Sprouts Farmers Market, Inc. Q4 FY2024 earnings call

• Acknowledged the team's efforts during challenges like floods, wildfires, and an airplane crash near a store, and praised the Sprouts Healthy Communities Foundation's support for affected communities.
• 2024 was a strong year with 13% sales growth, 7.6% comp sales growth, and margin improvement of over 70 basis points. Focused on target customers seeking differentiated healthy products, introducing ~7,100 new items including Sprouts Brand products.
• Streamlined operations through disciplined inventory management, improved customer service scores, and saw strong e-commerce growth with Uber Eats helping e-commerce sales exceed $1 billion. Opened 33 new stores in 24th state, Wyoming.
• 2025 plans include product innovation in attribute-driven products, launching a loyalty program, strengthening supply chain for fresher products, opening at least 35 new stores, and developing team coaching/mentorship programs.

In the fourth quarter of 2024, total sales were $2 billion, up $298 million or 17.5% from the prior year, driven by a 11.5% comp sales growth and new store additions. E-commerce sales grew approximately 37%, representing 14.5% of total sales for the quarter, and Sprouts Brand contributed 23% to total sales. For the fiscal year 2024, total sales increased nearly 13% to $7.7 billion, with comparable store sales growth of 7.6% and strong new store performance. Sprouts Brand continued to contribute significantly to sales, and the company ended the year with 440 stores across 24 states.

• For 2025, expect total sales growth of 10.5% to 12.5% and comp sales in the range of 4.5% to 6.5%.
• Plan to open at least 35 new stores. Adjusted earnings before interest and taxes are expected to be between $590 million and $610 million, and adjusted earnings per share between $4.52 and $4.68.
• Anticipate corporate tax rate to be approximately 25% and capital expenditures net of landlord reimbursements to be between $230 million and $250 million.

• Uncertainties in macroeconomic factors such as interest rates, tariffs, which could impact sourcing and margins.
• Challenges associated with transitioning to self-distribute meats and seafood, including potential operational disruptions during the transition.
• Impact of weather events or other unforeseen disruptions on store operations and supply chain.

Q: Leah Jordan with Goldman Sachs asked about gross margin expansion and store growth.

A: Curtis Valentine responded that gross margin expansion is expected to be 25 to 30 basis points for the year, with first quarter at approximately 50 basis points and slight leverage later. Jack Sinclair mentioned the company is focused on growing through new stores, being judicious in store selection, and confident in the 35 new store plan for 2025.

Q: John Heinbockel with Guggenheim Securities asked about supply chain expansion for meats and seafood.

A: Jack Sinclair stated the company has built capacity and capability in the business to handle more categories, working on fresh meat categories this year with opportunities to expand further, and noting commissary is not planned due to complexity.

Q: Mark Carden with UBS asked about market share and customer demographics.

A: Nick Konat responded that growth is balanced across channels, regions, and customer segments, with new customer growth and existing customers engaging more, and core demographic remains higher educated, higher income, skewing female.

Q: Rupesh Parikh with Oppenheimer & Co. asked about comp momentum and e-commerce growth.

A: Curtis Valentine said comp momentum is broad and balanced, with no material changes in drivers, and Nick Konat mentioned e-commerce growth is rooted in differentiation, with strong growth and expectation of continued growth outpacing core business.

Q: Krisztina Katai with Deutsche Bank asked about marketing and foraging team.

A: Nick Konat talked about marketing driving traffic and customer growth through authentic storytelling and tailored messaging, and Jack Sinclair noted the foraging team is excited about snacks, drinks, non-alc, and vitamins/supplements with 70% of products differentiated.