Sprouts Farmers Market, Inc. Q3 FY2024 earnings call

• Dedication and hard work of 33,000 team members drove excellent results, with sales up 14% and diluted earnings per share up 40%. • Gratitude to teams in Florida, Georgia, and Carolinas for supporting communities during hurricane season. • Focus on target customer drives all functions, with exceptional service and in-store experience. • Expanded product assortment, including organic produce (over 46% of produce sales), protein programs, new Sprouts Brand items, and Real Root by Sprouts body care products. • Marketing efforts via social media and influencers attracted more customers, with new loyalty program in testing. • Operational collaboration across functions for customer-centric events and enhanced in-store experience.

For the third quarter, total sales were $1.9 billion, up 14% from Q3 2023. Comparable store sales grew 8.4%. E-commerce sales increased by 36%, representing 14.5% of total sales. Sprouts Brand contributed 23% to total sales. Gross margin was 38.1%, approximately 150 basis points higher than the prior year's adjusted gross margin due to improved shrink and inventory management.

• Full-year 2024: Total sales growth ~12%, comp sales ~7%, adjusted EBIT $490M-$495M, adjusted EPS $3.64-$3.68, corporate tax rate ~25%, capital expenditures net of landlord reimbursement $205M-$215M. • Opened 33 stores (delayed 2 in Florida due to Hurricane Milton). • Q4 2024: Comp sales 8%-10%, adjusted EPS $0.67-$0.71, gross margin expansion ~100 basis points, offset by SG&A pressure from new store deleverage, strategic investments, and higher e-commerce fees.

Q: How is the cadence of comp from month to month and impact of hurricanes on sales?

A: Curtis Valentine said there was a bit of acceleration later in the quarter, some benefit from hurricanes but not a huge driver overall.

Q: Contribution of waterfall to comp and store growth outlook?

A: Curtis Valentine said recent vintages are outcomping core stores by over 100 basis points, with stores from a couple years ago comping faster and expected to reach mature state.

Q: Sustainability of Q4 comp and SG&A leverage?

A: Jack Sinclair said strong momentum with upside in customer base, Curtis Valentine said SG&A will normalize in 2025 with one-time items going away.

Q: New store performance drivers and NSP outlook?

A: Jack Sinclair said marketing teams honed in by market, teams behind the scenes improving modeling, leading to strong new store performance.

Q: E-commerce growth and loyalty test?

A: Jack Sinclair said e-commerce mix similar to bricks-and-mortar, loyalty test in Nashville and Tucson showing encouraging sign-ups and scans.