to and more were gross Our SG&A projected associated year lower expenses SG&A XX.X% when than compensation. in $XX on new offset sales. opening COVID basis of $X.XX was year billion at the incentive stores response lower costs

and were the earnings million. year, our interest For taxes before $XXX

interest Our million. $XX was expense

was XX% our Our earnings per $X.XX. share effective diluted rate tax were and

cash year, of $XXX in of our net capital XX During from million. with $XX XXX opened million and stores, landlord flow ending invested operations the across expenditures funded by we strong states new XX stores reimbursements,

our repurchased of For $XXX repurchase common we $XXX million of ending with million a X.X the for the shares authorization. stock remaining share year, under total $XXX million, million current investment year

$XX balance on Turning $XXX highlights. and our equivalents, revolver of ended letters million and zero. cash of the to ratio of the We year nearly sheet and debt-to-EBITDA credit a outstanding $XXX outstanding cash with in million million net

As the dynamics term. cash ongoing laid expenses pressures consistent will we as optimistic. our free and and in We're and and near by quarter profits we on move COVID as the strategic for our initiatives cautiously results growth fourth more encouraged product both success our have revenue, foundation lingering some be well inflationary cost, believe important to Navigating XXXX, flow. are in into many of

stores and supply with X%. between ongoing growth permitting are we December per strategic the growth equipment. of due the 'XX in expect and to total materials and sourcing XX chain XXXX. previous growth our to scheduled to now to X% new to X% sales communication XX year open comparable now XX% of less shifting of expect goal X% were quarter XXXX, of We to with new XX than associated store challenges first and of in our XX For stores, Several to our sales open and

And a leases estate to real to XX we can diligently, we more closer building work the of continues pipeline signed approved believe XX% XXXX, in be XX Our pipeline. our Today, quality we than have more sites and locations. by team than goal. new

and our X% to compared relatively For the to SG&A to year, approximately rate grow X%. we're expecting flat when to margin be XXXX gross

expect We of no and to adjusted $XXX share million to an $X.XX to between said, share should taxes rate repurchase do additional expense our which and opportunistically. distribution larger continue shares of expect That Capital tax landlord $XX between the interest $XXX $XXX total effective reimbursements, million, we potential centers a to million million interest facility. assuming and repurchases. adjusted includes earnings one per expenditures, be XX% of and before of net $X.XX to earnings of $XXX million, of relocation

cost is include COVID million. leave September with costs the temporary $X XXXX passage and time leave through million bill guidance recent the does for sick Our estimated of for California's The X. incremental year issues their that provides paid not supplemental off $X between associated

growth expect $X.XX. and and diluted over of first X% to sales $X.XX With turn I'll the comparable between Jack. it For that, we quarter, per X% adjusted to share store earnings

Jack Sinclair

Thanks, strategic speak would about our current business like ongoing Chip. initiatives. and more I to

I for all Sprouts their service. heart-filled team at to First, want a thanks members give the to

make also care members them in Sprouts, DNA. is never members across two are Our It's culture rewards able helping within easy an Sprouts foods healthy of and our within our to and the yet to priority. the our the continue amazing inherent them, of customers, to to work positive stopped their ensure We're We'll and the expanding lasting company team country. positive team to remain the changes reinforcing to our critical improving they grow serving Sprouts. working taking top been opportunities, development reap access hard not cultivating community for years access

wellness by sushi. strength partnership other specialty on innovation remedies our strong double for innovation. coupled a fourth and we when keto-friendly drive from innovation immunity [ph], quarter sushi Fourth with partnerships products, in COVID our is immune in fourth what And quarter inflammation digit immunity grocery. in all ended last to prepared the to quarter, beef immune year-on-year, sales product continues up in faster pleased grow especially breads cases, and and sales some on They This This vegan experts supported had grab-and-go, multiboost wellness the in Deli attributes bread with categories and speaks through brought items, with meals natural a Prepared grass-fed season. to anxiety, discuss plant-based into larger offerings. And and attribute-driven our our health. key program to interactive year to And sales to Jaros great OEM hosted Crema started artisan our year. our stream led Bakery cold like in now to return ongoing holiday elevated and a to October, health continues getting helped focus Mushroom trending holiday vitamins to the conventional bakery, makes support label. using experienced focus which new normal continues new benefited which innovative seeker NEA the increase brand and from chicken, Our private success Atlantic strength are a especially sales The we proteins. with us sales with again Suvi, options in salmon life. our the which in with benefited from and gluten-free in Holiday remained line Vitamins an Even early we is And seasonal bread a show released created of deli quarter. strong differentiation and we than category and and trending were top items. immune our and saw live keto released Foods, In which grow a deli, by meals, industry customer. Poblano our it the and in and sales flu chef to performance vendors created really grocer. ingredients of in-house program everyday lifeblood Cureton whole fourth Grocery meals items. the department included fanfare. events.

Chilean highlighted small harvested new into Dark our centers innovation driving Sprouts week Some complete tables displays around in line halo new compostable chips bimonthly, creating we each for Sprouts biodegradable our teabags trial strength hunt and premium new in as stores. we strings. Bonello bulk from [ph], XXX destination with rolled stores, our organic innovation our favorites private traceability converted and existing format teas innovative full nearly kettle corn items label fully teas. Mini branded treasure Cocoa the tables And as rolled These out and our and and trending branded items. farms the include top-tier This are world and branded and such Citi's

on As to it XXXX. moved fronts we in the relates strategy, needle many

contribution spaghetti we and of innovation sales of XXX and like like of the as tremendous other marketplace more by addition our or, better than vegan oil us increasingly grocers. wheat organic And much penetration than by In new of new Overall, plant-based label to Organics in is branded organic grew this the made XXXX. all more our private Sprouts. with dairy, meat In extra-virgin organic team even than well in attribute-driven new brought over our label Our than as basis of total total, sales continued conventional which In merchandising organic, is in our ended include ideas. were And products performed is they XXX releases. sales produce, grocers. our course, vendors a protein and new remains being nearly destination of private for organic XX% the products higher which our was paleo, keto, strength our and which XXXX organic We our X,XXX be differentiation at to XX% Sprouts. the highlighting differentiation department and XX% represented expected. than They plant-based progress health beauty whole strength of line. being different many and olive to powders as our recognized for as look which driver more items, to sales points. year of

local the we count in products the of three two mid-teens. in opening local Colorado, and Our supply by fresher boosted produce our SKU with improving penetration increased in In our centers, the local XXX% was miles road new season, more XXXX strength on distribution the chain in bringing resulting reducing million, by to sales and shelf. of

season. already local produce we're should in increase smaller, penetration a to we while opened more Florida, peak For format we planned have store. as local resulting new with still already also we in the are These many XXXX, mid-teens season, sales hit partnered increased partnerships continue profitable into growers. In and which

items grow being the sales new the I in salad cost smaller show new year even vintage. seven stores grab challenges addition of equipment. to XXXX vintages prepared stronger at one due the the finally, after except new mix, stores and relocation format and Our foods, change in one And opening And will marketing. in new this getting emphasis the best plant-based both highlighted the slight had all speak continues a SKU in including cornerstone scale sales. with more those build, new store, count items, lowering of deli Produce departmental of department, bars. in position prominent by in from despite is and very to the we total, taking supply similar put and quality to everyday labor-intensive focus pushed course, remains for a are Most it on expanded stores with In similar to in format, want to be to like chain in sales of older four options strength prices. stores on a of the greater frozen great more XXXX, and the out varietals resulting We showing remodel. which we

marketing an in through We began and awareness fresh strengthened year. as a has our high a XXXX with the very in specialty Our grocer. remains highlighted campaign new approach produce the It evolution gone our past perception that quality in industry. strength which

with of more drive door. which understood improvement, our footsteps that us the that potatoes store Customers up mashed growing all make half gets began but loaded the checkout. through in now change join quarter Chef codes it great all few the customer didn't the to fourth with to overall. product action Kevin's those our had clipping marrying all QR We're sides all the and healthy to turkeys, of in emphasized shoppers. organic value to And It catalog deals that paleo, delivered difference, in related we app, inside differentiation non-Sprout the that digital-based storytelling deals. Tattooed -- like holiday gluten-free base shopped the fell In sweet the a and attribute-driven outside storytelling reasons to free automatically include with to a stays at break holiday a to items a changes cauliflower the actions, to compelling included found enough to on like stuffing. XXXX, the starting short together access ingredients inertia are and informed market Directly to note we and year prices optimistic riced app Sprouts call traffic. and by given our our are visit positive melding know However, store storytelling, No more reinforcing best the tactics these back discounts we we the message, ending which, a slightly range necessary. good

than XXXX, grow more up efforts scans, loyalty our For helped these XXX%.

XX% customers a since e-mail XXXX. to to active addresses Our approximately grew million X.X over which equates XX% growth

text quick five Our led channels. over our different SMS by can grew million enroll through group program over customers nationwide. we reach In now total, a XX%

-- it to be if out would mention rating past we report made the marked disclosures. As remiss we've a last year improvement accolades the few for didn't be while I ESG, This year. progress past the the and rating respectable from from it fall, MSCI, has our Sprouts relates received BBB from AAA received our won't a updated XXXX months, a this from

communities the highlight company done the sustainable well, the were we impact most recently, positive As corporations team the positive on a serve. a Both has as foundation work on impact the the XXX our environment, and excellent one making Corporate of just in of members our and disclosures we Knights improving honored Global world. and by in our

product their shopping needs. providing our unique focus our For and XXXX, assortment remains with differentiated customers aligned our on

and creations as even to centers existing from will Sprouts vendors be to launch our approximately we customers and our able and see XXX new Our innovation more stores. taste

one growth next less in As opened XXXX strong retail. new our growth than is unit story with XX there best for XX%, stores stores, in the be remains the pipeline to our for of very remains years. Though more out few than our

the pointed to supply on we once high-growth back rightsized out, pandemic, chain be As Chip approval city and track expect our model. to process from the

stream customer past and this we differentiated marketing, well with supported exploring media get inclusive as successful, innovative mine messaging, value, this highlighting we're more we influencers. with experts. will The categories and and engaged our them vendors, industry for events broader so additional year our live partners as did by As to fall partnerships was data

challenges most focus do our we chain shortages drivers, well due warehouses heads and validate labor as quarter our on our a team differentiated to bodes down, shortage cost cases. here expect passing stay is optimistic supply While to which the increased source to changes. offering. remain in linger new places finding of to is believe We We're the and through the to products well strategic wellness fields and positive for that in fourth beginning traffic health as

and success encouraged Our time, And have XXXX line. in will to I'm grow structure. focus and in strategy customers made I'm we're take confident to coupled this against At will our efficient with our right beyond. promotions Operator? the we margin happy this questions. great will remains and change your and our growth progress only focus the delivering the with top our our on great unit internal expansion prices drive maintain products on and operations

Operator

question Our comes first Ken [Operator Goldman JPMorgan. from Instructions] with

line open. is Your

Ken Goldman

the frozen were were I'm When afternoon. there. you thank you if heard departments think Hi, particularly I correct that didn't me of, wrong Good I and proud listing you.

if doing two, And I you us the how bit time? the little an one, for you number number business omission, did frozen was at is that walk a So correctly? current can it through hear intentional

Jack Sinclair

the that's maybe lot a them products encouraged should place three Ken. us or specifically, in have lot honest paleo. We're selling, -- years. a by it's been innovative we vegetarian, very We've last something because we're And where keto, we're of Yes. the mentioned reinvented really it's vegan over plant-based it of you, or been strong I'm if that for the two frozen, -- with

we're giving our frozen to by stores in encouraged a at going lot if really forward. space our And it. you look more we're new So stores, new

been -- chasing So it. to we're the a against And years investing But fresh. something we're ago, -- a lot team was of poor in is a frozen of it. place think able few And generate it's it's encouraged by relation hard. been seen We're this as a are kind innovation. where that pretty we we've

for us. So that probably our part, Ken on a but was well miss it's doing

Ken Goldman

And Great. specific you know all don't margin gross I follow-up. guidance time. the then give quick

get 'XX. your The at to a wanted far is a from might off Is where Just time? XX% at that model about Street sense be for expecting range. this of

Chip Molloy

No, We Chip. that's is this year. for relatively said this off. flat not far Ken,

to be into to degradation is in some going it's the So relatively of subside and flat QX. margin starting QX

Ken Goldman

Thank Great. you.

Operator

Thank you.

Mark next with Our question from comes Carden UBS.

open. line is Your

Mark Carden

know Thanks XXXX said, that on afternoon. my why to degree is in the over your digits marketplace first for comp bring My taking we're lot desire questions. not single it term. given is anymore? guidance easy the in the Good a of relatively long low else? I targeting conservatism? some question Something up build a guidance. inflation you're That seeing simply the and Is what comparisons,

Chip Molloy

going AUR. the is to There's This going that of and on the units is just things One a traffic, basket of are balance there. Chip. couple

the basket the just baskets second then, quarter will to been traffic throughout part to traffic in units and the are. year-over-year hoping again. will down range had -- to start have We've subside look AUR the first and to we'll will start you in in XXXX. the going as and the where quarter we're year into to as the build so as we're comparing the at still -- And the positive be And we of -- -- and that down the through be trends continue you're have units

all zero two net-net, that as out range. -- of kind together in it So comes to

Mark Carden

play quarter? then rational? the wave? competitors Are inflationary And than have of And expecting Got how you still start to helpful. inflation more of you or That's at this less out are passing Are any it. is you the may how out? cost coming on trended

Jack Sinclair

as QX, it. you a try The there I'm it seeing market not But any get of on. no with little I'm bit there's inflation, in fast to high can seems it's and say pretty And little remember probably a inflation. we activity been. might how terms pretty major are promotional terms a were that of of people volatile But when kind coming what happens me, Mark, passing kind you of level line. you space we're is manage rational timing forward, you get in old of rationality on in And move timing from bit seeing on context there's you the as of the when in how kind have lags when it we enough And to is go the situation. and manage then it inflation. get anybody always you pricing -- of you cost get teen would of of than -- how is -- kind always that behind on that going we you and some get it slower in that ahead this.

Chip Molloy

to narrow in to if go flowed up. that little up catching through the starting was catch and this By of it's Yes. again, And we're bit starting year. the got QX And of think QX, probably add, next QX. Mark, back by would QX prices a and I year and cost I it's for ahead that's sure once where to you

Mark Carden

and Great. guys, much Thanks good luck. so

Jack Sinclair

Thank you.

Operator

Scott Mushkin Capital. question comes with RX next Our from

is Your open. line

Scott Mushkin

for questions. taking guys, my thanks Hey

you you one from Number the Why you hire is things. of he are a do expecting couple it? a What do think What So, that person? did of COO. brings?

Jack Sinclair

generate bandwidth I need in that the think the quite we we a in is immature the going that want This as growth to many and we ways. of Well, have to we our our stimulate widen capabilities forward. grow business, organization and kind business

our the to add a our bringing got he's more excited so do. a And we a what it's who passion going lot business as he's got, wealth developing us to of in to and growing a a he's more of marketing we're of people about proposition for play bring that excited of and many And side of experience the operations to I us. of Nick. part on ways, drive business. he's that and kind board can think real of which merchandising, very He brings process value discipline very about talent going and and I'm the our lot fact things the So and role background for that;

Scott Mushkin

Perfect. just kind quick to to sure I And then, right two question just want back I of something items. heard the around comps. I go housekeeping then last make and to want

you $X million to change the $X out as pulled million, So far think California I law. guys the as the in

not would think running is, mean guess the I zero suggested and I'm that are want fairly And from would the hot just be it I just sure it down it And I just what -- heard sharply. volumes to as guidance. comp first completely. you I two the like explanation. since I inflation excluded as understand it's in I with I said just quarter know the be -- you would it's I'm it with then, be sounds why number curious ongoing. And the thing second

Chip Molloy

things. of A Yes. couple

So actually piece, September. the that California stops in

September, was in cost. just got just and onetime a we weren't just a number. sure to when it we $X wanted -- And we because passed the million out like quantifying So of actually it's up we because law call sort $X we million to recently temporary set the it started it's just law felt

of kind of the year, quarter in it's so second and get Unfortunately, the to the what four almost of two, basket back to all relates about were And got quarters. the in you to the quarters. of units didn't quarter it -- second think you happen up you As zero when pandemic way way the go the to the at went it beginning next XXXX started the XXXX. four the in happened

So went when past you way they that down. they've year, cycle and this down been staying

bit then got -- who But should be relative that, AUR as going positive. of will of happens up stabilize that third should units to beyond relatively should the a cycle in Transactions something down. comp will basket last going to still should be where another be quarter, catch be a all it quarter a little -- positive. bit knows? to that second should And where positive basket big they start Units start be there's from variant we per with we've inflation to be pretty per small go anniversary. So the to And another little to together and some are that, traffic. come and unless positive start year. it else It going far --

Scott Mushkin

Okay guys, appreciate the thanks. yield. I'll answers. I

Jack Sinclair

Thanks.

Operator

Our with next from Rupesh comes Parikh Oppenheimer. question

is line Your open.

Rupesh Parikh

my afternoon. question. Good taking for Thanks

So the Is is have share on question quarter-to-date seeing trends. anything first there what in you of quarter-to-date? can I you're terms just

Chip Molloy

Rupesh, normally, given but the this -- hasn't yes, company that quarter current in done for the this past time. that we've guidance would

forward. will we and -- So going

So be the the guidance expect we where to we've of given the of quarter. for is in -- end end the with year line

Rupesh Parikh

great. private label. then And Okay, second, just on

So a of Curious you expect and lot to penetration your year. the private end of where innovations where label private label the by it is guys go today routes side. on the

Jack Sinclair

I'm exactly what about. Well, sure happened not penetration, to the

sit about the of it's lot I've XX% the mix label as the said that. XX%, moment, think in I think we XX%, past, something moment. these at a like as private conversations, our in I at

progress in we is And the product. Some but of that is And was we've some of right who very it design new don't by. the There's feel that in real innovative doing private label of kind direction that new the through. made team are products a -- for we've XX% commoditized innovative is really really encouraged coming job. place a nice got really some holiday, I

not to coming penetration we're products into not Tesco It saying need number. it's about I ambitious. that the It's the We're those So this new be at and designs XX something new I'm be are it's got a the of business to be doesn't to will years. was got where years year. particular what Exactly all ago. be, the course the through excited

I'm not bringing quite forward. The that's important thing that something exact we're where the the innovative for into our excited play out. about And going space. differentiation us bringing is sure number, will and to it But I'm that it's products customer very that

Rupesh Parikh

you. Thank Great.

Operator

you. Thank

Charles North Our Coast with from next question Research. comes Cerankosky

line Your open. is

Charles Cerankosky

I I Jack, helping with the you and efficiency stores best clustering how in discuss could was was Good cost some benefits afternoon, thus or reduction. -- sales distribution more clusters, growth, of far wondering having if and wondering everyone. it's Chip, of stores

Jack Sinclair

Well, don't. in do markets specifically, we open significant where than a when markets we've better we got where stores when we penetration, in open we

when build that speaking, got and We've the know little it we've hitting and who of we've markets get a people we're as starting a to But challenge simply the What the marketing that's easier in a strength to great in challenge. density don't on better Florida, literally in chance much of do And know But takes it these got little it marketplace that. faster. real people density, in the ground where customers it. space. mid-Atlantic it's becomes in communication got we time a when bit a that. who got opportunities are. we are, great you've finding And we bit So we're

when decent X, we on marketplace. do we we've -- in strength very or get in do in Vegas, Mid-Atlantic launch when California, in So Florida better day better than Arizona, market we we when than share simply, got the

a sense. So center lot allowing much encouraged I -- very us of that to that but more we're makes effective distribution the is be And suppose locally.

on some locally. that's allow another more months have to new us distribution the centers during product point at going two We're put ground. one or so. probably to to XX we next And going the So source

agriculture fact in shipping farmers actually we're center, Naples. Georgia, the working product. selling recruiting to Atlanta, distribution local to like I'd and where all an a encouraging a local down And the be we'll We've are from we've we're local more community, We've much got the better way much Florida, community you with that. when not that got in to people. more say, of ourselves teams the been So of Orlando place lot market now farming the do

local for more product, don't know you and add stores more area, providing pretty network distribution the So this through a which develop product combination our I of that, think Chip. getting in to sets future. us I dense well will want evolve if to getting

Chip Molloy

Yes.

from bringing don't they get then people Sprouts of on in easier that you the perspective, your add start within to And who and easier to thing to brand of other and we're new a course, get in boxes not that, from talent know media hire It's know would it just other to are boxes. people I market. to as promote move a The of them off top some awareness. you leverage you that It's as is spend talent promote well.

Charles Cerankosky

to run-of-the-mill of unique left amount out at products of many the Sprouts stocks? Can vulnerable products quantify due of on And more due to of what versus have supermarket? is might a it. table to typical the in you all nature your you out-of-stocks sales CPG Got

Jack Sinclair

It's we question. or question. last contrary with about battling few products the over hands. into own only that reality out you those significant the maybe the actually stocks. had destiny your when sell when I pretty sourcing a I to it's Actually, and the battling in over yourself, stores a Yes, last your world Walmart you're conventional so CPG with all lot. as you've great of of see months think talk The almost product. something two weeks, the And grocers for I Target is go

think I labor supply of some in nothing of we've in context wrong. of distribution I'm challenges And seeing that I better but those most in in some with able guys. We're -- a exist only to us. get think it's January, particular, other grocers. battling either Now other people that the base we're and inventory our vendor partners. and And like our for I the challenges challenges the And pretty it closely chain the place of marketplace. many ways, challenges more in conventional we're work than think the not in We or some it across factor the got right our get with

means Although we but we by I better we be than want think most. to where were went no

Charles Cerankosky

All right. Thank you.

Jack Sinclair

Thanks.

Operator

BMO comes with question Kelly from next Our Capital. Bania

Your line is open.

Kelly Bania

a taking that ticket bit types? and the there. wanted in on to between traffic thanks just basket, types The campaign just the any all to there? questions you and different your there of traffic is of per that a trends any units in decline customer ways that more your have, you campaign track questions. couple Or drive across is able Or our can little dig tie I Hi, for drivers. And customer how And guess to are marketing your working that new is marketing differences back then customers? you in momentum to traffic? I

Jack Sinclair

Yes.

Kelly, the two So separate me let quick. take

here. our to on question first Chip, lot versus terms think, better, telling there's of was of the up our regard good worked traffic, of our Maybe, can in fresh question. around that you a the in the of strength the how that QX. marketing marketplace. pricing I asked with start particularly story little happened Let's terms feeling a traffic in We With we're digitally pick produce did things about bit the pricing,

think pandemic, As how environment my I in kind the us we the bit kind also that forward. people digital context little that going some think that understand shopping happen a the people business. of the the our coming one shopping. in. end we us. I four helped were to get were messaging our or of grocery customers in the not a that where clarity, five COVID down accelerated or new markets people behind we think, times fact week. in has at went were remarks, And of mentioned produce that, That the nervous. that of for in our Since We number a in do I quite going don't times didn't particularly as value more have times two QX, week do feeling nervous December from of saw were the people of to start The comfortable that

customers communication back bounce-back to sending holidays. them the encourage message think of So the come the combination to I from out, getting to some

was the the I of context at I marketing the QX. end with a some as of pleased the little of that us marketplace bit helped And worked So think well.

this the early has we've So about we've had it's clearly very -- optimistic helping but we're factors as you days are that and done over a work on kind the that helping marketing the and getting with again, last a progress conversation of which little on probably optimistic been while. bit that made guys we've a little cautiously We're cautiously traffic bit macro that there's some well. is

Chip Molloy

XXXX, XXXX through then They -- And -- years quarter and and of we continue into year-over-year another you for basket negative go. had to I units, negative go you of be dramatic, mean, were have then, almost year to cycle -- and per units back on back you and beginning second And two XXXX. those course, back when you that dramatic in look go to because past will got this to all the go quarter Kelly. increases

should perspective, second quarter settle the that Net-net, units per if on of at So two this looked every been year. out by you up year quarter. we've a basket

Kelly Bania

cost and a margins old bit just Okay, and if And that's new of might with line But format. expectations. your out track about the also to ask they're the between coming how detail can the early. and starting very the then helpful. in the on in stores format the and new more is curious store talk this to if And sales little you be too

Jack Sinclair

the smaller. the of we've the we've them talked formats, we're course put the stores and less new that about Well, store fact into a making lot

in Having the side store to build the terms pressures them. the rent, the is of regard because of said there construction then clearly chain equipment. with steal of -- in lot smaller, that, other economics some to a spending we're are the So the on terms supply size of less cost

with that our had, they're some in to in had would have relatively other there's expectations spend coming to So were. the stores bigger the we in we've directly it pressures direction. what line that's moving pushing But what

might be they to were clear, lower but just and a up cost they're So significantly little line creeping expectations. bit than our they're be the with in

flow terms of through the is that -- way the in So working.

the exactly we new them margins expected to coming way through do. Our store are

older Some of VXs. of stores, our we've VXs, VXs, got nomenclature

the are VXs we coming want way through to. them Our

at foot we're got high we've of very stores California, in capture when for money Our that per that's at look making kind to them Make make areas smaller stores back trying of more smaller, the from them. what better most Diego stores those the San format volume deliver the that and higher stores. of and the are sales profitable and I are And ones us. some the square returns with older them the new are

Operator

you. Thank

Robby question of America. is next from with Ohmes Bank Our

Your line is open.

Kendall Toscano

And way on just Hi, I questions. the and, investment the to positive positive, maybe was now this return is on price guess, investing Kendall in Thanks for traffic taking wondering change gross to my you're XXXX? price turn you've that guys seen that does you I during Toscano in any margin the about XQ? Were for extent Robby. traffic. future thinking

Jack Sinclair

the years; our exactly we're chasing in prices loss leaders. last approach. in after price. cadence fairly change for [ph] the over investing of so in Well, couple investment been saying promotional gone years We're in has of not we've going terms two mix substantially what last the down and -- not and not -- we're the our promotion We're

of retails of of context with high cost out how are in time. moving to And do the fast Some pricing is the margin stuff through little -- a bit our smooth that terms inflation in in lag that's a the will we environment.

the going went are expectations And forward we have in with that through the expectations we're not in that answer is our investing his margin Chip presentation. the anything line So in simple margin.

in the in margins So and that? going investments provided Chip, we're comfortable marketplace want add forward. comfortable a you pretty set we're so we've our our margin feeling is there's that in about where and major good with shocks we're place going that that forward a pretty at that other to -- we're place no good do our

Chip Molloy

more selective. thing only being we're add that would I lot a The is to

deal. little the we So that little on being We're the more ones been selection a the bit doing, it's as a breadth that to. But nearly bit narrower a aggressive promotions sometimes, in the aggressive that's price. much yes, we've more of applied But wide. not are are

Jack Sinclair

we've our the way teams a more lot got engaging been people I've -- with marketing are pleased And very the digital space. in

we are it's got long up. ago, promotions of these [ph] people not demand. we've some two million and getting that And think our million they're actually we've scans now engaging are So promotions the from helping stimulate who -- There's digitally. and not five creating -- about got to

Operator

Thank you.

Our next Deutsche from question Krisztina with Bank. comes Katai

Your line is open.

Krisztina Katai

afternoon. good Hi,

consolidation, retailer last about to the and of strategy learnings just that and call or how scores, that impact all grocers can largest effective even some about really in now conventional essentially think And two years the over just the changed of the they been value-added two, and to of we last your on traffic focusing talk then drive as more your testing? more action bit you the a And of prices. promotions been. have has trip you the have value essentially in country at or terms as is quarter raising Just

Jack Sinclair

Yes.

Okay.

a that how a while. work engaged ones get I've bit done through are that loyalty. kind And we've let's go innovation was a about of minute the in. the little that the about talk we're And experience over people this by, excited of last -- that our narrowly on been into focusing when been part years customers and encouraged our being They loyalty-based following pandemic around work that scan ones talked So a to who strategy. that and more by We little clear, working excited by I the took base food one we've foods they ago, a lot in get we're basically, letter. But encouraged loyalty very the are the two when Those are X.X as said in -- kicked store. And that. maybe this that I'm on years communication. we when we're this strategy seekers. up, people before and embarked strategy upon fresh phone those the embarked ago we segmenting buying through I their healthy are ago the mixed we the than bit are a about doing. about

in And to lot marketing our money. had We us, a a terms that early in we put improving of put quietly So basically making we us that who of segment and I'm base. market. of on activity encouraged customers in that appears underlying behind to gently weren't by customer the the lot losing that be focus the fact,

seem to have those are come some a are from to deep we cut So to customers those don't being we that call, that there coming seems they customers not promotions. on the is not were reactivating, What because coupon we are away. want be encouraged that in And the but customers happening going we're back they where clippers drifted want.

to So if that makes you. some sense

to benefits comfortable who we're forward those we'd seems that us I those the more than As hopeful be a the the things of we're stimulate going to for People think bit were that not and a that's little to more before places we're with doing we about transactions they be the because the macro activity some try customers. happening. There love shop. which look going at primary traffic, improvement. seeing driving are year. us customers And And of bit more rest something

Chip Molloy

And and now just out were that's throw or two that is we're purposes, couple Krisztina, out, would I trip coupon getting when the strategy number years behind of points One lapping us. a XXXX, change the the did we for ago is intents all in clippers, things, beyond Number too. as of two the out weeded consolidation, one. Jack

much So we're value. is place feels where -- the the more a much stable. going in about you is forward when And other then really piece, traffic talked

pricing when been heritage always produce competitive price has the are of to comes We business. which very our it the

last call we're on as opportunities, have the and them said we We diligently. working

for haven't couple years, messaging for that get actually. a much a in that to opportunities of way several have done out We better -- we

Jack Sinclair

Yes. important for And the linked part the produce I us. to thing think value is

the volatility having up customers other as are guys at a think conventionals there's understanding the are that and prices the you I everywhere, the put alluded to, to moment.

comparable, when we having of sticking we're have that which that's what of Within seeing of have store to not directly will space than discount, that ever going watch and that's we which the rigidly and And diligently we're prices And we level something we're the need the looking maintain. at change. of and an that, inflation elasticities rest happens before the more up. because is we need produce advantage a pretty in our to context

Operator

you. Thank

Short Barclays. Karen from comes question next Our with

open. is line Your

Renato Basanta

evening. for our for Renato questions. is Karen. actually Basanta Hi, taking This good on Thanks

year But can wondering first, I you talk about was basis. a view the algorithm EBIT about growth you normal more relationship growth benefit between then more sustainable think just waterfall on a sort wondering store normal a growth And sales and of the you of bit some this a Obviously, noise the if a including inflation challenges. growth just how on and how So the lot sales little of overall more with company's basis. comp. year, in generally, to

Jack Sinclair

more growth. flows and Chip get challenging. deliver very We're let deliver I'll very very we've our we it's all, we're about pleased the into the comfortable be stores. the the leases of through sites store up with that new us is in the happen that really things construction the growth. have That's that a is a our flow-through the there that challenging. about the against as and algorithm got trying And note, complications of the will we are which simply year, to to we've side talked working our going said team of not when their the program to that talked than estate this store the need this licensing a you XX% new we on business. both because talk, But as way work follow the a but growth, algorithms comp we've I'm the up the and bit naturally store line top sites way running, into on in sales about as comfortable all let's from to first way for line team little real through have but that store know,

let space. this And grow grow along can detail, we've our way all line Chip top in we comfortable line what I'll our faster Chip? pretty than that we're about So and part bottom marginally. talked that's we talk can more in of the

Chip Molloy

Yes. just want Jack's to already alluded store kind growth. I the that algorithm before. say we that the described one, to give to of would we've Number

and a this? back good hopeful the So is -- what growth, 'XX? year footage growth on us not or the store new to double-digit growth -- in strategy square about we're is track XXXX Yes, feel getting we're we but I hope 'XX. feeling store

around two that. inflation noise zero something we year. So should comp feel footage once to, we We consistently. comps this the range. about be about going, low in drive size X.X feel moving unless before store guided can we're really can in able the to we up in else that We to And square then on good we've back we it, and forward, basket then singles We the year. growth and buy We AUR There still to all continue this for earnings the to XX tax continue to 'XX happens. for and single-digit and believe hopeful between get high going And good traffic. we'll double-digit call shares. is can grow grow somewhere continue to the get

Jack Sinclair

you looks not I'm the like we'll what It's there but I for changes normal of go. of anymore. -- get know kind question. And ever sure full don't Thanks

Operator

you. Thank

John question Heinbockel is Guggenheim. Our with from next

is line Your open.

John Heinbockel

right, minimal? go there assortment. benefit or you And is where dilution think obviously inefficiency, happy Or one, Number you reengineered How new you overly when secondly, 'XX, up things. of talk from then assorted. dilution piece any a some right? you've with to quick around two to sort And if breadth where the from stores? of enough versus you're temporary are is those XX XX-plus ramping Jack, Hey in maybe are, them openings of you

Jack Sinclair

Yes.

the with let's that's tail That the you've done efficient. out had in U.K. Tesco to retail items. lot context a mean broad and grocers, work years heart I in that something in is needs would job and I've much my the lot the be that principle the would company that's Okay. in being of of A couple fundamental being assortment. And got things start is your of the in back keep of conventional I've the say, high-volume at of pretty Walmart career over this John, one of this learned cut -- last say discipline the

or to of to a enthusiast we're diet customers opposite or very or assortment have a And those and the be trying focused a appealing We be to who diet. or ways. are on diet is paleo many diet health a gluten-free keto a that the adding that plant-based diet very in clear dairy-free about

target have, breadth you really If have those to you're going those to have customers, customers we choice relevant to be a that in of that.

message want and advantages differentiation because that much that would of that item-by-item we that great the sell up end the the of But sell to us being a you individual store-by-store going our you maybe create part So there's of into dynamic else items want. sell to because marketing that basis an a products of explaining that it allows the customer. XXXX, the of to don't And on that's of lot of having as very attraction much and we a XXXX have that's have load nobody would one -- different the we business.

always we're our at the assortment, So the question about looking does assort.

customer the XXXX the big merchandising able which we've of in to our get kind of and up. have diet think breadth to amount this we Chip of that product that works, pick and to dilution and the -- of in the maybe system the been places. and other thousands product I thousands that's our from fascinating pretty us a would we in of systems real to accommodating when think the stores base how -- I was And the you fulfill assortment of make items The would by new get see It them a we done flow systems doesn't appreciate that need. time. have one our of achievement customers of sure to a work of that can what replenishment year be exercise. lot what context and You into develop kind to added needs, vendor I over not will front the motivate maybe And period team we're

Chip Molloy

Yes.

until I do two think still is cost manage on you footage, is about X% or When it's to zero state, get difficult steady single to there square a to that low a comp think square your you in ramp having to get to XX% and great that -- up it that double-digit question. growth to from footage high earnings.

we if go through So We as that got period. will. there really diligent you brief be just funnel, is to that

are period, We but have we to in be cost to world that that to we The can two of really new the diligent managing get to the only a that a corporation the stores four so managing on costs the cost lot. place. beauty the we helps of make and sure comp is not state the can get if then steady

that might we it. just we'll got again, way that. X when you're once through from XX So There make to manage X that manage to get through, we'll We'll there. brief our be to period and ramping

Operator

you. Thank

with comes Research. Our from next Greg Wolfe question Badishkanian

is open. line Your

Spencer Hanus

just the given last eventually as to inflation? in-stock you to normalizes it's trade This do more do in the for Good are better Hanus been? conversation these supply just months? consumers thinking going been then to XX-plus for on rising be Spencer aggressively from a back And deploy start dollars to going to is is rational industry on position as they pricing. Greg. remain think the Or start they've guys to you prices invest in than about they're here, the want when I to chain How the go this need afternoon. face impact

Jack Sinclair

Yes.

and in going is with have it kind So can't our when happens not happen. us space with sure the when in conventional proposition. keep a does, I to of I'm affect see too going we to But regard grocery these if saying very different much I that's to calls, as supply whatever chain normalization, because

anyone that kind one talk directly sell the The products products else. that's projects anyone I'll a else we or else we not So in which of everyone with line are sell in about -- comparable minute is the that sells. with and

we're to maximizing But where past, what to as are conscious the So to got a a of do SKUs. happens on watching very now we on if our we've place happens go a volume price we've that is sure And carefully scenario. slightly prices that That's the not our figure got in perception. what a differentiation how make And with produce conversation. that and maximizing to of individual Produce quality that. watch are elasticity and be different we units in trying we to margin and inflation, sales terms -- it in have what sells. built units the investment up, we're on the out that's

up are on we're not it's the we've known, is about is is produce talk we there. It we're a price known. on to effectively. that that. advantage, In more where perception most -- way prices known, quality got need people high very where markets and our data above encouraging In markets although our Our

normalization, sense. unlikely be Spencer, it produce, to happen, I to use on that there. did key going that But great mix can't stuff clear that I'm of But activity at margin, are buy because to That our huge into not it think that the have to a low us be the of is there we very a a doubt in customers it's we us across there supply chain depends not when knock-on effect context So normalization. can price a love some the some to if is comes marketplace. their they produce to going it's thinking to sell makes come is people for produce store I driver the get chain the would question, kind going be they supply some other places. I And if we high will when get if on that because margin, bring being people would it.

Chip Molloy

have a make stakes sure to also table -- products, But earlier just And like lot of on we unique said on part -- that -- that. produce is great very to have are add every great messaging we products. we unique. the said, and we have as Jack value do that of day our get have knows world would we the I Spencer, we to about

do differentiated. products. are We unique We have those

do And or add the innovation more we more doing and great we're great with our merchandising job it's this to have so through centers continually, new of the conventionals and can to they battleground of that are. even in let continuing our product. products is the that stores how not same team know great consumer find which doing a the kind And we

stores we're going our all launch our You of can of by a of lot those stores end virtually today walk in into to and the this year.

fill and consumer normal message are just So, we're the driving that different the other needs for different than have conventional. we the -- different

Spencer Hanus

it. you that resplit refining starting to will sign be and that you the is Or a in message and marketing grocery back positive transactions of function about? is basket just just added Do the guys like Got you talked maybe the turned again here mentioned you think then rotation the into a really And quarter. it that's again?

Jack Sinclair

think Actually, bit I of both. Spencer, it's a

has time worry less around there when the there's -- this the think than first when wave happened. been I hit there going market Omicron variant about stores the was into

So think for well. that communication will And there bit people I is more as helped forward. marketing also which I a be places us little going digital more our I and has our think shopping in us believe good

those the of of both over watching dynamics be we'll So course quarters. next few the

Spencer Hanus

Great. Thank you.

Jack Sinclair

Thanks.

Operator

Thank I to turn to would like Jack you. back now the for Sinclair closing call over remarks.

Jack Sinclair

we to we're a company We today. the what and really in And do call support. appreciate this appreciate about interest going listen can the I time company forward. in to very your appreciate our volatile Well, our taking excited you world,

to so ever care. everybody much thanks So and take

Operator

conference participating. today's call. concludes This you Thank for

now may You disconnect.

Sprouts Farmers Market (SFM) 25 Feb 222021 Q4 Earnings call transcript