Sprouts Farmers Market (SFM) 30 Oct 242024 Q3 Earnings call transcript

Good day and thank you for standing by, welcome to the Sprouts Farmers Market Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susannah Livingston. Please go ahead.

Thank you, and good afternoon, everyone.

me are Sinclair, on Curtis at results, Chief Financial investor are of you XXXX third Valentine, section the pleased announcing relations be Officer call. Jack release accessed call investors.sprouts.com. earnings Executive with slides webcast are of joining quarter website and our Sprouts quarter Chief our this We third earnings financial XXXX can today. The our Officer the and through

our forward-looking this uncertainties XXXX expectations statement. management to regarding make those including During forward-looking involve that and in from described results for certain beyond. risks statements, statements call, cause These differ and materially the statements may several could

For our end at more factors the risk and refer our forward-looking discussed the earnings release. statements SEC of information, in the please to filings commentary on

references Our non-GAAP reconcile to non-GAAP let me over remarks earnings see hand GAAP that, measures. our our in the figures. With include it to Jack. today tables release measures comparable to Please to

everyone. The hard the afternoon, our third good in and expectations. dedication quarter results our Susannah, work XX,XXX members excellent and Thanks, surpassing drove team of

to increased third sales compared store an the in XX% by including quarter of sales. X.X% increase Our XXXX, comparable

earnings by year. grew per diluted XX% last from our Additionally, share

The achieved teams demonstrate we've our core as our recover. strategy. the with the their aligning our communities value Firstly, teams amazing their still to to recent work results our gratitude needs during to express but continue care, done, Georgia hurricane and the I progress the execution would of my Carolinas communities business in like from be these in to for Florida, directly support of season. Much

service begins an all provide members resulting store drives for outstanding exceptional some our highest target It service our on functions team in customer create our customer who of our in experience scores. customers, in and our Focusing with business.

delivering across to in in support and our talk encouraged come. been enthusiast our customer food engagement, years has the growing and enhanced investments we're providing the collaboration later. I'm short-term, differentiated the which merchandising exciting for to the resulting our especially traffic. of these in meet Whilst businesses by health many growth executing I will in functions customers, are making events success. demands to about more coordination significant focused assortment attribute products instrumental of to increased We infrastructure

For I'll outlook. financial XXXX Curtis? to to hand in third it now, quarter Curtis performance our review the and our

Thanks, good Jack, everyone. afternoon, and

X.X% of For driven increase same quarter, the third This billion, new $XXX sales year. period store or the total by $X.X XX% was were stores. addition up and last the growth of comparable million sales from

was also and comp saw Our by evenly fairly sales traffic for online. comp split between basket increased E-commerce and traffic in-store of XX.X% sales our total representing we a the quarter. XX%, and both strong

again, the Once the and In sales to sales Brand across and our was key total XX% Sprouts for quarter. healthy addition, company's drivers, balanced geographies. categories our performance all contributed comp

business vintages. components remain performance QX improvement was driven from all comp improved QX While by store from strong sequential in primarily traffic and new strong, our to

from the management. strategy, as bringing executing third additional our we last margin us consumers prior shrink, our a to gross XX.X%, basis improvements gross quarter, We the than on on inventory approximately in in customers improved was and to disciplined addition, in toward our living is the In adjusted higher due leveraged focus XXX year tailwinds. In was which the pivot capitalize This and points margin primarily year. lap increase challenges Sprouts. growing these our food-at-home remain healthy to allows

sales up while inventory. our these our operational forecasting to improvement, change In additional in reduced new to trends leverage additional drove sales our chain our and further step performance in teams supply caught and addition our chased shrink,

In SG&A of on was adjusted ongoing and cost $XX This mitigate opportunities partially same basis XX are against million. from headwinds. SG&A e-commerce Depreciation related increase costs higher year. focused and compensation million This offset $XX compared management of increased million, our points other depreciation longer-term, $XXX investment quarter. store fees in quarter, approximately closure the to incentive teams, the from to or the totaled period $X to due excluding we for costs spending our to the and the remain amortization, deleverage included by closures. for approximately sales was the business. for planned sales. leverage higher million an from was and our of last Store totaled cost looking XXXX cost in primarily our million the For deleverage These $XX occupancy

stores and third XX% quarter, adjusted and an $X.XX, ending income to the was prior the across was opened states. $XX increase was year. We from stores per of our For effective earnings diluted of during per share interest share income period XXX the compared Net million, the rate diluted third taxes our tax million and XX interest $XXX earnings were quarter, XX.X%. were million new same with earnings before $X X

communities. to about excited are our and success store We the more expanding new growth

stores have pipeline ahead. years executed more approved new XX the nearly and than for We XXX the leases in

in healthy the been we enabled to us our in to strong nearly million operating self-fund performance. grow investments repurchasing million cash cash in and sheet robust financial balance shares the down $XXX shareholders our has foundation Through third expenditures quarter, Our reimbursement generated quarter paid $XXX to flow, capital year-to-date. returned our credit second business. the we our of of net million generation, $XXX million X.X With by outstanding our our and landlord which revolver of

of repurchase $XXX our million outstanding borrowings under cash and no we $XXX equivalents, letters remaining cash authorization. facility under At our $XX million credit. credit million of $XXX million and in quarter-end, had share have We

$X.XX total sales approximately to are to between Turning for be and our $XXX to and the before and year, interest $X.XX, do to comp to assuming earnings million be continue to Adjusted opportunistically. taxes adjusted expected we That repurchase per approximately to shares expect repurchases. expect between share outlook, expected full $XXX no XX% share million additional and be X%. said, we sales earnings and be growth are

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

landlord expect plan expenditures, capital our Due reimbursement to be open until communities Hurricane the net and of of and $XXX team million and we year, million. planned Milton previous give to between of members to quarter our store recover, first to instead the guidance impact During X stores the decided Florida XX XX. delay We new $XXX of time XXXX. have of openings to in we the to

to continued XXX partially of with new sales strength sales. And X% fourth continued strategic pressure continued quarter, our to I'll gross To online to approximately e-commerce it margin offset $X.XX. of the store expect between quarter, to approximately basis fourth deleverage, the we higher per $X.XX points, to turn back more color Jack. expect we expansion our by due share on and and range that, For fees, be to comp earnings due and adjusted to investments, from XX% add SG&A

Thanks this positive Curtis. We've year seeing outcomes. and made significant progress strategy against our are

enhancing assortment, advancements, while experience, engagement Our and strengthening and successes include our customer all operational improving product our culture. unique

product better. customers Sprouts are our growers growing to of proud strategy. store but team to DNA, members, strive the be office. President internal a store target part and store. in will needed help help our has do in by This us This us has the to and That Vice communities inspired little team to while every into a serving these roll-out better on simple are that by be a and movement. cashier our words includes customers lifestyle. the around support to bit and been part same we and maintain suppliers future, are world to entrepreneurs, product from to into purpose with our And customers Our our at community update people teams, in our focus Greenville, put and of community a Carolina, purpose drives our a make healthier this eat always resonate we at and purpose This everything member, of South center live we

and assortment thus of consistently products, sales, products examples, topic compromise customers. range growth XX% to expanding our options. produce, increasing to To differentiated produce of our than highlight health are produce. our organic more cater is accessibility than we experiencing of organic faster is conventional Organic thoughtfully few our curated our designed total the to which a On now enthusiast

These programs pivot frozen back with departments consumers' protein black brands organic chicken only pasture-raised meal our by [NEE] they like increasing you category stuffed fresh can products garlic, towards Sprouts offering peppers, the non-antibiotic natural and expanded as and solutions chicken of items unique and Our food-at-home our and our our have marinated only such at taken skewers meatballs. by find advantage We've grass-fed lead Pasturebird. growth. across grass-fed our beef,

transitioned have brands. inline Sprouts us. a choice to be to continue Our vendor year, new ongoing Center a new innovation becoming our over This shelves, for items XXX forward trend differentiator for our Innovation as is of efforts from

continues tastes team from also Our to new globe, from across trade to for restaurants foraging inspiration. shows the and explore trends

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customer front, customers to stores. have engagement On visit more attracted our efforts the successfully our marketing

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future. customers data a tailor which customer customer more personalize for from seeing our we're engagement, cohorts, well the in to our we're support communications. Additionally, customer investing build and further long-term younger to To technology bodes foundation

our personalization for loyalty engine acquisition program will new be data efforts. Our

it test. plan Nashville Thank and with early, teams and a slightly this still to goals. learnings learnings markets While story We and we're scans across Tucson all our of our you together Sign-ups more will QX but XXXX the our our bring differentiated the and to later even test support in it in execution early and enthusiasm. are accelerate from these assortment the Outstanding marketing XXXX. deliver loyalty couple progress performance. and inform early for extend full are are A results. and and key, we're that the strong exceeding to their our tell we're in rollout gathering pleased required doesn't meeting functions making to to collaboration

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to items. our and opportunity As big, enhanced part and we engaging first rebranded showcasing and an the rolls Discovery of outside our for products, received our events and such customer-centric for tremendous brand debuted July, drove attribute-driven sampling fall continuous displays some we growth experience. In differentiated was Sprouts we seasonal are as the to products, better-for-you well Days. and showcase brand. efforts saw organizing It have embraced Stores go and coconut customer

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by operations the in reducing and advancing boosting improving sales, processes, our technology shopping shrink, optimized customer enhancing and our also experience. We stock,

brought together with X,XXX the retains talent, held we've We managers SproutsCon team, over that our managers Annual long top building recently team Sprouts attracts, worked members all hard for department various Conference, our to attendance. Regarding and store develops, and our term. culture create in which a

to the learned through team During our team about their knowledge introduced show innovation slams. customers stores pipeline, received products some leadership Over X,XXX members. their new were back allowing with each event, vendors vendor in fellow operations pitch member business our attended discuss live initiatives, development private the and to and to our it bring to share their their team and products, training,

job. our Our growth talent teams leadership on HR a and support to focused leaders year training objectives. are build doing coaching this great to They're and engine new our

acknowledge strong we the our environment. every that have will in back, in macro the to business we that to foundation As a we're some thrive enable putting effort tailwinds establish at

results of our said, each quarter continue do Our presents there That confirm to know work customer-focused third momentum in we and and to new strategy. challenges. our belief target overall day is plenty

customers We committed ever to are our making many in than possible. to as more options communities available as healthier

us enable to our investing results Our in growth. keep

will the shareholders. enthusiastic of With the We're ahead support across to value rising are we team are teams deliver opportunities confident continue of our our our and outstanding about company, members the updating we the months. And to Operator? I'd We it in over for challenge. to the you progress with to and coming turn questions. you with look many forward our like on that, connecting to

will we come conduct at Mark this session. time, first from And will Carden Instructions] the question-and-answer UBS. Thank from question [Operator you. Our

you the of for to range? How to guys Did see guidance bit an the from month been XQ impact to-date, assume an acceleration guys quarter. from the there's sales? month? of fair comp your And your is strong given cadence really another midpoint just thus in comp the this a hurricanes to far much of it is you So of

acceleration was then Mark, fortunately, we're missed it's Curtis. benefit kind the bit heavily a impacted southeast. good a and And little later Helene Florida. in of Florida, had penetrated in our the but a quarter the certainly and of hurricanes, bit stores, not We Milton little of the from quarter

a bad huge in was little quarter far anticipated so as the to to acceleration forward a a little and be, driver late and not overall what bit momentum quite pull good saw into [PXX]. to the there's but there. So bit you of was know we've it of as seen Neither -- heading

you're as talked should about of you ramp at about how much a further this think a comp waterfall your this your then forward growth? store And getting do And you we structurally? contribution performance, changed all from advantages. some stronger you How this newer going point? Has follow-up as think your

I'll changes, structural No take in order. reverse that

the comping couple you over I started of but faster. stores that from algorithm years talked we lower think the box our they've little than calls a economics, of know, been view, few last ago kind kind a

expected, we're a know, So call recent We'll I little kind as mature that and we are of basis of of have more get basis getting, than points box those economics. that give XXX think we XXX state a specifics, vintages. our playing kind that out we it but kind to over, probably they'll don't points, from in or little new

years are we years the So us. X the out core stores nice is X really of look a they're doing that job comping or and for at comping where kind

very on years And or X have by years. excited X Mark, that we're been for of ground stores kind the

start They when I we than think little of there a it COVID. smaller was during like opened were we'd to bit probably with.

in from markets So where well overall, we're the really in response that. a consumers strong benefit getting But we seeing markets. those we're established, been a from haven't

the Our Parikh Rupesh Oppenheimer. from next question of line will come from

So can this are just something that what a do the business? the strong on now. you're side. you if Is for the feel anything about to unsustainable complement you seeing to in continue sustainability QX guys back year? seeing just in How of want next and believe guys comp get terms to, that the guide a there's obviously, going sense you of right And

I'm very the that. our and shaping media and how customers our our some teams and first thing marketing got seem there's stimulating doing base. wallet, very effectively the things say upside the be think share using excited still thoughtful message I to very Well, a pretty customer we're about we is huge small customers' in want a being that to We've well. by of are

even a think able which we've I be year, learned to this we'll effectively lot use more year. next

basis the that's that. money systems happen the for We've at are of lot I us. more in and last behind and and the to of store-level a encouraging what as an terms invested So more in getting sign execution get over the And a think said in-tune our to in-stock better, business getting execution day-to-day of better the with in years I script, continues stores. infrastructure better on couple needs in and stocks

encouraged picking comp very to marketing some and to right will continue in that messages and drive better teams encouraged I'm sales So better will the that for those place. messages execution our continue our get right us, operation at sending the

a to whether lot lot customers. Curtis, there's I you on business So upside encouragement our of our know a in to go that. want and expand with there's don't of

pretty the was I the no, you the digital channels bit last Produce of few in We've little those of comp business, Yes, of in pretty is scheme couple third added Again, in think, a called a are season years X.X% an in strong. we've quarter. grand know, the out small the but one-timers. helper. hurricanes

continue for it against as we've X% in any environment. that really do results that feel a good X% now momentum. So Jack confident in says, algorithm to up year. We're when any got deliver environment. we come Expect building comp later can that in to to certainly We next business we

And follow-up question. maybe one just

year? I comp. know a terms program just could of, of you know, know, able insight loyalty leverage incentive some look quarter think point be normalized investments, as the you this what So to you we weren't in leverage given Any you higher beyond SG&A, this

help labor be there'll things just so points less a from normalize good with there the one-time less bit we'll and it in had Again, offset away of talent. has Certainly business to the the pressure pressure year, some say jump go wages incentive in I'll And invest bit that then will year. will quite getting from investments penetration will won't although we've and e-comm. there, e-comm little little the are have the continue and pretty next in got things and us, better. The pressure that. been so this market a for it that growth

much so the February, much in through working have a should we XXXX. XXXX. be more more budget are specifics but we year when process Teams And we'll normal have right to a normalized get more it'll and so now,

Our next question Katai comes from from of the Bank. line Krisztina Deutsche

to new I in performance, ask which strong. store very wanted came about

it I around XX% mid-XX%s. the think compared around to calculations, our based improved on previous

of vintages some what a terms the Just And behind forward? can the improvement? the a as this NSP, going level old? to the Anything those most about are share talk recent couple years of how drivers this that see in can you relative you bigger some of could you little of are higher normal range ramping of be

right, directly of those our that think the the scenes to our marketplace. with very thing how terms specific Yes, stores, bit strong stores I in even Krisztina, picking and pretty second understand vintages. doing little work by brand Why are closely build like marketplaces. a are we're all a the the in I encouraged very where that of being think and so years getting we by through role our very to in related little we've of are getting teams X, we One, how target been modeling our how getting bringing They're X, is, that better build people better? X, in terms to X, we coming a And are customer stores, getting bit more build market opening stores. they're playing to are that comp-wise. in marketing honed is where And to teams behind terms terms the working of X

and So right of stores, town built they're that right part corner the road. right the being when build in exactly on the we

excited when and opening and the outside. the to really So by a people behind it's genuinely and go at the things people lot And And us a new And teams for alive. teams. location, really assortment the to combination job the you are a you I stores be by the of of it. in these nice offer see and honest, have making gratifying done understanding marketing of think there's lines these and customer store come execution come surprised

we new gives So a store it of little program. bit future, at get certainly in better as honing confidence this lot the us a

And of things. Krisztina, couple One just a I'd density add matters. is

opened start the So more new word-of-mouth opening our we of stores store even we've on the great. and more stores. as before because in denominators smaller and productivity calc some the And awareness then you're we're is is markets, getting itself, program, larger which advantageous certainly

it on kind than a that be XX% calc. that new store that's of why would of bit So little productivity better historical

target that of on to you. insights And think really just the then are in I or base? a share a but for overall to we tie how they ask should have in of frequency in potential newer it could How basis? their of follow-up, sort shop wallet customer share comp to households started terms performing wanted stickiness you segments, you that about some with with any forward relative terms of your contribution go Just about and your

the customers seeing on seeing. We're Sure. we're A means we're little newer the basket. smaller which some seeing increase, frequency

a seeing transactions X kind of X, in more we're So unit range. X, X,

We're And a change so there speak. of to headwind mix -- mix so there. bit there's a little also

also we're customers stores. lot we're because pleased younger think a into I seeing coming of our really

they're So bringing the and a doing and in work seen the team is XX strongest in ones that the XX I to where one younger media customers. think in that's social we've And cohort marketing our growth. credit of to those

increase, bit pleased So cohort color with where there. of but frequency around customer little we're we're headed a the

kind attribute And I from growing health products. stickiness, comes of the based think this Krisztina, and interest in

past. that that's interested And are are clear of get we're that think contributing people in coming the that more people interested. I I think they to more -- increased very it's more back consistently this number increasingly were in that in and the than getting the finding

line Research. from Melius Aiken-Phillips comes from question the of next Jacob Our

it sales. least a there's just at slowdown might conservative like be math, XQ So the curious, little comp in doing like a seems I'm or

of because can a these that. just your lot curious if high. kind you going I And like, guess on is to your forward, continue thoughts of sales people comp then valuation asking So maintain are

for, like, just developing bigger I'm X over not So but or comps? are like, XXXX, in drivers, years next, like, those the the just what X wondering

Jack Well, I the QX. to the and I'll the cover is X.X% flat QX the drivers. let and than think an slightly midpoint first the in acceleration X I'll part in year then and cover higher years X

in business. we don't let we've guided I way the drivers feel then alluded the cover ago, about guide or few performance why And it's but good what in think some we So and the good the the sales. Jack about feel a the deceleration to a minutes I'll in of we

very feel and that earnings. our in the of in we direction confident Yeah, top-line terms can of terms continue to flow it right in will bringing through through move our that

benefiting economic confident merchandising a a one. that as So go share that some, customers good is are I to one to very shop initiatives it's continue are we're this I said marketing, feeling at we we're And real that going that customers from that and health in that And with resilient any the have. the tailwind away taking little our anytime that confident them. at pretty trend bit that We're moment. come that of soon. us we're I earlier that customers probably And think pretty to a should tailwind more ain't existing shape, wallet of think the operational conditions drive

think forward. comp we so. us all, that And think I some price the don't is we at too confidence gives can high share going So that the comp

You quarter, and consider about What bottom-line don't every I wasn't trying same for a talking the XQ? you is perspective raise conservative? from it too just XQ to growth. say beat about just was high,

aspire going kind and we delivered we I in-line it quarter. what every of again, we've beat to think we we midpoint aspire it's to right it deliver say with the to beat said. Certainly, in QX. put what We're certainly what

things there's that. in healthy and election on New Year week So fourth holidays we'll into an next the quarter. the going our we've -- got fresh some got And then We've head start. some got and after

moving of way as last we'll quarter, out lot good feel continues a their on consumer plays and all it the going on through about So in see we the the part holiday, pressure to be guidance. our they're how the but so

Goldman the line from next Our comes question Ken from of JPMorgan.

is Jack, right these costs continuing considering. Sprouts a fund about I some grow the is now. investments There's returns you but great of maybe article you're so help business. investments getting to say, an vendors per there invest item to its about growth of to on that in talked out don't little or want your it on fair of side two how Obviously, in asking your successfully growth, been fund to to a can share closer, that your those is. they into some leaning if and a with people investment vendors, to vendors question? with its want work a terms And lot that's of get trying among I'm you. if how vendors the of been that more it there articles couple about is of that of I to the detail valid valid, what the a than that idea maybe than receptivity a other sense asking of have couple want of to don't it. in go some just to

a it's fair course, of Yes, question Ken.

as and operated We're vendors and set and going who our as the how get for a and going past. work. are from we with to work we're who I our our a and the aspiration innovative, of comes our said vendors. hard make into better we've I frankly we think lifeblood we efficiency something with we very in what are customers it's with little customer been bit immature going how enthusiastic, businesses forward we conversations drive who becoming more have drive we're customer products. that And try very the we build to group and and we're in make Differentiation working less that new for vendors working relatively can vendors of stores having so for at want efficient? can to are hard our And us at operate of we opportunities momentum, head detailed and to our we opportunities very in efficient? that. And how we script how it's And build innovative efficiency these about access vendors, creative, momentum of our to some company. better our terms the margin. and bring all as curve real more for fairly of and become companies to quite build comp to products very How and try be how entrepreneurs a of can -- relatively a and and How entrepreneurial efficiency can them more our

few our You've years. seen the margins over last

it's I'm us envisaging of combination efficiency that vendors And working going really on getting more our a intense work this going profitable with really with vendor, forward. And good the So much companies that. our doing dialogue we're it's and with become great. will they the this merchants pretty really and really customer very that is they're good vendors because the responding And have, base excited can we are about and The opportunity. which see pretty well, are unique work differentiated.

the even inventory, a to to X, the on -- can forward years been of become drive give products think X, it's X the they're invest virtuous commitments more vendors. If over in and time, really of we can over growers business a enthusiastic more work very appropriately it's they X, a intensely and and their get how bringing they commitments farmers their positive profitability even reception with merchants So own to to and vendors then about cycle to bring give long from period having it. more and

in stead and vendors of of up good to having dialogue in with are us as we yes, going come company, way the it's of our Ken. to many it's definitely think stand we're growing part years very And been we operating. positive So for terms a that is lot dialogue us a

of Ohmes America. comes from Robbie line from of the Bank question next Our

you your social media more talk media X% you think here. a mentioned between impactful little difference to quarter, with a Jack, X% mind? been? in role XX% versus in acceleration in fourth maybe what's about Can social the fourth played the being the how you the quarter that, has XX% in at And about comp when

impressions gone media and from when happening. the literally social the conversation. misquote got Well, what I'll let The Curtis do into to millions the the get we've clearly very media, you in X% of what's numbers, real but XX% is social of I'll specifics billions we've

buying lot is and responded which sure [CMOS] us, messaging extraordinary of very from some And messages some terms our that product that, team it's able drives all a from resonated a social And some see for bringing lot well celebrities We've really out real amazingly of be part hold have coming what interest we of as things inventory in well. at some doing this it positive chasing I'm quite in and got try media on to all had but specific pretty the have a the it. in they're moment, our we support forward social doing lot, on interesting of work CMOS, called really as terms a a really done to products. of it's post. a the there product which with do it not and media make around to. of We've we're sudden And clearly to responded responses.

social some and behind we're both posts So impressions and support is of forward. enterprises sending driving on we're entities getting, sales that and the driving that is celebrities it's those getting number out, a transactions number media from also specific going different of products and very posts, which social specific and the which we're impressions, media

about, So message kind that's are really media the we social Robbie. excited the of of which

are and where mean there. XX%, a well last surprised changes those if X% it's more and in running step getting not we're how towards Yes, of Again, couple our business numbers better, holiday that a QX been Robbie of about uptick quick comes we're we if on in the little quarters. is end but feel step going the the think, the we of we surprised couple in to and come. do the by of better good of seen well kind business We've and a the get little we've I I they've pretty to changes magnitude

good little a in us one-time range those we think bit a feel and macro nature, I pretty momentum. a bit, a bit would goes the and kind little way those is more So on to of that that little longer of if But or our hold time. to about that's just of some down of see but our period watching over it wanting be gains that

of the Mushkin Capital. from Our Scott question line RX comes next from

times thinking maybe I think uses you I ago. are down So last the X capital, almost asked ton this debt. actually your paid you But about was cash. it time of Obviously, I of or question all think generating a

when then So a we think of we follow-up. it? capital, I think about have uses should of And how

Yes.

get capital. in on the expand always going kind ways you We to then start looking of to way we're good So to always. flow, cash X.X% store continue growth of range that about to kind feel what's back in the we'll forward for shareholder. it there free most always on business to the we'll be X% our it's but excess our get foremost, XX%, back side, get to the the first effective and down to and invest And to when

interest less investing we it rates, between kind shares. at and back Right push so the And a high on now, what with get pay down. to can buying or it debt was it's it hanging versus the the more banks of

bit the into the So we'll interest about watch what with earlier, share how we'll said manage it to with just a of pursue where move price, Jack I continue as But and shares piece as that. rate XXXX, little buy we would interest we are, on feel continue we're both. we think we aggressively good happens as we And dynamically doing to rates. watch of kind we'll

-- on M&A any wasn't then thoughts And there? front, That the

between, few think does Scott. Well, our we're tie up it target base We've got and and opportunities far about those specific. being very customer are to with

come moment. things of but not look the at the something us, out mind forefront at So it's we'll always at at our that's that

Okay. follow-up then this my And question. is

lot the be if obviously that when future that front anything about bit? a way a ability So trend thinking store, burner stores the on sustain to help the guys the the could have of little strong older you think might store comp very about? down even you a So into even bring slows that things of maybe should or that we

it's think Scott. good a I question,

things changed. our re-modeling had more cases stores that innovation our exercises, were changed, how our at done not huge stores stores new of centers have before. talking look they I that didn't meal When we the got haven't about although have our we had, ever They've stores existing have just that before. than is we got they've One have

You've got new facilities in our vitamins department that before. we didn't have

fleet, have are gradually the sizes. have But happening at a be and take time, capital most energy our store. of we're size stores we product-wise into it. a allocated. So and sure And got a shapes are the the things we our of number of clearly look some we've of category most back capital put of will over years. the sizes, interesting spending portfolio may been very right our over we couple within moment, there making At In of different every store wise the And last and going opportunities building that that that as we we're forward. that have done will existing on

Our next Edward from line question Fargo. from Wells of Kelly the comes

healthy a Obviously, you've I pipeline growth. wanted to store got good now. ask you about

stores the drive XX. on do capabilities it going that And I the open and over-time? be number growth building your ceiling you Is stores up to you're up to but unit year, the you continue internally are higher of over-time? soon of close the like pretty because percent sustainability the number ramping there think a of will goal to sustain or the growth. to You're to question XX this ask XX% How about

closely put Yes. the the pretty looking mentioned at looking we're we're continue into to really we've better and Ed, Certainly, now, cost to sites. build, faster this go really that ways find at at Yes, looking to opportunities in we're should those select process, and the analytics pipeline is intent looking in the at that that great right Jack gaining Curtis. to stores. trying up with we're ability sites, seeing the us few the we're It's years. to all so working back to for for get us. with But really open results on last We're been XX%. our things confidence of it good

love more kind in open-up forward digit range. as few high of So we'd been stores, that a we we've and to go single

back to piece, So really ability to way high-single our our working confident XX%. digit deliver in that

is think we're that. a years We XX more working invest good and question range, I the that X, teams ramp-up, kind and X, but we can the ourselves XX capability, our of get way one, I improve to think your out. in believe it's probably towards

And there's the there's that the huge it stores, whether exactly customers look kind in got lots in Midwest, Chicago be you look the country think I we've it at be where we're moment. customers Northeast. huge of the after. if stores like swathe numbers, don't places who whether have Ted, And of of Boston that only at the There's XXX the chasing we

been plenty we've on willy-nilly of appropriately teams And stores So making and we opportunity. as been place, there's about sure don't finance focused disciplined and wrong Curtis the in have the very that. open

we're I carefully appropriately. do So sure but we make we it can to and do more, going think

management, to I not Obviously, I headwind could with store remember thinking new was there you're growing are some thoughts the density opposed you just of that associated into But And the how new under how cannibalization. as versus you're your issue into that having some there like you, prior store and The markets? curious sort -- at ask about the infill, was I'm of older evolved time appetite your around to infill really push moment. have at markets density in? markets especially

really do cannibalization customers the our drive modeling Yes, with The that -- start better we come is go, it stores can to got got distribution in we enough that is so to opportunities in have good can opportunity significantly area we I store, XXX that new ready the appropriately. if center have think believe I If it's And significantly. you within all not that, there important to marketing little got we've few fulfills that last have and both. believe in alive got X gets When catchment density it we better markets, a it some has very go a while. to miles.

I'm So by very encouraged we're we fact that had. better ever understanding cannibalization than the

time cannibalization. new And moment. pretty we're sometimes both one better I modeling it feels at in forecast and better. like look makes getting very what sales, it sometimes them doesn't. at our it every been And look has we to and at what I getting the store And impact, for some But the of sense tune build our close

couple year just a I think will second be add in row I'd that of a things X%. the kind of Ed, X%, Yes, this of one is

faster, aggressive newer in a So there, we is the the in but that looking interest cheaper some rate out, our down, the as few that'll there, confidence the allow more to more markets. I be the And away growth inefficiency start and run and come build faster. the that to there a in think shift we're process us program, that of process cost we last them we of few better us from to of the parts the out, go and in. well bit that, these land go using be maybe a we our in get smarter sites take be our building we I can as mix rates kind as to cannibalization we're the the lot perspective. allows and can X%-ish really in we we think improve from take plans The Midwest build before into and we're years Northeast now, lower learnings can years at economics -- We're looking now, when a if

in those So kind years going the next up for couple are hoping accordingly. we'll things of manage here and us of line to we're

Heinbockel Our Guggenheim. comes of the from John next question line from

think about Jack, you're process can themselves into center think you process talk a how couple you the about a years sort of and at right, Are go know out, But the many has of think one-in, So I too innovation how all items then through mainstream. to foraging versus when new one-out. because those you to want And that you you going right? prove now them first the right the about one-for-one, year? items evolved, out I ago? planogram? don't it's are time, maybe taking items of taking managing How don't introducing

those The innovative -- new the team product. those part It's get that's lot those job suppliers when this a type our to really customers. amazing committed that, slams the couple been to an been lot have John. for innovative taking of about time a question. last spoke of good can We've I pitch last destination to think at doing on a years, ideas. the us bringing well, And journey differentiated products, entrepreneurs, a of foraging over we're we of us a said we're where making lot to Yes, was of products the I lots access call done see of

and We at are going the spending in a lot to of of world different different opportunities, applications looking literally getting the things thousands around different for and time exhibitions initiatives. chase product. And we're

to So for very not can allows enough give that's ways goes some to to center good stores a products it's opportunity. of the everything it us. have smaller all pipeline And the go testing does. into well, for reduce to certainly us the bringing vendors In as creating but it. of inventory us it so plenty Not innovation ground first, some

our how to we've But coming innovation learning change. that as of finding lot center customers And the do way from so transition of things appreciating a the So bit there's in to And go to vendor that got we think that the means it main these are we've all when can't new better we're are fact are to well, that the a And that consistently. base vendors the does XX% I involve been we'll that rejigging. which our how shelf, on how an stores John. as this, learn necessarily about are main And X the to right, to and on to curve continue work learned forecast day out suppliers. build store some products learning smaller our of evolution these their has the this effectively. into said, with I with it little

at know that a point I Southeast? build it's probably the you'll quick for in Mid-Atlantic, early Supply Midwest. are my about? Atlanta had work go back then get Do facility in capacity you thinking more And right? out. What didn't know else too you I chain, follow-up. you So some there to

the we're and business doing moment might too need that do because Atlanta business bit well. the Georgia little We a far our into is at really to shipping

going something both So going the do going a we're to quite of DC to we're not to Mid-Atlantic need to probably south and to sure. yes, the need Atlanta. we're in Midwest we closer Mid-Atlantic that, the When forward. But need

John, I'd our where to add expand Northern we California too is capacity with growth. and need space place expand a

and Northern California. right for looking So we're in looking at now that solutions

the from comes of Montani question ISI. from Michael Evercore next line Our

core fronts. wanted on the could, tailwinds. the Just you're seeing, X X obviously if that eating on I consumer to you healthy mentioned was ask,

you're bit consumer upper like middle variation of Just that versus to further? could the seeing if in your wondering a terms discuss any if income income little low core, you

talking and are we're more have how media, us. that narrower in to younger trends to as evolved, I find people that's that they talked they these our we've We're tending thinking hesitancy, to poor and or not eat. and people how that's in about as are the in younger bit a is, dietary well thinking partly And spent that Well, directly eat we that a group people of that us. was base. with or more they What for to segmentation are about and thoughtful more we're getting tend as well we're a what bit to social almost time necessarily related and people about as they narrower have because were drifting education to between. the are Not eat little customer people how tending works what definitely find about what tend partly base customer that I about cohort say be, And we much earnings coming level. to works. consumers And this reacting and because find eat wealthy

gluten-free, specific about are dietary we're as issues vegetarian. becoming thinking our think really dairy specific very that assortment, are evolve that. Those got attracting customers the I allergens, You've vegan, we

And well So are customer know base. are, well what's dietary that's driving Mike, how well I but don't income what really trends our about we know think or we about talk our the levels coming through. really

on the follow-up could color quarter of then some XXX gross bps you the gave some Obviously, and of front. SG&A I the into if maybe then And deleverage. margin you. fourth Got

I from been a driving seems outlook. progress our was if the there of So new as could there's And longer-term, wondering what's you it be a well shrink back in in a little as lot good further the then go, like discussion. peel to terms in guess but seems like vendor I that onion thing waste could pretty perspective, leverage a more

provide of or kind you that just wondering, opportunity So sustainable they're for does actually margins move to level higher that's feel at do a now? over-time

term the driver. shorter margin of is gotten the really We've on kind the quarters. the after QX, couple start I'll The so big about talked Mike, Strength it with space. has team last QX the in of it.

That our quarter like into with had was inefficiency compare as quickly year So saw from how they've shrink you perspective. felt and longer that of some bit result. gotten also little pleased to they're we the with the third term the we that easiest in we're a over this pulling a shrink

starting later we're get arms it to fourth year the in So quarter. in fourth quarter, last our around

compares for tougher the little So are bit a us.

QX. And be little maybe was a less it it so than that's in will what why

management that. line. On gross We've bottom really space with our term, feel that year that's to we'll point the algorithm, that deal stable good to longer and in confident of part parts driving I'll made expansion. back We about inventory really margin The year. investments in pieces

be today. to So order the business year that we're same what in bottom-line to confident stable be and a where that And balance jumping-off continue could of in the guided this drive the but goes forward. investments really and we'll next off gross, in in need good to point we SG&A, could for make going we new higher it really

and levers about through we've in SG&A got levers year-to-year. good that feel So, gross, got in we've manage we'll that and

Capital question Bania comes Markets. Our from of next the BMO Kelly line from

could whether Uber Can bit e-commerce about to a or that to unpack a Instacart existing versus customer. just the customer continues Obviously, it or growth. here. by partner, a Dash, pretty digital or that's bit you maybe you by if new meaningful little talk more accelerate Wondering, level little

about that. as growth to loyalty trying or what any to is learnings could going or if look then any about tweaks guess little longer surprised e-commerce to like. And gotten bit rate and Just questions you're term just how the follow-up, test we on you early to, penetration for willing haven't a I'm that and think talk test that to I that

Sure.

and e-commerce, well. our is customers the the now given delighted So and Uber DoorDash continues of business developing through we're We've well. operating those Instacart Eats really with to e-commerce evolving do business omnichannel and option

those our the and at and are truly the through they customers as growth it got assortment I And way our or get fact in omni with channel. we're target business bricks mix saw navigating channels. we're certainly different do Kelly, that in about what I've into we and it our this of customers, course everything. between delivered shows trust mix the buy And pretty are the very past, the fact in of is we have store, it the as encouraged whether think e-comm last thing is the over and whether seeing lot that we And that and mortar amount collect all is said within by it The the our same unusual. of go it, business the Our bricks mortar issues our selling of they store QX encouraging whether steady business. the same their produce, who within our we're in strongly they a in we've

up. in we'll to where the just e-commerce will customer creep-up how we our then with they numbers is little our And how that. few to start program be customers it's program the be at the the forward. it. way Nashville forward, I'm that pretty let Sprouts to of in on actually and brand that us a to that more a moment. the to the customers have that's program. those to to seeing we're us. we're back that end marketplace to in time linking towards stores the continue stores the while. will to really learning going key the more little come more. encouraging our navigate, we next to we're affinity unique we're even of coming very going that I will and over from get information to will be that encouraged Tucson And take of to that's learning. very And by the the and taking way it on kind think stimulate customers of learn And Those of we that of from a allow we're and really will roll-out loyalty learn it first going a sort the the bit. And that's bit data. to take in how the And them we're customers. scanning from are to we're What the coming how course navigate And how and scan, then learning right understand understanding the little need two program us of to create What to markets the do something do our getting what determined What extend that sign of me-to-grocery kind middle involved to we're it how that's the not and XXXX, in our get through information customers few that initiatives are We're

And from will from of come Jefferies. our Robert the next line Dickerson question

to say, was year. continue also a that relative updated the question you let's then Clearly more fourth are what's of nine now guide kind it is quarter. months that, ago. well the changed, of to should attractive, guess saying as And part than I earlier also much just general in right, the it

maybe being calling like maybe but you seems have just units weren't there were success you're And out in, maybe from curious be a baked hurricane like as was I'm growing it produce little coming really could doesn't So but you. and just what a much conservative, like better there now or right? sound or macro not tailwind, much

over months? like speak, what curious just the you, upside past on of the I'm shocked so to few So kind

team's taken in called done at acceleration doing how good the months us customers same a that I of QX accelerated. acceleration and quarter, saw couple marketing highlighted the doing from been off through fourth Well, the our we the years few quickly it's Certainly, and We great made and good quarters. biggest XX to are thing we've is last really there. and you in our covers the yes, mortar to fourth really teams and here, It under was QX. into the then That's script up brick it stores. I think it job the they're traffic, into it's change. pretty things quarter a that surprised part substantial think months We're last getting of more progress last XX job. the here driving to the the What's the

good right work. little it's So things I a of that happened kind tailwinds sending going team advantage. lot the continue at everything and we working some that is and taking showing and we've direction to working of in, customers strategy in a a as great time Certainly, them them our the seen the QX doing people well rare the everything's improvements When that where and we're job that's parts executing come made of in our think giving I a here. experience back. that's weren't to The career working, bit and the what's have we're got way and then bring these We've reasons in of same pretty too. business my in new

to Robert, exact call, at usually And we're business. good board. difficult as you been. the Exactly it's marketing. numbers itself as and there's are momentum, that momentum There's of We've is execution great got strong in merchants well. the for is stores tailwinds. in really but get to in when keep fuels The The it And we're the momentum kind across working trying Robert. just there's why the running moment, us

word-of-mouth, comment all experience I the clearly longer-term to the makes and the it's just little I of want earlier markets, But think now saying, and had trend. algo, also But the for look, right, it wellness this logical in in-store mean, it's health as Definitely next clearly the you I the year. to it sense gives mass back. right, X%, feeling you're to you some range, certain I on the the just then to X% you step X% quarter. midpoint fourth circle just earlier, Yes, of in and I critical mean, confidence build right, is X% X%, back well, up in came a about the

algo actually preclude So but your more you little mean, the from first a least of be above get would be what able half up? I challenging, above like couldn't being algo year, comps why right? the like it at to in

down getting to I think, that place. we're not slow going to it from

I X% it I more can should some on X% year. up when and get about think we'll good terms this as have of of aspire early We deliver momentum half these think head will higher as we That we those second we update that. numbers we're a types on. We We'll long have tougher the tailwinds into the have feel confident we to to to against February. in the deliver year. be in as numbers on that better We base can. in

it's see But that we the a X% healthy when more how to maybe through we'll the towards year, start, X%. to want through fresh February. election, holidays, end the next the our So again, get pinpoint consumer be through and does to then I our of little higher get get

it's terms. QX? of the bit amount little how maybe That's you're similar we it. the of gauge be SG&A to should about kind or Is a seasonal like actual be thinking business? like that aspect thinking dollar in And clearly just Just trying of you're of then margin. was up, in say up on QX let's is the saying $XX offset QX, X it's year-over-year know easy in quick a one QX million Algo gross bit given SG&A. kind a more for almost SG&A an larger I It little the would in

Yes.

on top what of in kind about think I saw -- little the it's we're in off is we it pretty don't about what quarter. about quarter of we basis it here fourth the it points raw going to head. think and bit think of I the terms my anticipating similar in more third But and to I numbers talk be dollar a have the the

for line question last the Goldman from our And from today will come Sachs. of Leah Jordan

into little I just bit more. a wanted basket to some dig trends

where back the the inflation basket? second, are then recovery for we're re-emerge gotten to we commodities. flat? we Have seeing volume various And average in on First,

guess And comp driver So going forward? about a what's AUR, here? inflation you how your from are thinking view I on as

I trends driver, be on as say We're comp normalized a the we're expect stable part into anticipate. would and our get as AUR So out play kind -- we're those of when driving a now. of we to we comp seeing you it would

always more up going with fresh a volatile. little is a to be business and business. Our more aspect of down little our the It's

expect So we we'll for it But in space but driver. are last see to stable have of quarters. be few different our kind been parts that the we and business, in of a that

units front, On year-on-year. we're driving unit more the

we're bit maybe things who units you some digit little single are inflation the the an more that we're customers our of doing smaller get But talked of more or us year-over-year, get seeing some think I flatten. skews kind a kind back, packs. apples-to-apples we infill get business, with value in We as of customers trying that's down to a about are we having who of core we're mix impact. when low an shop, in mix the standpoint seeing baskets, and from

third in set are core they flat kind skews. of that quarter of the So on here

traffic far as between the and the and AUR. and think play in out I it'll fourth played out it's mix expected quarter, as So forward, going here units similarly as

we're some inflation, because Yes. the always -- the got encouraging than And regard the is everybody in more with to to markets mix the else. it's us as bigger is and at volatility it's movement moment. volatile fresh produce across where And there for we've

of seasonal think So some we where environment, lot I that's ups labor aspects both things on back kind of weather and of and more and there's volatility a like a downs. to that. and availability inflation And depending fresh certain seeing are normalized and volatility

that So there's of down. industry. talk a inflation is But overall lot settled definitely about in the

last on over mean, investments from well, I months. if obviously, comment produce my price about And performing I hearing changed see few within the just environment others. and we're you how the but are just you competitive then wanted maybe could follow-up, to guys for it's more

think differentiated, what just know So but do seeing you're about I there? very you curious that? how just you're

it's doesn't know, part organic you and Leah, produce produce very an focused We're lot outside too little geographies in such there. pricing Well, important produce given a closely. the in really volatility as outside our aggressive investment a us of we're our -- affect on much. in one time of shape very There's watching two produce we're we that our pockets seeing the of of pricing lot watching not different feel spend board. across business. We're good comparisons that mark or But and

We to we amongst a people potentially kind certain us conventional the us And seen that produce too doesn't really stuff. we're lot pay certain markets. about I a place haven't affect think all that pricing concerned Walmart it of on in doing anything in volatility grocers much. it. and of that's there But put is some and of what attention kind are

for it you. back to over any Thank closing I'd to like remarks. Jack turn Sinclair

in for Take look everybody, you, care, you thank Well, our in course. updating your due interest everyone. and company, we forward to

conclude program. in participation does your for the you This today's Thank conference.

a day. now great have may You disconnect. Everyone,