SFM - Earnings call 4 2023 | Sprouts Farmers Market, Inc.

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Operator

Good day, and thank you for standing by, and welcome to the Sprouts Farmers Market Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Susannah Livingston, Vice President, Investor Relations and Treasurer.

You may begin.

Susannah Livingston

afternoon, good and you, everyone. Thank

Valentine, you We fourth Chief Sprouts are Curtis our joining and are Executive me full and Sinclair, pleased quarter Jack year on call. Officer, are XXXX today. Financial Chief Officer; with earnings

our and investors.sprouts.com. earnings call section full year of slides of Investor Relations can be our quarter XXXX The fourth and at the results, announcing webcast the website release financial this accessed through

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

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

include measures. to non-GAAP our the remarks Please to earnings references measures our Our non-GAAP figures. see release GAAP to in tables reconcile the comparable today

to hand that, over let me Jack. With it

Jack Sinclair

Thanks, afternoon. Susannah, and good

our again our review for while we As margin grew maintaining sales expansion XXXX. our future. with the with year-end encouraged X% year in stable I'm once about our slight We a pleased performance accomplishments, and

per our profit Moreover, XX%, demonstrating earnings rose growth. attractive adjusted share diluted

target specialty that profitable this approach with strategic shift trillion indicate positioning to strategic resonating a every us customers. customer. our highly for everyone and Our space instead on these believe slice clearly results focus $X.X the competing of allow food-at-home of And with we is

a becoming leading retailer. are We food specialty

else. are in-stocks. focusing products. hard want, scores XXX striving the high-quality including that healthy, ended broad company's with find differentiated, the improving deliver We better anywhere experience assortment new, was fresh, focus continue through by customer more of best target our year and We service to a customer assortment Sprouts the new Approximately brand what they our service to on on of customers, products XX% to of our

by and stores chain part smaller in growth We adding in differentiated capacity long-term rooms team. quality. expanding of supply of momentum, our without especially so center new amazing our a in XX Florida. and possible product to DC we None assortment, our prototype, our be to we improve establishing this our distribution As experienced to ripening new created new will opened the California, support expanding Southern Texas good in access

we XXXX, new believe for XX% that a business sustainable great of maintain members We years profitable enhanced promoted everyone fostering our a grow In Sprouts. to our that We jobs come. continued for and workplace XXXX. programs we culture career and development members at X,XXX XX,XXX approximately will team so can created team a in

decided Dan building his many years March steeped has promotion our also California, had a been leadership to industry. has for in and delivering in results impact Dan I'm in Chief Dan team X team. serving executive original Sprouts as and values. internal Dustin after to retire VP pleased announce Stores I Officer. more Hamilton replaced great our our our to years Sprouts. thank another of want on lasting Dustin to as Sanders the at

working XXXX journey will in a XXXX Sprouts in for in about talk have achievements positioned our moments. well future, and our we summary, more to In continue us few the I'll potential. full unlock

and our Curtis hand full I'll our it over the review now fourth performance For year outlook. to XXXX to the XXXX financial quarter, in Curtis?

Curtis Valentine

everyone. afternoon, Thanks, Jack, and good

the X.X% addition quarter. and new fourth million or period the the sales same from online up growth driven Traffic store was of store by billion, the increase year. This were $XXX positive $X.X of comparable sales total X% For and stores. quarter, both last was in throughout

sequentially. stabilize units and per continued expected, to As basket retails average unit

representing Our e-commerce sales sales XX%, of the for quarter. XX.X% grew approximately total our

Sprouts. to assortment. new highlighting acquire our our we performing have also differentiated their quarter, and appeal partnerships Along the we with DoorDash, partnership customers well, Instacart with Uber to the Eats and of launched X access During now expand e-commerce

with see growth departments and in as choice with their Sprouts return health making and our from attribute-based categories was categories them a holiday benefits, due differentiation, categories during meat. superior strong no-antibiotics-ever quality attribute-driven within and prioritize We frozen exceptional the continue the our This seasonal beef true brand performance favorites such the Sprouts to healthy to meal in proteins. of grass-fed gained bundles. most top including these experienced dairy, customers These have who for eating. growth convenient has holidays strong popularity grocery, and

as our quarter our total the unique sales Sprouts our in to of target brand continue to up products fourth appeal made XX% customers.

was Our fourth merchandise same XX pressure increase by Favorable our offset new recently period nearly and margins centers. partially were last points an quarter the year. distribution expected XX.X%, expanded of margin basis the gross from from

million SG&A for quarter basis million, the year. increase XX $XXX approximately or the an of of deleverage totaled from prior the $XX same period of points

wages positive from pressure was a fiscal with see partially into from pay to shifting by offset impact Day holiday New Year's the benefits. This continue and XXXX. We

quarter. Store from related for $X occupancy approximately This closures. store closure the other to and costs noncash costs primarily and ongoing store is million totaled asset impairments

from was our the million. $XX million earnings same last $XXX,XXX XX%. year. diluted per Net $X.XX, an effective and before were and were our quarter, expense XX% tax of For period earnings $XX the interest and income increase Interest taxes was share rate was

year by partially billion the supported were in positive for by reduction year growth of to For sales and XXXX, stores. full new increase slight fiscal increased X.X% driven an X% of inflation basket. sales in the due items comparable by offset a also and the Comp traffic, sales total $X.X basket store retail to

which grew the for XX.X% accounted sales total XX%, year. sales of e-commerce for our Our

continues to throughout with on than sales. as the keto, resonate company our and assortment grew customers target products focus year. vegan average differentiation innovation drive grass-fed, Our organic, and and our the such Attribute-driven faster

of in costs prior warehouses. from and an XX The points on continued adjusted promotion year-over-year adjusted margin shifts, from XX.X%, exclude both optimization and distribution offset higher to resulted slightly compared margin, basis basis our items, by pressure increase increase Gross new approximately GAAP special year. of category mix the to impact expanded from was recently a and the gross

SG&A restructured expenses the on special bonuses increase and adjusted XX $XXX the basis totaled billion, points approximately cost of is team deleverage stores, investments items, increase on attributable in in exclude and million for $X or of new GAAP both adjusted of The basis increased a member impact the to store an training. year, basis. and an wages, of mainly opening to

manage contract challenging inflationary experienced the ways fees linked and partially despite environment. offset card to efficiencies sales. In e-commerce team costs as addition, the we Labor higher to find and to savings this credit higher continued

in store the For year. totaled XXXX, charges and costs with to XX primarily closures the million, fiscal other $XX stores year earlier related close associated the to decision

Excluding store and costs the closures million. impact special items, $XX other were of

Depreciation $XXX and depreciation the amortization, excluding included million. of sales in was cost

depreciation special associated $XXX the closing store amortization adjusted and of items impact the million. decision, with the Excluding totaled

year, and $X.X For earnings was taxes million. Interest interest the our million. before were $XXX expense

rate Net per were and $XXX Our diluted $X.XX. million effective tax was share earnings income XX%. was

per were Excluding prior impact increase net to the $XXX XX% was an of before million, diluted taxes earnings the Adjusted adjusted million. income interest of compared were earnings $X.XX, share $XXX special year. adjusted and items, and

store. and XX previously During across licensed XXX the We All were the XX year, acquired stores states. XX, opened stores stores. with stores, X XX ended closed we smaller openings our XXXX new year format new

by healthy strong million by allowed expenditures, generated flow, invest We has in $XXX paid grow our Our cash $XXX in net cash capital $XXX down to financial underpinned us million of X.X also repurchasing performance flow, we a robust operating sheet. business. our shares. our been revolver which owners and balance to and returned to million million With reimbursement of our $XXX bank landlord million

outstanding equivalents, our $XX and $XXX of million million million revolver in outstanding credit. ended million We with on year $XXX the of $XXX letters cash cash and

we weighted Our diluted outstanding repurchase our the have share shares to last compared down $XXX remaining current X.X% authorization. were under and million average year,

Since have support implemented strategy, key labor to significant we to operations. our store model streamlined changed systems growth. XXXX, improvements our and We our our business made

create and our differentiated critical also added We target the hours team love. experience a store customers members, increased store compensation investment our for to training

As have points. XXX XXX margins by our gross our basis adjusted a EBIT and margins by improved basis result, improved points approximately

CAGR EBIT square with in increased diluted XX%, per strategic foot by All earnings Our share line adjusted was targets. adjusted X-year and our our XX%. per

our with opportunities remain. pleased progress, we're significant While

growth As earnings to we drive sustainable on come. look ahead our to and opportunities focused while our expectations delivering investing XXXX, we for years for remain to unlock growth

are planning invest build-out We to on million, of focused loyalty primarily the our approximately program. $XX

our technology data and continue to personalization improve management our to foundation in capabilities. and also scale inventory our invest We

per Adjusted taxes earnings range And share XX additional million are plan all we total we to in be That interest For expect to and stores be be growth X.X% sales continue and sales the expected share do approximately X.X% current to no of opportunistically. said, X.X% $XXX comp earnings in assuming are shares to our $XXX expected $X.XX expect prototype. between million. to full and new repurchases. repurchase the between to and X.X%. We to to open $X.XX before adjusted year,

rate expect XX%. approximately be also We tax our to corporate

During from net expect a million. color, $XXX To million to $XXX landlord bit and we expenditures work the to add continue more and focus promotional and shrink as annualize year, of to gross we initiatives up to we optimization expect be the improve margins capital on reimbursements between be XXXX.

in increases we deleverage merchandising store our and with investments front, remainder XXXX. and additional our pressure initiatives spend and Most wage refresh On resulting in the CapEx maintenance. for technology the will cost strategic expect on of SG&A focused ongoing stores new be enhancements, to

of to and X.X% year, the range earnings of quarter expect between in first the share X.X% comp and approximately $X.XX. the sales For adjusted we $X.XX per

New due holiday fell investment pressure of Year's which will SG&A first shift in additional pay for initiative day face the fiscal X and XXXX. strategic the timing to Day, on quarter of Our

I'll And Jack. to it turn with that, back

Jack Sinclair

Thanks, Curtis.

across and setting exceptional supply customers Our more continue year, build plan across sustainable target growth. in Sprouts and loyalty while for for improve to advantaged team stores. more even business when and the our drive This our develop chain, foundation we from initiatives table to the the will innovation store strengthen a our brand XXXX long-term strengthen best-in-class

as low new Matcha bubble a categories. to provider forging and in and tea Our searching ], [ a team vendors far vegan, categories, with these our grass-fed is snackable organic, this, caffeine winning chip annuity products differentiated health intent prioritizing Popadelics, attribute, such keto, niche leading differentiated achieve To health-driven gaining and such mushroom trends is share become and to drops. wide find in and market for as working

trust. innovation ahead, on deliver Sprouts our growth Looking This store will Sprouts with value ahead trial drive our we and in basket. products, focuses and and to brand launching customers programs, in of leverage to sampling products provide and they centers company engaging and continuing seasonal more out continue new brand expand our performance

to increase opportunity store an have service gain new we maintaining provide We'll to and continue XXXX, of customers. wallet wherever are. health meet share exceptional omnichannel among customer experience to great In in-store existing an approach customers enthusiasts to our prioritize while and they execution

I'm often of and and to grow program opportunity additional base customer iteration We data target specific particularly basket. items is preferences, to excited The their introduce their of by the plans more designed first to about their our program us with the experience on them identifiable see gather to add to personalize this to our summer. valuable getting new enabling big our needs. grow loyalty a customers to share wallet our visit

customer Sprouts We're brands our to vendors to with our business deepening our will across value and product our data also the how new improving aiding on potentially insights about by providing grow development, a business. mutual asset utilize unlock customers, acquisition optimistic

to investing program ready and are the for develop to feedback testing dedicated listening We for value establishing will in full XXXX launch driver Sprouts. XXXX. concept, a to a long-term our customers' be

support and growth. meat in our progress our in-stocks significant bakery to made by chain we to advantaged We've adding our will departments. supply In XXXX, creating PICAO an improve future deli,

will chain enhance foundation. data supply and our also We technology

will and us on and Over systems further our computer-assisted disciplined allowing overall future. rely for these This forecasting the years, a the produce opportunity data processes systems chain ordering. our to to There's planning, the management process, last improve and to improved inventory replenishment. an enable production we've our supply more that connect ordering in now leverage

concentrated have values team Our best-in-class and building culture the workplace, most and the important few of a years. we is part our business, over past on

made process, is we significant it ongoing While improvements. have always

develop store XX% our than result, while driving retention our main growth. This for for has and improved leaders provide in to service, prioritizing our more to store team being restructured performance a continued results, growth. bonus we team stock in and As customer our is to year, which focus led store our more XXXX, member improved by To rate supports growth. plan, our faster opportunities

talent for career and critical is create our at clear on achieving paths aspirations. for levels. improve growth development This leaders our all will We focus training,

the create external We support and bench VP growth. with have Executive fresh a Director blended perspectives at to deep and promotions expertise internal our levels to

to Our strategic team customers. priorities and our is coming and stores execute together our support

accelerate open will year, growth the first approximately the quarter unit for we to again XXXX. Lastly, new year. in already opened we of In plan have and total stores X XX this

a pipeline have robust over leases. pipeline intend selection stores forward. strong XX We and approved of -- a our process continue we moving XXX executed improve And to to nearly maintain site

with our our strategy main specialty focus closing, In offering. as exceptional differentiated to executing Sprouts an retailer is establish a better-for-you

year. another initiatives strategic are off, Our these that and paying successful will through results confident demonstrate I'm principles us guide our

opportunities our team the year ready I'm to excited unfolds. to many share Our resonating our and the well is collected efforts face progress customers our as ahead. with are

with turn it to Operator? over questions. I'd like for And that,

Operator

from Guggenheim our And Heinbockel first Instructions] [Operator question John comes from Partners.

John Heinbockel

wanted with At I you're adding Jack, to assortment. the start -- time, footage. you're square So cutting right, same

the there to any in space. of terms So taking and maybe out I moving. with don't going foraging process is the and talk are sort your that -- managing planogramming not think of And about that items you're more vertical process

one So with one are Or you that? kind dealing of in, is it how out?

Jack Sinclair

back in were Yes, which allowed from department. a think XX,XXX, cutting focused we to ] space, footage arbor took on great to It's few us the we out about department, selling the XX,XXX we vitamins from business. SKU that losing space, our and When on right reduced of how noncustomer-facing had, not our count it's we down the actually apart [ we square in a retain to that question. but heart which very

innovation we which put really we center items with move it an allowing our us into the fast stores the And are stores, is Going the the with foraging team forward that introduced innovation center. foraging team, into to in finding.

their does delighted and So I we discernment of skews in have I've what innovation customers that's creating the hunt think to whether center. what treasure with items, into customers from being to us couple is that the -- have ]. the of sell, how own and the a been gives items assortment space section react customers this then way there products interfaced [ new the really the that extra to without had would coming we're of that that. months customers checking It's see that store, What looking that we're -- the is curating at us. something our doing appealing to the

are overall of of got the wayside. the they happen So that count in base are a planograms, number. fall come within because automatically can -- flow ones the the center, happen increased and There planograms, out so by other that those we've of of the products planogram we as the don't little SKU we're well fit on the the into really the sales innovation into in coming innovation But products kind put fixture. them terms effectively, or original get as bit an center out selling

so forward. -- we how that's that's going really this. that business all -- kind about don't been part broad our we've of But operating assortment that is assortment. And important It's compromise of

honest be to than And to with trying stores, the get so into always we're of less. more kind rather you

John Heinbockel

one Yes. No, on that one the great. And quick was loyalty program.

as top but don't assume kind million? million, to Is about I to assume then operating a an there to you the an it not if the going of capital. size correlates would case, $XX to I line OpEx And You're comfortable for cost that So beyond I $XX what 'XX can -- us, uplift be? business know get that's item ROI? thought tell the probably the with you the you opposed

Jack Sinclair

So for in XXXX. and issues flow that other we're of the in we're excited about million the you'd But say, clearly about $XX There's through investing probably the as the all some about business working for numbers some we around on. do that. way issues, fundamental to will within isn't and in loyalty loyalty. with today. you that the is it. infrastructure program -- that the benefits going And share things future, We The benefits investment some We're very all that of IT the not have that.

Curtis Valentine

into And $XX John, it as all it go is forward. the -- OpEx. always yes, go million and it And we as plan we is -- manage we'll forward as

Operator

from comes UBS. from next our question Carden And Mark

Mark Carden

So guys to adding that natural at for than now from organic to category to players your point? And much pressure to start, At quarters. this the stage, then you this at you sales still consecutive outgrown several offerings? mainstream you the channel? grow have overall faster are buck ability with seeing really the out census the largely out jumps and played what Has else trend respect broader

Jack Sinclair

found that Well, interest. this But comfortable a something to I like, -- we're we leading that manage way don't think as niche, that a is talked really we the over with we assortment that we've the guys -- last is few such other Mark, we niche, watch remarks I that our if are we of and differentiated that the our what what have about kind earlier. try in doing said quarters, you can in is be lot

give would keto of something But because target doesn't relevant that have, What's guys some they the that as their of able benefit assortment with our relevant seeing are to conventional few they're and a the to they this that such in, we've total. the for seeing we other quarters, our And watch they compromising not bringing And proportion over very that assortment real small it's bringing last them in. we after kind this that we're happening -- odd no be -- do. allow ability planograms dialogue the compromising can't can't a to to target it's what not It breadth -- customer. and but it, certainly it something mean to of customers thing are overall be for how chase of there's it's we're it's been with our course of observed the yes, the have the too the simply guys odd to item customers. is, to compromising the hard the that's they

Mark Carden

follow-up, Got trend it. to you And sense. date? in as comp then what from did month month? And makes how a your That to have XQ seen quick

Curtis Valentine

Yes. Comp here, trends through and the solid the guidance. good but our been performance, we're ups baked pleased certainly business about and the fourth to quarter running. It's We're intra-quarter Mark. pretty with stable, and where it's is going talk downs, into not it's no a major

Operator

our Edward from And Wells Fargo. from question comes Kelly next

Anthony Bonadio

This is Ed. Anthony on for

at there's growth a just So the you'll talk we about to can comp last started inflation I angle guidance, this little bit year, guided the think less back with benefit. drivers? you see idiosyncratic step just taking X.X% midpoint it's a know an what's looks which But the and elasticity outlook. likely constructive confidence actually in about giving despite guidance a you some like you -- as here more there you underlying line on year where about

Curtis Valentine

just the pretty steady. Yes, watching us, we has solid it for business, were been pretty

And seeing you the the in back continue. pointed stabilize rate as well, you certainly, driving we're out, disinflation. come as the we elasticity comes comes stabilize as can the And We're to and seeing expect nice the the that and we're AUR job from down units down, AUR doing a units traffic, expected. so sequentially

where with pretty we couple X-year pretty quarters. running is expect a to forward. that stack it's last of been business that where and can we've continue we're the steady perspective, So pleased the running From

Anthony Bonadio

on new you go? to think know 'XX? then just And launches helpful. private or additional how And in you that that can That's product think as quarters last about the on guys thoughts brand I category But the about for SKUs give these just been updated a few beyond, that's where in ultimately can growth pipeline, in us Okay. really. growth. just your you strength and

Jack Sinclair

redesign pretty items the like. which the development Yes. redesign we're have is last been the our very been the the team our quarters. brand working I that has growth to really make with brand together, focus attributes brand customers. the evolving way place, and Sprouts see for the which on pleased programs for seasonal Well, we significant Sprouts playing look our with I've developing modern over how Sprouts attribute, the The them has when put significant way pleased focus business. few pleased the come much I've been and and been us, target evolution about that and well think looks in is we a

that. I'm comfortable with So

that how business Sprouts brand see isn't -- sales So that is items, going terms our or We'll will we're to brand. see The and focus about happen forward, items the continue in whether it focus then Sprouts percentage branded of of the is, business branded do it The products. what our of with be -- we launch grow. of we Sprouts our differentiated. focus ensure we'll

So on the think really commodity sell. the becoming items to focused becoming on pleased -- We're is, we're right it's we if I the that is less been bringing the decommoditized. I've word the What about marketplace. brand Sprouts products

differentiated. So the they're team doing is a focus we're the that's terrific And and everything selling that of job. the

Operator

Leah question Sachs. Goldman next comes from from our And Jordan

Leah Jordan

you I the wanted in margin. then that up in about gross could more to also that be margin drivers And provide the on should fourth first detail saw merch ask if expansion I'm you seeing quarter. to mentioned margin gross 'XX. you the

expect on about? color any any there we should magnitude Just puts or you're detail that the and takes thinking on

Curtis Valentine

Sure, it's Curtis.

a around nice bringing third back last as trends the about some but line. we retail challenged little has done is the different. than challenges ours a test broader [ spoke in fresh about had the in a the you're bit in more again, And QX, we job -- It's seeing shrink little is had difference ], time, that For and quarter QX. team the yes, was there, it

the difference DCs QX. Outside of So QX nice product still the managing pressure we're expanded job a merch teams really are that that, from the to the the experiencing doing and was from margins.

to ahead expansion look at looking for those to XX, of XXXX. XXXX, well, basis about the I it expand will think in we much probably as As from continue points XX think I margin 'XX, things we're how gross expecting

Leah Jordan

follow-up, then to Okay. wanted Great. labor. just for ask about I my And

You had mentioned still there. you're seeing pressure

Just some any update the overall? specifically the be ways what on California you're helpful. labor of seeing cost market pressure what Maybe on mitigating through you're color in thinking that And throughout year? would are as you move

Jack Sinclair

I'll second, an people, through our But of terms let Curtis obvious how go of been some they're in our think, we've members, group working and when we're terms Leah. earn in remarks. hard numbers a as would we bonus which important of program, team to such they as in encouraged significant the by that. identified more has to done reaction than have opportunities we the given we and people otherwise, changed That, in

us lot don't the much than workforce, member -- customer money you less when rotation a well. as have said, you when actually I as service up team of saves get it As builds and

is So people of effectively. we part how we do program. do retain Part it bonus of more it is the how

specifics that conversations California. prevalent we're our people, is -- thing Most the of we're watching. with with clearly of the something California, And which around north to $XX all so in

the of well. quality getting We're getting high, as there. applications good in we're of in the very company high we're and encouraged shape by the kind applications, -- more our is we're applications jobs strong all-time for is a So

with associated good in what's think happened, Having that, we're with So with. get numbers that. shape there's I'll deal which said Curtis at we some

Curtis Valentine

Yes.

year-over-year that additional some the continue. carrying as expect into we'll cost certainly it we're to So and year to the relates

to mid-single our digits in mid-single just into slightly the planning year-over-year growth on for wages. we're lower So digits end less

in it ways we're be As really at it, work and looking Well, works under offsets do as efficient. to The hard we SG&A, every mitigate? business. it team for more kind to relates relates really hard continue of how for look it to rock at and to our we'll constantly looking

Operator

comes Rupesh & question our next And Parkih from Oppenheimer from Co.

Rupesh Parikh

Congrats quarter. nice on a

your ] openings, a curious going to just store And far? sounds But So new look lot they perspective? doing expectations are just new [ store the commentary, are at back Any your of your surprises from it you well. then really meeting of performing? class stores thus as they're how like ramp a collective

Curtis Valentine

expecting Yes. Yes, we're right in line they're Rupesh, to perform. thanks. with how

talked we're seeing quarters, it about the the the a the we're major deviations no few over little there. new So last lower, a We've starting them. trends particularly We're stores, pleased from in with little places ramping lower seeing faster. Overall, That's Florida. and awareness We're comps Florida. we in and results the as expected, the performing strong been they're story good have really across seeing in country. we're we're really

Rupesh Parikh

I now then But double-digit is you And earnings business, your closer growth the explicit in at low looking to my look you year. But I'm know get follow-up question. for to And not longer-term XXXX. to the the double-digit again, loyalty coming Great. years? the guidance for business as this in position a related algorithm is for this headwind have Clearly, low program earnings that growth.

Curtis Valentine

script Well, about certainly, we sustainable talked a lot the long-term in growth.

important us to to moving XXXX. some the to in and term. got our investments as that's goal you need not those are that. for keep through investments set in piece Certainly we've we're and forward that progress we guiding into an XXXX up mentioned. moving direction, long here the But of so move And make yet, We that as

Jack Sinclair

in year Yes, it's for making us this having investments help certainly early and XXXX. said we're our future that, confident guidance But to very we're Rupesh. about the will XXXX, give

Operator

from comes Ken question Goldman next our And from JPMorgan.

Kenneth Goldman

didn't Could kind perspective. I misunderstood. And just you how continues I think response something just I question ongoing understand didn't that about XXXX. maybe to your repeat was spending your just you it? about quite the this that if that the clarify $XX or year? from answer And million you're know that in OpEx after an of

Curtis Valentine

No, I'll clarify, Ken.

OpEx I XXXX, in yes, million loyalty here investments. foundational and that's to get along in the $XX going really think program some technology with

So continue forward. going not investment of that level expecting to

Kenneth Goldman

curious just question to we're just is this -- if again, necessarily So can't on be build going I'm a but you here. to wrong answer,

build to prior question on there. the Just

than $XX is in of Wage knows for investment about 'XX. where year, have the -- in next but in getting headwind. You card Who you've loyalty a it way. terms inflation, of less becoming less talked the million it's trending that less

in stores you're your You'll It up terms feels better 'XX? next an as What that loyalty think a of help you, lower because to Are And just kind about these year really to have this there's specific? the too have an that think maybe it's have you way with base, are tailwinds about missing at comps well comps though from acceleration. maybe are will year. you we that we benefits for -- the you year, early we as accelerant be for of as maybe wrong accelerating new even like of setting lot a card.

Jack Sinclair

think it there. with said remarks I last your you

XXXX bit certainly will it. come in But of And the I in to it's think early that's investing why of of us premise share get that this little money future. for way terms we our and it more our navigating about understanding the believe certainly a top provide line target this through we're for is buoyant that a our to wallet beyond. larger in with and customers very customers us trying drive year to growth going

have process If at the got we understand And than it. ongoing better. of really customer be behind it's specialty the work great conversation we in, get putting that of year going 'XX. to about it learn able customers lot more in the we'll even we'll from XXXX, end understand part to will us think going this that And an a towards be to moment. for to as able And grocer, terms do. we do that's work actually a mean And do we've be what and of 'XX how of better key it's a the I in we're to our we're what

Operator

And from Scott our RX Mushkin comes next Capital. question from

Scott Mushkin

understand if me And at, why coming that the the decently longer-term of Rupesh at store -- hard are in. especially the lines the of what builds, And Kind base and of looking kind and new with it's it's here, And of stores case? you about. same with talk were to along how talking comp stores kind algorithm X%. the be just like all normalize on new me the like Ken and trying that, to kind out of least wouldn't wouldn't out for the medium- of growing growth at

Curtis Valentine

what Well, certainly, We've we're I deliver of in beyond. on things do we're I don't good the to XXXX. moment, I for drive to certainly and a in the consumer XXXX comp investing in and as think look ways out we're to of long at type ahead. drive we'll Again, that Scott, angling putting on and don't here a got mean, got But job that. pressure a and and comp you we've execute. the to sustainable talk -- from 'XX, we some XXXX off aspire we that

Scott Mushkin

box working and said going you're smaller you you the tweak? new better getting worse? to And through. are maybe there's a stores. guys And your come take in if and -- that a what going formats happy you're And process a what's with your I than you a lot of the back seeing there step maturation what's assume and you ground, you're maybe like little that thought? now But

Jack Sinclair

We're a we're doing talked in performing very I what really said well. that's with for with foods, when as well we pleased been our pleased innovation we with lot new I'm put that invested of stores, I've introduced new terms how through format. earlier, in really stores. a the encouraged that, and center meals, our that's meals, doing and with about of that. prepared emphasis format I'm lot and turn, frozen by, on is flowing which a pleased space in we we something Yes, very That's with

high of X X or kind it. points in there's So

liked been of probably and in was as it that areas But is business as our do. maybe well a plant-based plant-based meat that we the and strong Plant-based hasn't to as One invested we well. very well, the that's doing through dairy doing not would have big is trend, meat investment. is dairy come

total, coming doing meat in of it. like got But drive overall, of at in the plate. I to fact we'd the of we've it's the terms that what store way center to through front like that's

have pretty by that think, place worked we and large, I put well. So in things the

Operator

Montani from ISI. comes question from Evercore next our And Mike

Michael Montani

the then in just for guidance hoping unpack and for was I year. full little a quarter the to the bit

comp? baked and thinking in And If guide you for traffic. inflation, could quarter? how is And you much terms the traffic that then just do of what X% have how terms unpack of that in year? next the you're about of the to a little the into Would of be X% bit saw also up that you fourth kind in

Curtis Valentine

Yes.

the in quarter. the there, saw Yes, again traffic AUR fourth it materially take the you I'll the I third were from the Mike, quarter. fourth than than a AUR didn't higher units in it So from positive slightly quarter. other shape stabilizing of change a what -- describing Really, little is and quarter fourth bit.

As will a slight we again. to ahead 'XX, positive be look it traffic

hopefully, inflation of then there. We out and We're the lower not units couple finally, flatten years we'll there as way normalizes XXXX. running what AUR all for everything that's are and yet, expecting and units slightly XXXX. expecting now. but expecting to a to And in the stabilizes have of offset up. we're kind slightly We've And pretty be as said that close,

Operator

question Bill next from from Kirk our comes MKM. ROTH And

William Kirk

you've So e-commerce partner. adding incremental think as lapped DoorDash an I

up that same the was happens I So if XQ mostly now XX% year-over-year, to growth partners that guess, the what year-over-year? e-commerce rate are

Jack Sinclair

Well, partner. we another brought in

Uber be really going navigating we're are we've of we're foraging wouldn't for about very through. very add encouraging I'm It's We brought So I will got so that that there's it. that how to -- is the get that -- didn't into coming Eats process Uber encouraged a we business, omnichannel when the Eats the sorry, growth kind recently What minute. of -- is we're the there that it. fact me an environment marketplace. products the that customers we're about if doing work wasn't doing that differentiated assortment to in -- encouragement And of merchants in to the something the our getting well in terms gives bringing lot team the a and the e-comm e-com because in so remember

going will have been can as going giving They and do the us it In forward, us. do take they can now they terms where customer it well. great will DoorDash, We're be to Instacart partners the option. what them Eats is want for take be, us of Uber to

got very, providers. all with we're So of the pleased e-com very partnerships X with we've the

it forward, So it's be within guidance be, will it's going the but to going what that Curtis talked.

If to build you want that? on

Curtis Valentine

I timing year. think, up pretty after right? just DoorDash of throughout it Uber the and I about the ramped is Bill, X year launched think we DoorDash Yes. close,

degree, to to the as they'll later. year to year. But continue not so Uber launched And same clearly, the comp, basically last X contribute rate has

So those neutralize X things of should themselves. kind

William Kirk

prices produce more Awesome. a me bit the Okay. shelf. your are deflationary on prices produce follow-up, to then input than And a as it maybe seems like

then more that would First, to if is, a a place way Or I match? as profitable eventually two guess, dynamic be is that refine And the in industry-wide more a base a like it is it households? fair? and would of dynamic customer temporary towards

Jack Sinclair

week never the happened in one Well, on as that. about exactly what's to we've mind to next it's there's pricing, kind next very difficult and in definitive year talked lot a lot to from of be projects, about a volatility of one -- the

or that a something own in or we to It's really can we've would produce you organic of and Our business. very that's our kind different see with -- grocer we produce in total pleased business club produce, conventional how have very of mix been even we -- the that has been channel. organic Walmart in

we and in manage place prices. to happens the volatility question, what certainly, business. not and pricing terms really of organic organic got for really of forward. I doing freshness if in we're and we're relationships and customers. the but strong that produce, even in differentiation answering our our stead base strong going price and your forecasting terms have investment kind of We're and better our and good in improve of produce, distribution a of in downs work with in us seeing we vendor the effectively both of a in think I'm to systems, lot freshness that's our make -- to we And investment terms of to organic get in ups sure and think think our the stands of systems in sure physical I'm we where long-term systems And that quality organic good the we've produce, replenishment a produce

question to to it's for again, kind probably too your So give there. a volatile of definitive answer us

Curtis Valentine

different else. a than I add, just of that Bill, because And we're just organic going bit mix look to everybody

too. that, And so that will play a part in

Operator

Toscano question Kendall comes from of Bank from our America. And next

Kendall Toscano

what and there color basically on was inflation expect you on is at just back Congrats all? XXXX, from a My anything seeing quarter. heading what price question on that store. And you're suppliers center guess there? would I pushing about great Any into they're

Curtis Valentine

for Jack more you assume And But certainly, I I alluded say think think, just you nonperishables, I center is mean when the in store, which as fresh different the volatile us. piece, is to.

volatile what bit and And piece. on business be so the the we macro that's more our line with little in a is to the about more I think as newsprint tends nonperishables, that, think fresh

As experiencing or and we're I stabilize in here that what digits watch of in current mentioned we'll earlier, single we're on -- the higher XXXX. QX, is end low

Jack Sinclair

in pricing. a remains volatility commodity there And

that and to hitting other. the We've through. we at store, items again, that way center affect one will are by I are up of sugar, the managed things some But going center for think going think a those our in being saying look of sold Other our that dramatically conventional the prices without being the that which affected swings or we one got nonperishable of the I flow business, kind expression flow lot maybe sell, And that in and opposite commodities for roundabouts. drivers business dramatically. navigate But like not -- in direction. unlikely us Sprouts that way if through are commodities you and really of people are CPG have in differentiation will very cocoa pretty difference certainly, a big lot what it's those store. it's is, our with and a

Kendall Toscano

focus year, markets? existing it. then That's could and And XX of a helpful. between you're Got really remind stores the follow-up, as what you the opening just is new me next

Curtis Valentine

markets established the and of and Coast kind about half drivers XX-XX, Mid-Atlantic in existing on Florida there. then half and as it's East the about really Kendall, the

Jack Sinclair

in that -- we're [ cuddy which store, store opened really is Miami. We've We've about X when we got ] with we've it, really in One opened Los just I this pleased think year. a Angeles. a very nice nice

the of all opening country the at over in kind stores moment, we're Maryland. So

And so the building see to exciting from actually us shining quite to sea it's sea. Sprouts brand

Curtis Valentine

the open is going in they're I about X/X half to only the Kendall, of half on for year them this be stores note, will the year. second the other back think new of loaded

Operator

from And Bank. Katai Krisztina Deutsche comes our next from question

Krisztina Katai

wanted the to about ask strategy. I customer

even insights patterns, than a a you did you So more year lot into purchasing ago. overall have

data especially And increased was if quantify, a traffic how you driving you how up wondering about loyalty I maybe is launch? just you're program as in uplift could the opportunity, gearing you or helping do So customer for frequency? think

Curtis Valentine

identify. XX% of Well, we're our and kind immature right? space, high digits, customers of about digits talked transactions fairly we still low We call it, can that identifiable of in double double that

the to a on of We're long -- getting go ability there go So do our But ways the we've to really ways with we've for got long to a that. in there. and loyalty out middle excited year. opportunity the test got the

organic early personalization gone and segments things after think work the team some like We've work, within has retargeting some of around testing. some customers. good our done We've some done vitamins I and attributes that.

the to and do in foundation the this really investment able be data loyalty the of foundation that year getting right scale. so and to And part about at

we'll we're the do working be year, so that us this down And for line. could that hard excited and on what for

Krisztina Katai

color in just give what a are of was comp I wondering And from doing actual more mature stores perspective. you bit your if could terms a

just benefit of mature if in have waterfall newer how And the mind for comping on keep the we couple should there's any are wondering benefit. obviously versus that a update next You ones? stores years. the But waterfall

Curtis Valentine

Yes. No problem.

momentum They comps, especially strong a and comps. markets -- a lot newer good where the So talked seeing again, not strong they're those we're places lower we've established. in and really start as in a little

per mature comp I the get to into comping our it's contributing stores won't and specifics sure, well. So se. for are

stores. comp so the as newer will they just mature and bit lower is I think think as the little to as thing kind that the about only the the that new between stores or impactful of start. Not impact a the mature stores, the base spread other on volume stores, again, comp at

Operator

And from BMO question comes Markets. Bania from Kelly Capital our next

Kelly Bania

Wanted long-term back plan margin. to margin, flattish discussion gross I to go was there kind of your the believe a gross of for

I some you I has see see up to changed year. if to But opportunity curious You take Do this talk anything that take clearly long opportunity was could term? about you just to elaborate maybe us out term? you think Maybe the And just could the opportunity? driving on just understand help if optimization. year you up? long shrink and that more maybe can called that factors you continue this and promotional

Curtis Valentine

Sure. margins thinking as holding stable from steady. Well, it we're term, our I about long still think

of on bit right a story. is a bit really I now a think shrink little just going we've got what little

team we rough in job So had has of that QX, done shrink kind Ops really line. a late getting a perspective. a back in from nice half second

be we we so those year there'll as like the And opportunity, numbers lap second line. particularly the on some feel in shrink half next

that a driver it. be So will of

a nice have done merchants job. do And -- then we

in and working of year. us the continue from the optimize So of bit promotions the for and to business, manage the little have will of XXXX in carryover half mix we what's a that been just first

into experienced supply the will the get that half. that we'll the I think the the through we ease year, the of expanded that we've from half footage, second the is and square piece second as first then half in lap last chain pressure pressure

Kelly Bania

kind on us get was range I -- manage a think of also at mean how to kind range, -- really the full puts I for of talk the you plan about follow-up that your can the the end just still of about comp how the if on to is of I low Maybe pretty can comp? just kind range, year. help you that that. and take. earnings you can flat the it's narrow guidance just And curious

Curtis Valentine

Yes.

mentioned, you're little We'll goes the the pressures of of experiencing. some to on again, end work we'll towards of ranges to but bit as for had deliver. guidance and to I hard the a comfortable and we're does we it the as we have offset cost -- some have of being to opportunities out deleverage we've costs, with obviously, think, side, to gross fixed margin get expansion. range It the the starting we harder, have feel able as low there and the against look

Operator

like I back remarks. showing to now turn over would closing you. call Sinclair no further for And to And the I'm Jack thank questions.

Jack Sinclair

date in evolves. the with forward time our Yes. as this afternoon. you much. up spending some We Thanks, appreciate ever we your to interest everyone, year and bringing us company, look to our through Thanks so for business

Operator

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

disconnect. now may You

Sprouts Farmers Market (SFM) 22 Feb 242023 Q4 Earnings call transcript