Sprouts Farmers Market (SFM) 1 May 242024 Q1 Earnings call transcript

Company Profile

Participants

Susannah Livingston	executive
Jack Sinclair	executive
Curtis Valentine	executive
Leah Jordan	analyst
Mark Carden	analyst
Michael Montani	analyst
John Heinbockel	analyst
Rupesh Parikh	analyst
Scott Mushkin	analyst
Robert Ohmes	analyst
Kelly Bania	analyst
Charles Cerankosky	analyst
Robert Dickerson	analyst
Jessica Taylor	analyst
Evan Ketterhagen	analyst

Call transcript

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Operator

Good day, and thank you for standing by. Welcome to the First Quarter 2024 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 Susannah Livingston, Vice President of Investor Relations and Treasurer. Please begin.

Susannah Livingston

Thank you, and good afternoon, everyone.

are on you XXXX first pleased call. earnings are joining our Sprouts quarter We Executive Curtis Officer; Officer Chief Sinclair, Jack and me are Valentine, today. with Financial Chief of quarter The statements, accessed be including certain expectations this Investor our our results, our call, release of the and for first statements section beyond. at earnings the slides regarding announcing through webcast XXXX forward-looking website this Relations can management call financial make XXXX and investors.sprouts.com.During may that could statements. These results several statements and uncertainties described forward-looking involve materially differ the those cause from risks to in

risk For comparable the more to our earnings information, hand see GAAP factors at earnings please the discussed reconcile forward-looking references to me it on over release today our refer the and Please non-GAAP to to filings remarks tables of measures measures. to our the figures.With release.Our the SEC in statements Jack. our let end in that, commentary include non-GAAP

Jack Sinclair

centered been our customer. the remains the has of continued momentum thanking strategy It to per and the store our and per good approach growing adjusted create execution business.Our around experience And strong Susannah, These Thanks, which comparable by work positive our for our have we're together diluted entire across impressive results.Our by grown our in the share with year. to members and in a team. the effectiveness by X% sales earnings by afternoon, compared hard results X% by the to great financial same year. start customers, in growing I earnings want target working period team delivered who turn business sales reflect encouraged start diluted our everyone. XX% XX,XXX last by share to exceptional a

operations, attribute-driven and marketing, marketplace. provide freshest, to the in design chain We products most new-store merchandising, innovative, supply strategies our the have aligned

in first in traffic easy-to-shop Sprouts quarter, and We led with customer were quarter. highly successful. the These first service.During events and great brand we growth organic have also the events, created organized others format positive a which to unique

pleased continues on every with up a country.I'll opening are our just our first We And more XXXX to communities bit, more in for I'll financial store the in to better the our but are to hand we're our and the now, for new the eat to store across pace. program new committed over follow the quarter journey opened year. customer live We Sprouts country. X quarter to it to and Curtis? track The for with bring gather across and review performance outlook. Curtis on helping

Curtis Valentine

Thanks, afternoon, Jack, good and everyone.

addition $XXX sequentially. We For the as per sales expected, were average or new units quarter, and up billion, sales last stabilize continued the total increase to growth of This retails traffic, store had of the unit basket same million X% was another quarter driven from $X.X period comparable by and first X% stores. positive year. of and

Our business continues be to resilient.

and drive grocery, continue frozen customers for results.Sprouts growth outpace total our attract performance most our the comp total categories sales company such the the Our dairy, our contributed with to and XX% performance differentiation, Brand quarter. continued meat to and as of target highlights

our differentiated the create partners and year.The included XX%, quarter. our new assortment. approximately joined from sales all of so in the representing appeal partnership online Uber of of incremental our highlight launched for continues XX% Eats of promoting grew recently X sales e-commerce total many This our out customers seek online Our healthy sales momentum trends to the in fact us to target Sprouts our

continued shrink period points due of the was year. focus to significant fresh in increase management. approximately same of on gross from driven basis first inventory primarily turnaround margin a our by This our quarter an Our prior was the XX.X%, XX improvement performance,

We SG&A see from carrying of adjusted million totaled period margin deleverage of compared the from million, XXXX.SG&A same to the points quarter or to improvement prior of $XX an due efforts the $XXX also year. continue optimization to over for increase approximately year-over-year promotional XX basis

the million was quarter impacted As of by the first in Day New in anticipated, Year's the pay first holiday $X approximately day XXXX. fiscal falling with

sustainable has of income allowing new earnings across We investments the generated operating the capital $X self-fund expenditures, A rate Net in Our earnings and in us in from balance million the increase million net strong the growth $XXX our approximately the cost we $XX long-term higher quarter, million XXXX of depreciation to with we as reimbursement with we business. the the XXXX are to on prior related and before was of and are $XXX and an share the higher occupancy diluted XX%. $XX million.For $XX flow, share approximately foundation well stores per closures. to store the the quarter, underpinned compensation track led to invest X approximately cash sales our closure our states. period was $X effective as $X.XX, performance build costs quarter totaled for tax to our first our for quarter. spent million and incentive primarily shared million. diluted quarter, fees first Depreciation stores, financial plan to million same a grow XX% ongoing quarter. e-commerce included in strong team.Last opened compared for ending was million earnings in to our interest sales and These $XXX adjusted was were other the and excluding were taxes $X landlord XX million per from Store Interest costs year.During of XXX expense sheet of healthy earnings amortization, performance.

to repurchasing X We also our million returned $XX by nearly million shares. shareholders

$XX remaining and million million revolver, $XXX $XXX outstanding have ended of and million in our We our $XXX under of with our repurchase our We to cash the cash quarter current on outlook. share letters authorization. million $XXX million equivalents, outstanding credit.Turning

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

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

deleverage million expenditures the be continue we million. margins of up we year, color reimbursements $XXX to full to between expect and the promotional the XXXX. wage ongoing from deleverage, in add to shrink we XXXX.On strategic capital and new expect be optimization in investments a work gross pressure cost To our front, $XXX bit focus During as on initiatives an to more to improve net increases, we expect store year, resulting to our annualize landlord SG&A, additional and

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

We turn are will expecting margins up quarter I'll we in in our comparison, that, outliers Jack. more slightly.And gross while back slightly, SG&A resulting fewer moderate impacts second SG&A both and with lap it in to deleverage year-over-year as gross margins

Jack Sinclair

them our live We remain with that to and enthusiasts better. customers, our serving health help Curtis. Thanks, products committed eat

others. they distinctive innovation grass-fed continued unique destination attributes to organic, as frozen believe program team have as culinary non-dairy Sprouts The finding like food grow, chicken add of and to products on and innovative the our such to the spirit center is has their brand companies cauliflower honey that foraging and gluten-free, lives tenders, continue entrepreneurial vegan we Our and become our marketplace.This success as teams to exciting sales for or introduce of products innovative apart items hundreds set flavored new rice. with desserts, to continue dedicated within our from we us hot

Additionally, help in our many customer engagement Part quarter Sprouts brand. and to paramount our mentioned of a highest our the to team earlier, customers navigate in incredibly them.The remarkable assortment dedication of our customers history, members differentiated available the and of I the is as is the service for in-store remain support team's who our us. customers to achievement. friendly knowledgeable in appeal who first have resulted fortunate truly love scores customer some experience

customers have share will to passion live distinguish and program loyalty we is our customers to shop, functionality our our personalized brand an and to we're better. can team their opportunity of improve we our our our engage their with shopping experience, is with them unique excited complementary to catering already over-time. in wallet and the by a vision provide feedback beta quarter what incorporating with the program.Our enhancing community technology a beginning. is continuously launch engagement preferences.Our This in a where by to through build just to grow that of customers thriving program this As members content X the endeavor markets upcoming Sprouts their enhance does, our eat deepen multi-year from Rewards can enable And our helping to Sprouts brand and customers a and

team reasons published impact products, and such recently we with sourcing or of believe of our One areas highlighting We planet. our of our report the the are care deeply members communities in for love our because our all values Sprouts customers aligned. We is on work XXXX attributes. our $X.X serve.In we products target and as supporting customers, to sales responsible waste social areas XXXX, our communities were sustainable the environmental from matter most billion reduction

stores donated million Communities focus XXX on of encourage and the XX from see flavor Cudahy, the kids our circulation, the meals through quarter, reusable team we donating year. nutrition to to grow need to our end California, approximately support the those members our and Burtonsville, I XX Maryland. bags a build transition to hours that of In single-use to several our our within million was X,XXX with delighted Foundation school launched get Our fourth the stores by impact.I communities. X the help healthy are over and new to by education. report you areas read through was open store to from first service gardens new opening approximately in bags exciting to It of removed Healthy track quarter during

estate building momentum and our to culture. our markets continue executed extensive we in as and confidence year progress healthy we our will across in growing a and openings is this approved commitment new-store coupled continues model, much seen support We with in we country.We've and workplace of pipeline to expanding through this to awareness openings continued XXX stores XX have better newer brand evolve. of and access also aspirations.Internally, best-in-class These have in real our improved making selection testament improved great robust to attribute an densify foods our to the a pipeline growth site our values to success approximately communities leases, brand which our and new markets team comp more

to have know that excited tribute in that aim a Our intentionality work, work. impact. To culture year skilled member another service graduated rates is in across XXXX.In store close to the efforts collective members believe roles, encouraging the tracks, retention initial team we're into currently far.In ongoing with execution. seeing leadership our leaders high, demonstration continued journey XX to effectiveness manager we're at addition a this seeing. store receive we for confirms is of that of ready engagement we the an leadership pool them. team our made all-time feedback and our great assistant improvement We delighted our promote on them is program our the our towards from the board We are our customer making translating which the on scores seeing We cohort behind this we've future to customers, are We're managers the are focus team for progress for the are focused closing, XX our and a prepare for this of which XX% typically We're we assignments. preparing momentum culture growth. culture members over meaningful entered improving to a thus from of and have scores developed from is

with we office and our future remain that focused all turn stores investments determined over and many Thank you and on future, both keeping questions. deliver I'd Operator? teams top support, on for coming opportunities you center execution, like ahead.Moving on the ambitious for and with in customers we in our Sprout's the forward, day-to-day that, are for lie your store, to to Our while the support look are for to connecting distribution it our of months.And priority. forward

Operator

coming from Goldman be [Operator Instructions] Our question first will Jordan Sachs. of Leah

Leah Jordan

Great job on the quarter.

share you on start gain? recent versus the Just attribute wanted quarter? the How to comp. traffic the market to primary the what trend What do driver your was off And outperformance throughout expectations? the did for

Curtis Valentine

for the there. thanks Leah, note

So yes, comps a things. outperformed, it's really lot of different coming from

a expected. of think being bit I it's little than a better just we little bit everything

So continued expected to just and stabilizing hum as solid business AUR units the traffic, positive, continuing the along.

in we're with performance So the pleased QX.

Jack Sinclair

e-comm business. channels We're both we basket bricks-and-mortar seeing in traffic both positive our -- positive and Yes. traffic terms positive that in We're of in have. in seeing those

complementary places, define in people us basically, see So But because total the shape.On the little -- we're that. last about to suits kind shopping us. have been asked, context and Leah, what market everything question shop. share our doing how at look -- to We grocery it's you that market we the do a certainly, of of share very of for pandemic, well of seems comfortable more kind business in gain as a to since kind within more And We in feeling good think, I positive on be the in is share. which comment it's difficult market difficult just own the bit.

Leah Jordan

Okay, follow-up, And great. gross really expansion I it then just in quarter. wanted ask very I helpful. That's came strong a about margin. the mean, to in

about You earlier. tailwinds of some the talked

the much the promote quarter full of Just then for to of would the it be basis said the magnitude year? How when to side in for will would Any think basis And quarter? color it last up on the the how year. compared said the can for from given first strength points points be up more of XX optimization about XX you -- the we you moderate the it balance rest year?

Jack Sinclair

sure. Yes,

so I the would $XX year, now. for say approximately [ million up I ] think,

just moving better second top call, year. on but they we expected a in than really little got a it throughout got really quarter had half. And in happened So particularly last to it and on last in story. business a on the And things And figure some the performance.Really in direction. really good we we analytics turnaround the credit right expected the certainly, we out our investing of working teams that the for help to about million together expected flow-through it ] coming some inventory the talked first together, on the teams operations, it IT than focus year year, things was the growth and challenges $XX full shrink be and the about merchandising, late But things last I the of and resulted faster teams, that and of we and team get and we're just side. up yes, [ really our management in,

Operator

our Mark for question moment one And be from And question. our coming will UBS. of next next Carden

Mark Carden

quarter. Nice

seasonality maybe lot going on question. management. that now, XQ gross strong clearly from strongest last Obviously, from performance clippers. your is benefited shedding historically margin to follow-up is So start, quarter the right a a perspective, a coupon inventory

back more backdrop next still Just see to these room thinking really for other of is you to scale a to you the do upper perfect year, that think bound or current much about more year, in when from the or the So benefit XQ in you you about XQ relative this maybe just room half see Are was you words, approaching tailwinds here? guys? do pretty go up?

Curtis Valentine

Yes.

think we're lot a there's that. I pleased, in

we're gains in It amount. a we that forward, kind and going that which margin, we're in So and a we there's gross nature. particularly It be than little here helped here water shrink we're in and longer-term, feel experiencing I'll nothing fairly it's sustainable from good margins. and by doing an and talk fair soft changing about bit be the there We're perspective. of level like compare won't feel it Certainly, magnitude the stable about it work was piece that moving about was again, will one-time feel XXXX a still to try the we business. we to definitely year-over-year, we big better immature But XXXX. overall in was quite line, And a expect be it tackle bottom forward.But in that business good them our a there piece.

points opportunities. bottom grow net-net, business. plan continue as So There to on and manage well. to the the And to we business the there line pressure stable are are

Jack Sinclair

kind I And, this And Mark, us benefit at, for look we a in buckets continued of the shrink gross big margins certainly think particularly, that opportunity. there's been quarter. there's

the business immaturity managing As our more in and the we Curtis said, applying put better we as increasingly of at get with effectively. some systems inventory that in are

at little we're And been years. forward. getting of organic which of will better last for. further I work elasticities. promoting products a when better efficient Well, thing ongoing think going towards bit drivers promote.And some there's to think been I over think continue a towards help at we there's I the getting more that increasingly promoting some just We're mix some little attribute-based few that's terms being mix the do benefits and of effectively we on on a mix, understanding an getting in and bit us mix, more gradually reputation that the

help buckets I those think will X going forward. us

Mark Carden

Great. home? a or just some think food outside about it's on do coming has any from sales home? restaurant demand heard trade-in food That's uptick Have in you from Do you as helpful. think prepared mainly at experiencing recently. you been follow seen then we've within of much up, food And at pressure Sprouts

Jack Sinclair

on benefits made I cabinets a got the seen been from I've benefit by support both number business dairy that. inside and space business, the the have stores. meals meat put the some think the in and No, that pleased we've made, we've have we new of had very -- investments We've good that. the some we've to from team

strong. Our frozen business has been

And as a think bit people had restaurants, eating X So come a of that big I who the X, going think from next how XX that. likely forward. I benefit to in be basically we've the months, opposed benefit a eating to of the than it's X, home the going go economy knows disbenefit but from buckets more over at is kind to do

Operator

next moment one for And our question.

Montani next Evercore come will Michael ISI. from of Our question

Michael Montani

could. wanted if I I X was in to One on focus areas, on just shrink.

a benefit for of give seen you there, theft. in think could versus the opportunity you've then But us if I what the incremental more wage some on just you and can efficiency of terms and Jack, story what color secondly, front. all, it's wondering And be? gains

an update experiencing just can line all in looking provide So what you're this year that for item. and you what about there are you

Jack Sinclair

a I'll we color, on the our Mike. kind Sure, let of particularly are going-forward, fresh made hearing X Curtis add some benefits, more our say, bit -- from little experience the don't of And partly because products attribute that it's a retailers non-food so you likely lot less shrink, theft but buckets, as in differentiated. correctly we've the shrink. you're

honest be think I steal on, them and them people for it's to you. with harder sell to

we're to a people inventory. I that not space And So benefit issue how think fresh bigger we've it.The watch lot of fresh that manage continue of got we're than getting the real are -- although in doing, we lies a most. our we seeing kind in other mix

So going time. inventory is the And more in the Replenishment us Forecasting right much is stores which putting which this, at the we're Allocation We've allowing I got immature initiative bigger better at get in amount of the as these called we replenishment an Mike. better around Management, FARM, systems. here get to, opportunity think, right into forward is

wages forward. we're made progress of lot the opportunity teams the that And kind way really encouraged regards very benefit. with we're support the some benefits, having that's -- our the very a I'm retention continued think a teams.With the stores. on positive one IT teams we of that and have going merchants about and remains that So operations the pleased And having is a in we're from to things rates and

enrollment. as You much pay don't to have for don't training, have you to for as much pay

remarks. positive way So on in are of the as gives I confidence a very a my well, fact significant me lot working and teams that that and the we're other managing the operating alluded to retention each at is is a improvement

care is going and think some the that purpose retention.Wages dividends quite the think of and of self-financing. benefits beginning all in well are number and -- done stores, continue the that the on pay store work in going the actual And on everybody in team The whether rise, and leadership reasons And communicating that we've the we values is to of health one of and benefits gets are retention we bonuses. numbers is bonuses a significantly rising, pay team, some a We give, we're store it doubling a bonus. to I working in down forward. to bonus. numbers every those culture XX% leadership it's we've got improved be got over

So working. our been we're very programs positive about bonus the way have

add So I something you that, don't to Curtis? know whether to want

Curtis Valentine

I on No, side. we've -- shrink just about the is is of think maybe talked our fresh XX% shrink about about in only color the

to context some to. small pretty Jack just alluded to piece as add us, is So for that, that theft

Operator

question. Heinbockel our be One Guggenheim And from of moment our question coming Securities. for next next will John

John Heinbockel

how what about with figure to program? what the basket? start But hard share. that? test do don't me you you with benefit let Jack, traffic, markets it's learn your from do the X do out right, lies, think for you know I the then wallet And think you if loyalty to So And want

Jack Sinclair

iron marketing we'll that a got so we've test markets not, stores.So a to that we're for expecting a efficient pipe Yes, seamless of customer learn of The do in behind we'll John, that creating work sense so will the the right end to, an how target extend first you and increase the more doing, experience XXXX. happen, pilot it's this by learn the will first work we're that that. our of as in in -- well. questions the it to What expect all, to plumbing kinks and great right much as XXXX and benefits a and come we'll when get do they in then doing be The very in experience. to the all, -- as an that we the of the that of year, works And proper with very out is, we're customers. XXXX, whether get wallet we'll And technology alluded or will through the efficient broader XXXX. relate process to share we that to X iterative comes

those of more pay -- we'll into into measure, wallet. and be hugely able to able little -- think think we'll from got bit wallet terms in for are not this what kind we've understand where customers much past. I the It's customers. it's of we that of to that And so I than of better be to it's the the it. of that's those some double-digits share measure a this but that share not And going more we'll And we've -- will increase that of in the drive fund double-digit, thing above talked be a target forward. low-teens.And context context about that expecting

XXXX. benefits as learnings said, in the XXXX. come So will will I The in come

about the of learnings marketing technology. technology The and element first are

out doing going about you The excited second feeling our part understanding by part something of element that we can John. about The of the it. can as and team about what's other so of of a we're the customer come to lot and the create behind end, being of excited this being work Sprouts pretty special ecosystem. we're stimulate -- learning are scenes, are And the imagine,

John Heinbockel

did in adding little right, bit and a stores year thing, of Northeast. the last this lot obviously you're year second a Maybe you

the do about how beyond How can all or that? well of you think now? produce timing, of DC, when the beyond I that idea push potentially the push And think about DCs. right, you envelope? you how you far going well can in far was the that So know

Jack Sinclair

Again, FARM -- you got when we've Northeast to about us got about in mode take allows there are the work probably of there's XXXX a get wanted Sprouts place, get that where was our the and have have to saying going-forward. our space. there what that brand business think going infrastructure fresh capacity lot this we've that we replenishment but in We distribution, by and quite get be initiative, to of do to right hold linking business will at the be. place a the in we what created of. on some not optionality. lot that.As We've having our the optionality in more There's I elements I We choice back alluded that is to, what's can of want that the the right place in of control to we in for we'll terms hoping for is distribution place. of I'm in latest we'll there yet, us our

-- got the we've now. So selling more -- see -- than we're the creating XXXX, doing we're doing by work working definitely the us into you'll optionality produce. by going And

Operator

Rupesh And & Co. Oppenheimer one And moment from Parikh for coming be our next question. our next question of will

Rupesh Parikh

Also, congrats nice quarter. a on

front. e-commerce the on just So

you've added Uber as So

Curtis Valentine

Yes.

in It's really We've new everyone expected. they out partners of X. the as respect. incremental great and that yes, did strong And We it's to for that a partners. They seen really nice job year The been a all X us, year. healthy were fresh the all pleased time start with big through. are business in goes

really both seen this you have we've just curious at with X partners So added these recent strong point years DoorDash partners. last results.Eats, seeing over years, and if additional would the the expected in you're incrementality

Jack Sinclair

Rupesh, as base. and about got it, got Uber the a customer different have kind good you've of both thing DoorDash And Eats

slightly to So base. we're some assortment that I the a to have we access bringing broader think

said. Curtis well, working it's been as So

Curtis Valentine

differently too. They play wise geography a little

allowing our that are that further well a as a it's and customers us helps again, access So different new little from convenience us stores. And an standpoint it's customers. and for then to increasingly world, omnichannel away those from

Rupesh Parikh

what follow-up curious there And is question, new just given in just concerns seeing note with you're all your Great. just trends performing well. consumer, clearly any quite consumer? -- just But the the or macro, you're then the your business what to from one maybe out seeing changes anything any

Jack Sinclair

you're irrespective if confident world. we of is to happen about one stay the vegan assortment we've have, a always the talked the to a feel Well, vegan, what's going that that we in macro of you're going pretty things that

we So like, environment. if some macroeconomic you there's feel moat, to the

we closely. lot happens there that health a we as it feel think next years and very those stead want continue uncertainty. in watch forward that appropriately.So customer that good I going shielded base happens Again, be are to we going little couple honest, here. guess whatever I in it's a me, macro-environment, continue what's of we're stand the believe macro-environment. to to few doing to them to enthusiast us but over We good grow, there's from is that's And Rupesh, almost don't customer as happen continues in them, base to as work specific customers, the serving is something of the macro-environment, more your them. and dismiss to whatever again, and a And we going bit that what that targeting the from we hard think of at

Operator

one for moment And our next question.

will question Capital. next Our Capital. RX Mushkin come from RX Scott of

Scott Mushkin

a here. So X kind question part of

more of it kind So dollars, a of been about think to stable. But accelerating you versus focus perspective just the dollars philosophy company and do and to where versus like rate up want even you be trending going talked I you're margins being rate have mean, is kind margin where more? sales it you obviously, and the from margin on

Jack Sinclair

on on I'll talk me pass a at have margins. let Scott, that the to it Curtis and start to Yes. specifically then

think the talked in line. promotion thinking better it. terms top promotion, but and will us forward. manage of and target everything on it better or thinking product we in the traffic our to and mix at how making around what forward.But will we're works said of And we'll of I between if doing elements is better. our of going of that, opportunities sensitive to serving margin sure terms focus customers shrink, an our a the customer terms going stage our there's interaction Having be And evolving compromise line, that no top context, we margin within our we've primary is be about gives that able we're that in Our

both manage that as is effectively. say, pretty feeling far, about the pretty traffic. So thing us point, for haven't hit I'm we But can confident that and I we important

Curtis Valentine

think about. cetera, to add and about feel just Jack good in line et about that. able to term, I'd spoke margins do long EBIT being to the bottom that really I stable, Scott, the being on and what short-term, it I mean, And, we

sometimes, investment And like a will inventory can we bit SG&A, better a of mean little management an shrink. in investment that that so get

we're going business. our the work in immaturity So to

good will an that able we're that benefit focused going really, sometimes to that. that But feel gross pretty about line sometimes stability and being fall that SG&A forward on And maintaining be will and in do bottom benefit. and we a

Scott Mushkin

as seems So customers strength matter not my it business let's your nice the may And macro question the guys the of string had little you in is, to just like a that Obviously, much. quarters. follow-up way, say continues. have coming

the years? So business if this strength of of couple more would you in continues, next areas over invest what the

Curtis Valentine

got we'll a for improve customers underpinnings talked for a and store So continue And who last provide on store. I and the we're multi-year continue engage same work target is about then investing be we've managers us the loyalty we technology managers, management, components, will sure be that right? find think this have And in with grow. great and to take continue places and will team of to foundation continue our journey think customer, it's to we've and the is make care to scalability. experience critical great the the that right We'll inventory year team the department key upon. to I members talent to piece

So and places the we've that and right will down foundation got to the we're the be scalable for continue make we'll long haul. those double that sure

Jack Sinclair

-- forward, to us to going that maybe we supply now. sure plenty broader important forward, as store. And chain well, for there's making be to terms country of not the in we're geographies Scott, don't where a in than the of that at go we of moment. need going That's have we're But invest the supplying as is ourselves we giving options Sprouts places

to as strength So we we accelerate success that to continue see in our continue business. and

Operator

question. one And next our for moment

coming be Bank of Our Robbie of next question from America. Ohmes will

Robert Ohmes

a little such you opened you dramatic in in And a performance Jack, mentioned store productivity? there first improvement significant pretty new a on your like was stores improvement productivity. Any can color little how more the I in earlier quarter, the bit. It new talk is know a about lot, store where in more store a quarter? say, new the

Jack Sinclair

we Well, and what remarks. it's X of alluded most stores performed, I But stores, in those the of to were stores, think I X the only X how by pleased it's pleased them, X we're very partly with.

just where encouraging. terms seeing accurate new that's right find our the little in stores. store the a something to beginning bit are modeling open of we we place, that's more success think of And I

their buy I to in I back as a during about places last pandemic, conversations people when of we think And to years.So to we the look that over traffic the stores to a think, reluctant were to those our again, groceries. store benefit, probably we're was couple drive stores it getting go model. talked lot better think lots I harder of the you when opened

I -- think And think that so stores them getting we're -- not more putting geographies, putting always a has beginning and in we're us awareness been known that are stores getting the of we've and challenge a right where markets driving little awareness. concentrating bit I people in better got marketing. for at more

stores think helped the benefiting significant Florida. and think in I portfolio. benefit think the us little into build in as because of I in by lot doing the -- well a that's Florida we store we program.And as I of in places. bit start years to has we there forward our filling think that we've sorts to sense, in we'll as And fairly store got stores now we've forward couple see we're significantly next up work having and a of that of We're there's benefit go us going real a happen been coming that Mid-Atlantic the concentration all some in going from number

Robert Ohmes

but types any this And regions call than others quarter particularly more stronger regional differences or existing? to any mentioned were any out? Florida, -- You regional of markets versus new

Curtis Valentine

We're what in similar the well. not of pretty No, but momentum, the markets us. any several think I prior kind performing from it's seeing consistent to in quarters. have The excited seen quarters. come what We're the been departures trends for we've last are new we've major seen for

Jack Sinclair

encouragement of kind Burtonsville, And it doing that Maryland, has open confident. a expect in well. us given California, place when a in well outside we team terrific like of a as where done us job. of expect the strangely, We well but have do we lot to That -- we're is making real

and about. we Florida, talked So that's encouraging, very as

Operator

moment next our One for question.

question from of next be will BMO coming Our Market. Kelly Bania Capital

Kelly Bania

This is Bania. Kelly

follow could any membership they Sprouts the given Uber. different and here some topic. for that of DoorDash for point wanted Just Are Foods at the new consumers the just partners? partner also still to is you recently-announced Amazon? up is on wondering impact across they Instacart the model e-commerce on between about growth are also, Or I you coming vantage X? guess, the competitive from there expect would follow-up e-commerce, from with just But similar then any that. your Whole And And newest preference, outsized with to from the and competition just assume the if I growing? talk fee maybe structures,

Curtis Valentine

cover on the But us. well those of I'll one. ECA I'll and of all maybe are performing couple let Jack cover kind for last really the first X

in we're e-comm growing are seeing definitely and overall we're X I the all So pleased really with performance. and won't get X, all but results very specific, strong

there I the we Uber through into be, wants go if us, there, And If comfortable customer no happy to but through for want between with won't Instacart want DoorDash, there's stores, partners. to them. to Eats. really And go the with the us to have. On wherever be our great. they they we're we're grade, X, for work the fees preference fee get We specifics structure, closely the again,

with However they to to them. have we're us, want engage happy

Jack Sinclair

very Whole us reinforce with Amazon -- to for fresh pretty the our Foods, we conversation, look growth. context are job the all of in strong against the what Just Whole about Whole X of regard them with We partners. Curtis which pleased them made a of we X I They performing of we're kind With feel Amazon all Kelly, food of and e-comm to is is great do said, and and Foods have at. Foods our positioning a watch lot this statements would context interest. that watch well

value important terms our less feel fresh which whatever part irrespective of a customer on value our of produce, really particularly we're delivery charges in relative important important good is organic of produce, an in strong part produce, are.We're their the In mix, of a we place of mix. but mix, on an part the for place,

that produce. feel feel pretty and the but in in we're it's on everything Whole And that's at position carefully, versus a And good we're got -- good watch pricing a look versus not something carefully, have, really else Foods why to carefully charges.And differentiation? we of our there. So one but we we we a that would of Whole watch business we it's unless And differentiation if pretty think switch. strong The as e-comm on we reasons strong. shape I it place Sprouts on the so happening e-comm product groceries to don't there what's we you the pricing that's through was all irrespective easy is think delivery your and buy Foods

we'll but So obviously, confidence, that's us some gives what closely. it watch

Operator

our our moment from question our Research. Cerankosky next will next Chuck of of And come question. question from next Cerankosky Again, will Chuck Northcoast coming be One for Research. Northcoast

Charles Cerankosky

how how Jack the you in reacting the average? than more and comps, customers and can categories about Curtis, inflation are talk or to are inflating And was your SKUs there? X% much that

Curtis Valentine

Yes.

makeup again the in continued story. So driver then solid AUR stabilization traffic comp quarter from this the of and positive and unit kind

to now we're we really We're than month. inflation and quarter quarter from then less anticipated. slightly and place negative it So of change material a kind not really closer out on a We're passing bit perspective, And had as low-single-digit inflation. still unit customer last. getting to little each but where flat seeing this there. with has stabilized. it's side, that all trends And trajectory our And a in playing we're the

to relates continuing it think no or change in the were that inflation price to things in or quarters but as customer out, behavior talking major about I similar reaction play we prior there. are

Jack Sinclair

that to sell categories a dramatically we see else. are is very When in happening sell quite customers volatility it's most And do always we unit trends that up volatile, any category. of worried a the are not avocados dramatically, one more. everybody the specific linked bit the space double volume that produce that And mirror that have And what price but going fresh down to coming produce Chuck, and will in or fresh the Curtis' about than down the the which much more you see And less you reasons Yes. to doesn't categories the areas. inflationary or bit kind react either seeing we're point, been. with we're any inflation of our see you so is up going

Charles Cerankosky

innovation private And centers? and the that's inflation strides you've the for slows all helped value down. it in that is being label How in new even by looking of a with made lot as with your trading products off people

Jack Sinclair

have private and where team what re-labeling differentiated Brand the new brands. done the here. not We're going is products in the trying Sprouts innovative very been trading encouraging. of Yes. or clear about proposition we're to label on our it's that have We're have Well, about and world be balanced that. against We're very the commoditizing to down

stores differentiation trying in at it's find like we'll going Sprouts that. being number at very health-based really I have those perform used branded that to that And and the Walmart's to encouraging the entrepreneurial really traditional think of good items. are all a our the of And is sense our for differentiation center.We at attribute Brand businesses continue traditional unknown are business, our about centers, into new and mainline product of got XX%, branded real where we've and a you team customers and our to and terms the We can but brands that we talked look be away driven people to brand, in differentiated kind by excitement XX% which from of are mix strong you and as branded -- be items kind be in our really members. and keep innovation good it's of which is now want in well, on space. our for destination if innovation products around supermarkets

going good standing different in be we going that's stead to can us I be. forward. think as are as possibly try and We And

Operator

for Dickerson our moment question. Jefferies. next Robert question from our one of next And And comes

Robert Dickerson

follow sound ask all curious, might companies random follow your This the I I'm department frozen but how to that just doing? kind just produce so frozen has products, again, the on year relatively food other let's or past say, volume groceries, also store. been of lot the general the like of frozen a it. of have but question, I'm because But is over weaker in differentiated I side kind product. you going versus ask And a

or I'm be that So differentiating a our bit curious, would you're seeing would little which say, clearly factor? we're not, oh, maybe department, a of pressure frozen you

Jack Sinclair

happening question. It's random we kind not a too it's Robert, about the of categories. with Yes, what's lot, a different think things

across business, the was happened lift during marketplace. pandemic got frozen there frozen and that our -- think I a pretty big a the what is right pretty big So

It us space Sprouts it some -- with used itself we lends frozen, Brand to itself for through the category have don't to been what's products. in vegetarian-based more happening know stores giving I seen we attribute-based of well our some think playing our the success. In cabinet.So plant-based well in pleased believe products, in that's we really work doubled frozen space. because broader I've market. new And really we're we've the to than stores, give well I on products. it is we blends down it the that

but that's honestly through a that's rest strong pandemic in-line we're market. And slowed the on in I I broader in have and think comps. what's our And seeing a at in really by if market, space, boost little But I'm happening where down it. frozen. happening the encouraged might some we there the don't was know it the Robert, of bit in what's are with

Curtis Valentine

great us a In are have that for would making it among I that to story have we a we're that to, Jack the well. and that we been Rob, and And job well categories do broader those. think, the and departments with team attribute differentiation, where as fits to just frozen for I drivers is our story. And departments Yes. different, just does differentiation continue within those it's assortment, the where alluded different of most comp,

Robert Dickerson

then question. or Great. that with potential. stores, prioritized you guess continue smaller maybe have I growth broader Yes. better And "more stores maybe I the stores newer some categories" highlight to know just of your a merchandiser

on you that's mean XX,XXX. where I kind I'm size. mean, from, square better these economics, just feet, changes I drastic you're curious, are XX,XXX they're the box like If a smaller, I'm smaller, just a everything great. I open like, trim? going do don't the know, then I understand, up of view growth now Does bit would to store? store if those where produce of guess, XX% broadly get better you now, more new little areas? trying you

Jack Sinclair

square fairly XX,XXX next the Well, do year, numbers they the square building, that's large we building space. do Yes. forward, non-customer-facing we're the and [ we'll cut XX,XXX will foot feet. the did back significantly year this stores We do? all and What we that XX,XXX we're what ] be that going by

assortment that's going of And chased little a our same it's rest rest around vitamins SKU to more and the bit of stores. count. back SKUs to. focus out in supplements on frozen continue room.So for got business. up put We space we stores, one and consequences and less, the grocery lot is we because We than behind the dairy more all as created few space more space room a the produce the scenes the the we pretty a scenes across probably the space the our spaces in bulk department, little and slightly the less actually alluded of less in the other we've categories, I some just bit a space that done. key the behind dairy, in the drivers categories frozen of back the -- bakery, the after It into a in we Category-wise, required took scenes meat, our and So a but together. more create that's them the slightly in lot forward behind for to ended merged with SKU

kind So by at. frozen, bit and of with where a and be more grocery. we're would counterpart large, SKU vitamins, we from a ended little up more same little bit the That

Curtis Valentine

Rob, that space in I is of assortment. arrival, when think the wasn't in proposition, the kind to it XX,XXX dead and was key wasn't to in in feet again, Jack's -- up square we piece, wasn't It it was prior crept it space. fixtures, it unproductive

And so get it to us was the for assortments. not to without hard back-down impacting 'XX

Robert Dickerson

me. for expand then quick curious, hasn't opened market as you another pre-existing new area been great. the there -- just It's Okay, a And or a enter just in market just you right, Sprouts, where maybe I'm a one store.

you a there that for I is As store, this and sure store by mean, like of are essentially but open kind and have drive the word-of-mouth? I'm see signage you people they having it, without actual other of fair ways capital community, to the store welcome speak, of the spend to all. kind amount to to try just That's so? to so to do

Jack Sinclair

that's of is aligning we talking -- certainly Yes, get make better earlier to we're better what store, people increasingly our our And marketing enthusiasts the in terms And open people working are health are. a terms model I where area. there that that store in we than at we there, enough to communication weeks with are in about like sure the to and those We teams open of direct talking the getting at catchment are the that our so X X was opportunity customers. that. good and target there, look

will hide when different. fairly people get approach in Aberdeen, a open sites not than much, of be on can I excited kind that Los try the places But us intensive we Jersey. that getting way people individual we Angeles, How in spend teams know. want when them will it has we right It each to them trying different know be we it marketing they about to Cudahy, mayors get into us. coming and to increasingly a Certainly, excited people at how of don't store better be And be towns in they time and to think New so drive-by, there's see So store.And some talking approach it. we are that but advance. about picking the will it visible too try to and We different. let

that things so great are a And job. marketing it's work, but of teams our combination a doing

Curtis Valentine

and Jack's having And a reinforce in there XXth I'll when helps. open just the and market, the density some the around you put of easier signage And the the the just more performance. new gets. you is as comments earlier up with together first. drive are things than all in mouth market the stores store those by, people word easier building store Certainly, to that and it's And help in, up more the coming

Operator

will come Okay. Krisztina And from Katai Bank. our Deutsche next question of

Jessica Taylor

Taylor Jessica is for Krisztina. This on

to and much Just the product don't and today, but given talked worry customer interest private go label wanted competitors' how the about you to a And like in bit. watch differentiation. past your too little back you

who from and attribute private are set more brand increase retailer health share conscious. largest label a of So customers new now that's the aiming has to driven announced are who this more really its

your watching label this general might how how in impact of attribute-driven lead? So And change that go-to-market does how kind and it for of private your kind and competitor competitors your follow you're items. does strategy view that like on who

Jack Sinclair

reading kind haven't days, -- initiative, of something. better question. forgotten good or tasted eaten I've of is or Jessica, for couple it's been an of the called whether been Well, sort we kind What Yes. it of called? all. as We've with interest, last it it I've

Curtis Valentine

foods. Better goods. Better

Jack Sinclair

goods. Better

it read way watch but way your the strategy. we'll So Jessica, I've branded the way the clearly tiering it's that, read I've in and a it,

from to So up health not I'm I it exercise feels background it's It And doesn't trade people thing trying It's like people up. trading I again, is how being to trying does It health in up a people say, a Trader kind a our think that feels to how take And that's people milk, Sprouts attribute-based the of initiative. reading let's business not trade same was feel quality. it. that's Trader a my about in look than be Brand like some will that.But pretty like like that. on -- we oat I as It much Joe's and -- on at exercise, business thing. necessarily next attributes. But differentiated, focused more trading common very being more and tiering. although a it initiative the to on didn't there some it was there tiering U.K., this, I I felt felt a more things from about and think something love Joe's.

a to going be it got this to of Better initiative, clearly be that that develops.Walmart, For big. going attribute-based And kind and business is of but do. keto what so not can that customers they thing is We how and set I them, change to to don't a habit it's to of sensitive believe do watch do we'll whatever we products. evolves we're going relevant I've that got are XX think and target very we've our

Jessica Taylor

follow quarter and bit quarter-to-date little about any trends a just you comp And through true. cadence that's Yes, a month-to-date the trends? talk up, for the or can

Curtis Valentine

won't Sure. and events comp too from perspective moment. guidance the within a we're consistent within specific that little at range certainly comfortable quarter. always here, some you'll trending weeks things for and There's us pretty see get intra take consistent like one. the then throughout QX. business weather but the where bit with noisy. the that, And some quarter, QX generally but in in here weeks down, up and QX I'll is our pretty We Always usually is some a

Operator

from Kelly of Fargo. last coming question be Edward our And Wells will

Evan Ketterhagen

think We a correct talked touch are weather on a Ed. prior of it that should your included January expect know here. if just we to for bit started Evan partnership of the might number the also a wanted includes about And you that going e-comm your Ketterhagen is we a this forward that there? Do up online This acceleration the you versus XX% Or that role just have? have the increased a quarter, quarters. that's played comp. that recently? growth in guys already, and sales you partnerships higher bad Yes. growth but in overall bit confirm an Eats I on Uber assume more just But rate lot could then if more with of

Curtis Valentine

Yes.

stores. And is question. embedded of of tends in and part out people up. Eats, which some then our the comp that kind the mid-to-late Yes, be the e-commerce yes, part has ramping events, last it of definitely we certainly, when and included with there's first it, significant So see of to kind it's in good some new our partnership move been a of and comp. QX weather And the Uber into would launched acceleration

and best the And phenomenon.I at us doing kind customers. year. we the could quarter, those with half target Super add had That's of that X were to right partners with of and beginning of trend of so too, they all as through our a Bowl that of Sprouts recognizing there our again, capture and the kind first that they the few would health saw the

take activity had first going quarter And try a us, of advantage X weeks with so to of with of partners those to our lot in on that. the we

all think stronger things that growth. those to e-commerce I so of are contributing X And

Operator

to remarks. hand for like would to back call closing the Jack I now

Jack Sinclair

with look Yes. in your And Thanks, to you due support. forward and everyone, catching up course. for we your attention

ever much. thanks So care. so Take

Operator

today's Thank concludes this you for participating. conference And call.

disconnect. now may You

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