Sprouts Farmers Market, Inc. (SFM)

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Financial statements

data from SEC XBRL filings. Values are as-reported; restatements supersede originals.

From 10-Q filed 2026-04-29 (period ending 2026-03-29).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the 2025 fiscal year, filed on February 19, 2026 (“Form 10-K”) with the Securities and Exchange Commission. All dollar amounts included below are in thousands, unless otherwise noted.

Business Overview

Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. Headquartered in Phoenix with 483 stores in 25 states as of March 29, 2026, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.

Our Growth Strategy

We continue to execute on our long-term growth strategy that we believe is transforming our company and driving profitable growth, focusing on the following areas:

•Win with Target Customers. We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments. We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app.

•Market Expansion. We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through March 29, 2026, we have opened 118 new stores and remodeled one store featuring our updated format. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth.

•Create an Advantaged Supply Chain. We believe our network of distribution centers can drive efficiencies across the chain and support our growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve our financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. As a step to improve our fresh supply chain, in 2025 we began the transition to a self-distribution model for meat and seafood through our fresh distribution centers. As a result, we are better leveraging our existing distribution center capacity, and approximately 80% of our stores were within 250 miles of a distribution center as of March 29, 2026.

•Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are increasing our use of data analytics and insights, including through the nationwide launch of our Sprouts Rewards loyalty program in 2025. We believe this data-driven intelligence will increase customer engagement through personalization efforts with digital and social connections to drive additional sales growth and loyalty.

•Inspire and Engage Our Talent to Make Sprouts a Best Place to Work. Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work.

•Invest in Technology for Growth. We continue to make investments in technology in support of our strategy, with a focus on enhancing efficiency, scalability, and customer experience. While

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we are showing positive outcomes on our strategic investments in inventory management and customer personalization, we believe that ongoing investments in our technology foundation will allow us to streamline operations and improve decision making to execute on our strategy.

•Deliver on Key Financial Metrics. We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. Since the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline.

Results of Operations for Thirteen Weeks Ended March 29, 2026 and March 30, 2025

The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted.

	Thirteen weeks ended
	March 29, 2026		March 30, 2025
Unaudited Quarterly Consolidated Statement of Income Data:
Net sales	$	2,329,179	$	2,236,436
Cost of sales	1,411,903		1,350,073
Gross profit	917,276		886,363
Selling, general and administrative expenses	658,781		623,226
Depreciation and amortization (exclusive of depreciation included in cost of sales)	42,027		35,099
Store closure and other costs, net	1,161		1,706
Income from operations	215,307		226,332
Interest income, net	(129)		(924)
Income before income taxes	215,436		227,256
Income tax provision	51,712		47,230
Net income	$	163,724	$	180,026
Weighted average shares outstanding - basic	94,813		98,537
Diluted effect of equity-based awards	772		1,182
Weighted average shares and equivalent shares outstanding - diluted	95,585		99,719
Diluted net income per share	$	1.71	$	1.81

	Thirteen weeks ended
	March 29, 2026		March 30, 2025
Other Operating Data:
Comparable store sales	(1.7)	%	11.7	%
Stores at beginning of period	477		440
Closed	—		—
Opened	6		3
Stores at end of period	483		443

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Comparison of Thirteen Weeks Ended March 29, 2026 to Thirteen Weeks Ended March 30, 2025

Net sales

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change		% Change
Net sales	$	2,329,179		$	2,236,436		$	92,743	4	%
Comparable store sales	(1.7)		%	11.7		%

Net sales during the thirteen weeks ended March 29, 2026 totaled $2.3 billion, an increase of $92.7 million, or 4%, compared to the thirteen weeks ended March 30, 2025. The sales increase was driven by sales from new stores opened in the last twelve months, partially offset by a 1.7% decrease in comparable store sales. Comparable stores contributed approximately 93% of total sales for the thirteen weeks ended March 29, 2026 and March 30, 2025.

Cost of sales and gross profit

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change			% Change
Net sales	$	2,329,179		$	2,236,436		$	92,743		4	%
Cost of sales	1,411,903			1,350,073			61,830			5	%
Gross profit	917,276			886,363			30,913			3	%
Gross margin	39.4		%	39.6		%	(0.2)		%

Gross profit totaled $917.3 million during the thirteen weeks ended March 29, 2026, an increase of $30.9 million, or 3%, compared to the thirteen weeks ended March 30, 2025, driven by increased sales volume from new stores. Gross margin decreased by 0.2% to 39.4% for the thirteen weeks ended March 29, 2026, compared to 39.6% for the thirteen weeks ended March 30, 2025, primarily driven by the impact from our loyalty program as well as unfavorable shrink.

Selling, general and administrative expenses

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change			% Change
Selling, general and administrative expenses	$	658,781		$	623,226		$	35,555		6	%
Percentage of net sales	28.3		%	27.9		%	0.4		%

Selling, general and administrative expenses increased $35.6 million, or 6%, compared to the thirteen weeks ended March 30, 2025. The increase was primarily due to the increase in new stores opened since the comparable period last year. As a percentage of net sales, selling, general and administrative expenses increased slightly, primarily due to lower comparable store sales during the period, while fixed cost components, including payroll and occupancy expenses, remained relatively consistent.

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Depreciation and amortization

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change			% Change
Depreciation and amortization	$	42,027		$	35,099		$	6,928		20	%
Percentage of net sales	1.8		%	1.6		%	0.2		%

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $42.0 million for the thirteen weeks ended March 29, 2026, compared to $35.1 million for the thirteen weeks ended March 30, 2025. Depreciation and amortization expense primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores.

Store closure and other costs, net

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change			% Change
Store closure and other costs, net	$	1,161		$	1,706		$	(545)		(32)	%
Percentage of net sales	—		%	0.1		%	(0.1)		%

Store closure and other costs, net decreased $0.5 million to $1.2 million for the thirteen weeks ended March 29, 2026, compared to $1.7 million for the thirteen weeks ended March 30, 2025. Store closure and other costs, net primarily consists of ongoing occupancy costs associated with our closed store locations as well as one-time costs associated with disaster recovery activity. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Interest (income) expense, net

	Thirteen weeks ended
	March 29, 2026		March 30, 2025		Change		% Change
Long-term debt	$	196	$	210	$	(14)	(7)	%
Finance leases	261		176		85		48	%
Deferred financing costs	134		193		(59)		(31)	%
Interest income and other	(720)		(1,503)		783		52	%
Total interest income, net	$	(129)	$	(924)	$	795	86	%

The decrease in interest income, net for the thirteen weeks ended March 29, 2026 compared to the thirteen weeks ended March 30, 2025 was primarily due to lower interest rates and invested cash. See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements.

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Income tax provision

Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pretax income as a result of the following:

The table below provides the updated requirements of ASU no. 2023-09 for the thirteen weeks ended March 29, 2026.

	Thirteen weeks ended
	March 29, 2026
Federal statutory rate	$	45,242	21.0	%
Change in income taxes resulting from:
State income taxes, net of federal benefit(1)	10,689		5.0	%
Enhanced charitable contributions	(2,059)		(1.0)	%
Federal credits	(40)		—	%
Transferable Tax Credits	(127)		—	%
Share-based payment awards	(4,203)		(2.0)	%
Non-deductible Executive Compensation	2,364		1.1	%
Other, net(2)	(154)		(0.1)	%
Effective tax rate	$	51,712	24.0	%

(1) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.

(2) Includes items that are immaterial individually and in total.

	Thirteen weeks ended
		March 30, 2025
Federal statutory rate		21.0	%
Change in income taxes resulting from:
State income taxes, net of federal benefit		5.0	%
Enhanced charitable contributions		(0.9)	%
Federal credits		(0.2)	%
Share-based payment awards		(5.6)	%
Non-deductible Executive Compensation		1.4	%
Other, net		0.1	%
Effective tax rate		20.8	%

The effective tax rate increased to 24.0% for the thirteen weeks ended March 29, 2026 from 20.8% for the thirteen weeks ended March 30, 2025. The increase in the effective tax rate was primarily driven by a reduction in the benefit for stock-based compensation in the current year partially offset by a decrease in non-deductible executive compensation.

Net income

	Thirteen weeks ended
	March 29, 2026			March 30, 2025			Change			% Change
Net income	$	163,724		$	180,026		$	(16,302)		(9)	%
Percentage of net sales	7.0		%	8.0		%	(1.0)		%

Net income decreased $16.3 million primarily due to decreased comparable store sales and higher selling, general and administrative expenses for the reasons discussed above.

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Diluted earnings per share

	Thirteen weeks ended
	March 29, 2026		March 30, 2025		Change		% Change
Diluted earnings per share	$	1.71	$	1.81	$	(0.10)	(6)	%
Diluted weighted average shares outstanding	95,585		99,719		(4,134)

The decrease in diluted earnings per share of $0.10 was driven by lower net income.

Return on Invested Capital

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (referred to as “ROIC”) as additional information about our operating results. ROIC is a non-GAAP financial measure and should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. ROIC is an important measure used by management to evaluate our investment returns on capital and provides a meaningful measure of the effectiveness of our capital allocation over time.

We define ROIC as net operating profit after tax (referred to as “NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease. The assumed ownership and associated interest expense are calculated using the discount rate for each lease as recorded as a component of rent expense within selling, general and administrative expenses. Invested capital reflects a trailing four-quarter average.

As numerous methods exist for calculating ROIC, our method may differ from methods used by other companies to calculate their ROIC. It is important to understand the methods and the differences in those methods used by other companies to calculate their ROIC before comparing our ROIC to that of other companies.

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Our calculation of ROIC for the fiscal periods indicated was as follows:

	Rolling Four Quarters Ended
	March 29, 2026			March 30, 2025
	(dollars in thousands)
Net income (1)	$	507,368		$	446,527
Interest (income) expense, net of tax (2)	(1,374)			(3,003)
Net operating profit after tax (NOPAT)	$	505,994		$	443,524
Total rent expense, net of tax (2)	211,596			195,944
Estimated depreciation on operating leases, net of tax (2)	(116,239)			(108,504)
Estimated interest on operating leases, net of tax (2), (3)	95,357			87,440
NOPAT, including effect of operating leases	$	601,351		$	530,964
Average net working capital	143,291			171,007
Average property and equipment	1,005,134			858,191
Average other assets	608,916			603,576
Average other liabilities	(116,691)			(105,772)
Average invested capital	$	1,640,650		$	1,527,002
Average operating leases (4)	1,816,695			1,640,730
Average invested capital, including operating leases	$	3,457,345		$	3,167,732
ROIC, including operating leases	17.4		%	16.8		%

(1)Net income amounts represent total net income for the past four trailing quarters.

(2)Net of tax amounts are calculated using the normalized effective tax rate for the periods presented.

(3)2026 and 2025 estimated interest on operating leases is calculated by multiplying operating leases by the discount rate of 7.0% for each lease recorded as rent expense within direct store expense.

(4)Average operating leases represents the average net present value of outstanding lease obligations over the past four trailing quarters.

Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands):

	Thirteen weeks ended
	March 29, 2026		March 30, 2025
Cash, cash equivalents and restricted cash at end of period	$	254,805	$	287,735
Cash flows from operating activities	$	235,287	$	299,089
Cash flows used in investing activities	$	(101,151)	$	(59,479)
Cash flows used in financing activities	$	(140,225)	$	(219,088)

We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures primarily for opening new stores, remodels and maintenance, repurchases of our common stock and debt service. Our principal contractual obligations and commitments consist of

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obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Our operating and finance leases for the rental of land, buildings, and for rental of facilities and equipment expire or become subject to renewal clauses at various dates through 2049. We believe that our existing cash, cash equivalents and restricted cash, and cash anticipated to be generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including new store openings, remodel and maintenance capital expenditures at existing stores, store initiatives and other corporate capital expenditures and activities. Our cash, cash equivalents and restricted cash position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within days from the related sale.

Operating Activities

Cash flows from operating activities decreased $63.8 million to $235.3 million for the thirteen weeks ended March 29, 2026 compared to $299.1 million for the thirteen weeks ended March 30, 2025. The decrease in cash flows from operating activities was primarily a result of lower net income adjusted for non-cash items of $4.3 million and changes in working capital of $60.6 million.

Cash flows provided by operating activities from changes in working capital were $17.3 million in the thirteen weeks ended March 29, 2026 compared to $77.9 million in the thirteen weeks ended March 30, 2025. The $60.6 million decrease in cash flows from changes in working capital was primarily attributable to the following factors, each of which had a negative impact on working capital: (i) $56.8 million change in accounts payable and accrued liabilities primarily due to timing differences of payments for goods and services;(ii) $17.5 million change in accrued income tax, (iii) $7.9 million change in accounts receivable driven by the timing of collections, and (iv) $4.8 million change in accrued salaries and benefits primarily driven by increased corporate bonuses. These decreases were partially offset by a $21.5 million change in prepaid expenses and other current assets and $4.9 million change in inventory.

Investing Activities

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $101.2 million and $59.5 million, for the thirteen weeks ended March 29, 2026 and thirteen weeks ended March 30, 2025, respectively.

We expect capital expenditures to be in the range of $280 million to $310 million in 2026, including expenditures incurred to date, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.

Financing Activities

Cash flows used in financing activities were $140.2 million for the thirteen weeks ended March 29, 2026 compared to $219.1 million for the thirteen weeks ended March 30, 2025. In both periods, the cash flows used in financing activities primarily consisted of stock repurchases.

Long-Term Debt and Credit Facilities

The Company had no long-term debt outstanding as of March 29, 2026 and December 28, 2025.

See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements for a description of our Credit Agreement and our Former Credit Facility (each as defined therein).

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Share Repurchase Program

Our board of directors from time to time authorizes share repurchase programs for our common stock. The following table outlines the share repurchase program authorized by our board, and the related repurchase activity and available authorization as of March 29, 2026:

Effective date	Expiration date	Amount authorized		Cost of repurchases		Authorization available
May 22, 2024	May 22, 2027	$	600,000	$	457,408	$	—
August 13, 2025	N/A	$	1,000,000	$	303,995	$	696,005

The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. Our board’s authorization of the share repurchase program does not obligate our Company to acquire any particular amount of common stock, and the repurchase program may be commenced, suspended, or discontinued at any time.

Share repurchase activity under our repurchase program for the periods indicated was as follows (total cost in thousands):

Thirteen weeks ended

March 29, 2026

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holders ( registered funds via N-PORT, institutional investors via 13F). Showing top by dollar value.

Holder	Type	ETF	MF	Position ($)	% of holder	Δ % of holder	Holder AUM

Next expected filings

~2026-07-29 10-Q expected by 2026-08-07 (in 89 days)
~2026-10-28 10-Q expected by 2026-11-06 (in 180 days)
~2027-02-18 10-K expected by 2027-02-25 (in 293 days)
~2027-04-28 10-Q expected by 2027-05-07 (in 362 days)

Predicted from historical filing cadence; not an SEC commitment.

Recent SEC filings

2026-04-29 10-Q Quarterly Report
2026-04-29 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
2026-04-07 DEF 14A Proxy Statement
2026-02-19 10-K Annual Report
2026-02-19 8-K Officer/Director Change; Financial Statements and Exhibits
2026-02-19 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
2025-10-29 10-Q Quarterly Report
2025-10-29 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
2025-09-08 8-K Material Agreement Entered
2025-08-19 8-K Other Events; Financial Statements and Exhibits
2025-07-30 10-Q Quarterly Report
2025-07-30 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
2025-07-25 8-K Material Agreement Entered; Material Agreement Terminated; Material Financial Obligation; Regulation FD Disclosure; Financial Statements and Exhibits
2025-07-23 8-K Material Agreement Entered
2025-04-30 10-Q Quarterly Report

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