Sprouts Farmers Market Posts Strong Q3 Growth, Net Sales Up 13%

Ticker: SFM · Form: 10-Q · Filed: 2025-10-29T00:00:00.000Z

Sentiment: bullish

Topics: Specialty Grocery, Organic Food, Retail Growth, Share Repurchase, Financial Performance, Customer Loyalty, Q3 Earnings

Related Tickers: SFM, WFM, KR, GO, WMK

TL;DR

**SFM is crushing it with double-digit sales and profit growth, and they're buying back shares like crazy – this stock is a buy!**

AI Summary

Sprouts Farmers Market, Inc. (SFM) reported robust financial performance for the thirteen and thirty-nine weeks ended September 28, 2025. Net sales for the thirteen-week period increased by $254.695 million, or 13.09%, to $2,200.430 million from $1,945.735 million in the prior year. For the thirty-nine-week period, net sales rose by $934.406 million, or 16.33%, to $6,657.468 million compared to $5,723.062 million in 2024. Net income for the thirteen weeks surged by $28.506 million, or 31.11%, to $120.116 million from $91.610 million, while the thirty-nine-week net income increased by $132.846 million, or 44.14%, to $433.845 million from $300.999 million. The company's strategic outlook includes the implementation of a new customer loyalty program in July 2025, which is expected to drive customer engagement and future revenue. Total assets grew to $4,013.122 million as of September 28, 2025, up from $3,640.699 million at December 29, 2024, reflecting investments in property and equipment and operating lease assets. A significant risk factor is the ongoing evaluation of new accounting pronouncements, such as ASU 2024-03 on expense disaggregation, which could impact future financial disclosures.

Why It Matters

Sprouts Farmers Market's strong financial results, with significant increases in net sales and net income, demonstrate its competitive strength in the specialty grocery market. This performance indicates effective management of operational costs and successful customer engagement strategies, including the new loyalty program, which could attract and retain more customers in a competitive retail landscape. For investors, the substantial share repurchases, totaling $341.925 million for the thirty-nine weeks ended September 28, 2025, signal confidence from management and can boost shareholder value. Employees benefit from a growing company, potentially leading to more opportunities and stability. The broader market sees a robust player in the natural and organic food sector, potentially influencing trends and competitive dynamics among other grocers.

Risk Assessment

Risk Level: medium — The risk level is medium due to the company's significant operating lease liabilities, totaling $1,633.293 million long-term and $170.614 million current as of September 28, 2025, which represent substantial fixed commitments. Additionally, the company is evaluating the impact of new accounting pronouncements like ASU 2024-03 on expense disaggregation, which could lead to changes in financial reporting and require additional resources for compliance, as stated in the notes to the financial statements.

Analyst Insight

Investors should consider increasing their position in SFM, given the strong revenue and net income growth, coupled with aggressive share repurchases. The new loyalty program, launched in July 2025, could further enhance customer retention and sales, providing a competitive edge in the grocery sector.

Financial Highlights

debt To Equity
1.79
revenue
$6,657.47M
operating Margin
8.46%
total Assets
$4,013.12M
total Debt
$54,920.00M
net Income
$433.85M
eps
$4.43
gross Margin
39.07%
cash Position
$322.42M
revenue Growth
+16.33%

Revenue Breakdown

SegmentRevenueGrowth
Net Sales$2,200.43M+13.09%
Net Sales$6,657.47M+16.33%

Key Numbers

Key Players & Entities

FAQ

What were Sprouts Farmers Market's net sales for the thirteen weeks ended September 28, 2025?

Sprouts Farmers Market reported net sales of $2,200,430 thousand for the thirteen weeks ended September 28, 2025, an increase from $1,945,735 thousand in the same period of 2024.

How did Sprouts Farmers Market's net income change for the thirty-nine weeks ended September 28, 2025?

For the thirty-nine weeks ended September 28, 2025, Sprouts Farmers Market's net income increased to $433,845 thousand, up from $300,999 thousand in the corresponding period of 2024.

What is Sprouts Farmers Market's strategy regarding share repurchases?

Sprouts Farmers Market repurchased $341,925 thousand of common stock for the thirty-nine weeks ended September 28, 2025, demonstrating a commitment to returning capital to shareholders.

How many stores did Sprouts Farmers Market operate as of September 28, 2025?

As of September 28, 2025, Sprouts Farmers Market operated 464 stores across 24 states, offering a unique specialty grocery experience.

What new customer program did Sprouts Farmers Market implement in July 2025?

In July 2025, Sprouts Farmers Market implemented a new customer loyalty program where customers earn points on qualifying purchases, redeemable for discounts on products.

What are the primary risks related to Sprouts Farmers Market's liabilities?

Sprouts Farmers Market faces risks from significant long-term operating lease liabilities of $1,633,293 thousand and current operating lease liabilities of $170,614 thousand as of September 28, 2025.

What was Sprouts Farmers Market's basic net income per share for the thirteen weeks ended September 28, 2025?

Sprouts Farmers Market reported basic net income per share of $1.23 for the thirteen weeks ended September 28, 2025, an increase from $0.91 in the prior year period.

What is the impact of new accounting pronouncements on Sprouts Farmers Market?

Sprouts Farmers Market is evaluating the potential impact of new accounting pronouncements like ASU 2024-03, 'Disaggregation of Income Statement Expenses,' which will require additional disclosures for fiscal year 2027.

How much cash and cash equivalents did Sprouts Farmers Market have as of September 28, 2025?

As of September 28, 2025, Sprouts Farmers Market had $322,415 thousand in cash and cash equivalents, an increase from $265,159 thousand at December 29, 2024.

What is Sprouts Farmers Market's approach to its product offerings?

Sprouts Farmers Market focuses on offering wholesome, innovative products with lifestyle-friendly ingredients such as organic, plant-based, and gluten-free options, emphasizing fresh produce.

Risk Factors

Industry Context

Sprouts Farmers Market operates in the highly competitive grocery sector, with a focus on natural and organic products. The industry is characterized by evolving consumer preferences towards health and wellness, increasing demand for sustainable and ethically sourced goods, and a growing emphasis on digital engagement and convenience. Competitors range from large national chains to smaller specialty stores and online retailers, all vying for market share.

Regulatory Implications

The company faces ongoing regulatory scrutiny related to financial reporting standards. The evaluation of new accounting pronouncements, such as ASU 2024-03 concerning expense disaggregation, highlights the need for proactive compliance and potential adjustments to disclosure practices. Early adoption of ASU 2023-09 will also impact income tax disclosures.

What Investors Should Do

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Key Dates

Glossary

Operating lease assets, net
The value of assets leased by the company under operating lease agreements, net of accumulated amortization. (Represents a significant asset class for Sprouts, totaling $1,596.100 million as of September 28, 2025, reflecting their store footprint.)
Long-term operating lease liabilities
The total future payments the company is obligated to make under operating lease agreements that are due beyond one year. (A substantial liability for Sprouts, amounting to $1,633.293 million as of September 28, 2025, indicating significant fixed commitments.)
Breakage
Revenue recognized from unredeemed gift cards that are not expected to be redeemed by customers. (A small but recognized revenue stream for Sprouts, managed through historical redemption rates.)
Deferred loyalty liability
A liability recorded when customers earn points in a loyalty program, representing the obligation to provide future rewards or discounts. (Introduced with the new loyalty program, this liability impacts revenue recognition as points are redeemed or expire.)
ASU 2024-03
Accounting Standards Update from the FASB requiring public entities to disclose additional disaggregation of expenses in financial statements. (A new regulatory requirement that Sprouts is evaluating for its potential impact on future financial disclosures.)

Year-Over-Year Comparison

Sprouts Farmers Market has demonstrated strong year-over-year growth, with net sales increasing by 16.33% and net income by 44.14% for the thirty-nine-week period. This performance is supported by a significant increase in common stock repurchases, indicating a return of capital to shareholders. Total assets have grown by $372.423 million, primarily due to investments in property and equipment and operating lease assets, while total liabilities have also increased, notably in accounts payable and long-term operating lease liabilities. New risks related to accounting pronouncements, such as ASU 2024-03, are being evaluated, indicating a dynamic regulatory environment.

Filing Stats: 4,494 words · 18 min read · ~15 pages · Grade level 14.9 · Accepted 2025-10-29 16:24:38

Key Financial Figures

Filing Documents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. 4 Consolidated Balance Sheets as of September 28 , 2025 (unaudited) and December 29, 2024 4 Consolidated Statements of Income for the thirteen and thirty-nine weeks ended September 28 , 2025 and September 29 , 2024 (unaudited) 5 Consolidated Statements of Stockholders' Equity for the thirteen and thirty-nine weeks ended Sep tember 28 , 2025 and September 2 9 , 2024 (unaudited) 6 Consolidated Statements of Cash Flows for the thirty- nine weeks ended September 28, 2025 and September 29 , 2024 (unaudited) 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 21

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 33

Controls and Procedures

Item 4. Controls and Procedures. 33

- OTHER INFORMATION

PART II - OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings. 35

Risk Factors

Item 1A. Risk Factors. 35

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 35

Other Information

Item 5. Other Information. 36

Exhibits

Item 6. Exhibits. 36

Signatures

Signatures 37 Table of Contents

Forward-Looking Statements

Forward-Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the "Exchange Act"), including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses, and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "estimate," "expect," "intend," "may," "might," "plan," "project," "will," "would," "should," "could," "can," "predict," "potential," "continue," "objective," or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors" included in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended December 29, 2024, and our other filings with the Securities and Exchange Commission. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to ref

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) September 28, 2025 December 29, 2024 ASSETS Current assets: Cash and cash equivalents $ 322,415 $ 265,159 Accounts receivable, net 64,848 30,901 Inventories 399,938 343,329 Prepaid expenses and other current assets 30,344 36,131 Total current assets 817,545 675,520 Property and equipment, net of accumulated depreciation 989,587 895,189 Operating lease assets, net 1,596,100 1,466,903 Intangible assets 208,215 208,094 Goodwill 381,750 381,750 Other assets 19,925 13,243 Total assets $ 4,013,122 $ 3,640,699 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 268,330 $ 213,414 Accrued liabilities 239,836 216,842 Accrued salaries and benefits 89,595 97,991 Accrued income tax 11,522 — Current portion of operating lease liabilities 170,614 150,400 Current portion of finance lease and other finance obligations 1,597 1,321 Total current liabilities 781,494 679,968 Long-term operating lease liabilities 1,633,293 1,520,272 Long-term debt and other finance obligations 53,423 7,248 Other long-term liabilities 37,783 38,259 Deferred income tax liability 72,571 73,059 Total liabilities 2,578,564 2,318,806 Commitments and contingencies (Note 6) Stockholders' equity: Undesignated preferred stock; $ 0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding — — Common stock, $ 0.001 par value; 200,000,000 shares authorized, 97,451,026 shares issued and outstanding, September 28, 2025; 99,255,036 shares issued and outstanding, December 29, 2024 98 99 Additional paid-in capital 831,870 808,140 Retained earnings 602,590 513,654 Total stockholders' equity 1,434,558 1,321,893 Total liabilities and stockholders' equity $ 4,013,122 $ 3,640,699 The accompanying notes are an integral part of these consolidated financial statements. 4 Tabl

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation Sprouts Farmers Market, Inc., a Delaware corporation, through its subsidiaries, offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. The Company continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. As of September 28, 2025, the Company operated 464 stores in 24 states. For convenience, the "Company" is used to refer collectively to Sprouts Farmers Market, Inc. and unless the context otherwise requires, its subsidiaries. The Company's store operations are conducted by its subsidiaries. The accompanying unaudited consolidated financial statements include the accounts of the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The information included in these consolidated financial statements and notes thereto should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included herein and Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the fiscal year ended

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Summary of Significant Accounting Policies Revenue Recognition The Company's performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and payment from customers is also due at the time of sale. Proceeds from the sale of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer and the performance obligation is satisfied by the Company. The Company's gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented. The outstanding gift card liability balance is included within Accrued Liabilities on the Company's Consolidated Balance Sheet. Beginning in July 2025, the Company implemented a customer loyalty program under which customers earn points on qualifying purchases. Points may be redeemed in future periods for rewards to be used for discounts on the Company's products. The loyalty points represent a material right to the customer and are accounted for as a separate performance obligation. At the time of purchase, the Company allocates a portion of the transaction price to a deferred loyalty liability based on their estimated standalone selling price. Revenue allocated to the points is deferred and recognized when the points are redeemed or expire. Points expire after 6 months, and points that have been converted to rewards expire 60 days following conversion. The outstanding liability balance at period end, which the Company classifies as a current liability due to the short expiration period, is included within Accrued Liabilities on the Company's Consolidated Balance Sheet. A summary of the activity and balances in the gift card a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Recently Issued Accounting Pronouncements Not Yet Adopted Income Taxes – Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU no. 2023-09, "Income Taxes (Topic 740) Improvements to Income Tax Disclosures." The amendments in this update enhance a public entity's annual income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance will be effective beginning with the Company's Annual Report on Form 10-K for its fiscal year 2025. Early adoption is permitted, and the guidance should be applied prospectively, with an option to apply it retrospectively. The Company expects this update to impact its income tax disclosures but does not anticipate that this update will impact its results of operations, cash flows or financial condition. Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU no. 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The standard requires public entities to disclose additional disaggregation of expense in the notes to the financial statements for interim and annual reporting periods. The guidance is effective for the Company for its fiscal year 2027. Early adoption is permitted, and the guidance should be applied prospectively, with an option to apply it retrospectively. The Company is currently evaluating the potential impact of this ASU on its consolidated financial statements and disclosures. Intangibles — Goodwill and Other — Internal-Use Software In September 2025, the FASB issued ASU no. 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)". The standard clarifies and modernizes the accounting for costs related to the internal-use software in Accounting Standards Codification (ASC) 350-40. The guidance removes all references to project stages

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company did no t have any financial liabilities measured at fair value on a recurring basis as of September 28, 2025 and December 29, 2024. The determination of fair values of certain tangible and intangible assets for purposes of the Company's goodwill or long-lived asset impairment evaluation is based upon Level 3 inputs. When necessary, the Company uses third party market data and market participant assumptions to derive the fair value of its asset groupings, which primarily include right-of-use lease assets and property and equipment. Cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued salaries and benefits approximate fair value because of the short maturity of those instruments. 4. Long-Term Debt and Other Finance Obligations A summary of long-term debt and other finance obligations is as follows: As of Facility Maturity Interest Rate September 28, 2025 December 29, 2024 Senior secured debt $ 700.0 million Credit Agreement March 25, 2027 Variable $ — $ — $ 600.0 million Credit Agreement July 25, 2030 Variable $ — $ — Finance Obligations September 30, 2036 n/a 40,874 — Finance lease liabilities Various n/a 12,549 7,248 Long-term debt and other finance obligations $ 53,423 $ 7,248 New Credit Agreement The Company's subsidiary, Sprouts Farmers Markets Holdings, LLC ("Intermediate Holdings"), is the borrower under a credit agreement entered into on July 25, 2025 (the "Credit Agreement"). The Credit Agreement provides for a senior secured revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $ 600.0 million. Amounts outstanding under the Credit Agreement may be increased from time to time in accordance with an expansion feature set forth in the Credit Agreement. The Company capitalized debt issuance costs of $ 1.6 million related to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) interests in substantially all of the assets of the Company, Intermediate Holdings, and the subsidiary guarantors, including, without limitation, a pledge by the Company of its equity interest in Intermediate Holdings. Interest and Fees Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00 %) plus a 1.00 % per annum or alternate base rate (with a floor of 0.00 %) plus 0.00 % per annum. The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company's total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement. Under the terms of the Credit Agreement, the Company is obligated to pay a commitment fee on the available unused amount of the commitments, which commitment fee ranges between 0.09 % to 0.225 % per annum, pursuant to a pricing grid based on the Company's total net leverage ratio. The commitment fees are subject to upward or downward adjustments of up to 0.01 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement. As of September 28, 2025, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus 1.00 % per annum. The Company had no loans outstanding under the Credit Agreement as of September 28, 2025. As of September 28, 2025, outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 1.00 % per annum and a fronting fee of 0.125 % per annum. Payments and Borrowings The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on July 25, 2030, subject to extensions as set forth therein. The Company may prepay loans

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