QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2025
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36029
Sprouts Farmers Market, Inc.
(Exact name of registrant as specified in its charter)
Delaware
32-0331600
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5455 East High Street, Suite 111
Phoenix, Arizona85054
(Address of principal executive offices and zip code)
(480) 814-8016
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
SFM
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 28, 2025, the registrant had 97,726,169 shares of common stock, $0.001 par value per share, outstanding.
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 reflect events or circumstances after the date of such statements.
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the “Company,” “Sprouts,” “Sprouts Farmers Market,” “we,” “us” and “our” refer to Sprouts Farmers Market, Inc. and, where appropriate, its subsidiaries.
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
June 29, 2025
December 29, 2024
ASSETS
Current assets:
Cash and cash equivalents
$
261,404
$
265,159
Accounts receivable, net
61,550
30,901
Inventories
351,111
343,329
Prepaid expenses and other current assets
35,263
36,131
Total current assets
709,328
675,520
Property and equipment, net of accumulated depreciation
922,966
895,189
Operating lease assets, net
1,543,865
1,466,903
Intangible assets
208,180
208,094
Goodwill
381,750
381,750
Other assets
17,139
13,243
Total assets
$
3,783,228
$
3,640,699
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
248,980
$
213,414
Accrued liabilities
223,677
216,842
Accrued salaries and benefits
85,115
97,991
Current portion of operating lease liabilities
161,818
150,400
Current portion of finance lease liabilities
1,397
1,321
Total current liabilities
720,987
679,968
Long-term operating lease liabilities
1,586,088
1,520,272
Long-term debt and finance lease liabilities
6,528
7,248
Other long-term liabilities
37,125
38,259
Deferred income tax liability
76,000
73,059
Total liabilities
2,426,728
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, 97,768,860 shares issued and outstanding, June 29, 2025; 99,255,036 shares issued and outstanding, December 29, 2024
98
99
Additional paid-in capital
823,766
808,140
Retained earnings
532,636
513,654
Total stockholders’ equity
1,356,500
1,321,893
Total liabilities and stockholders’ equity
$
3,783,228
$
3,640,699
The accompanying notes are an integral part of these consolidated financial statements.
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 June 29, 2025, the Company operated 455 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 December 29, 2024 (“fiscal year 2024”) included in the Company’s Annual Report on Form 10-K, filed on February 20, 2025.
The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.
The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. The fiscal year ending December 28, 2025 (“fiscal year 2025”) and fiscal year 2024 are 52-week years. The Company reports its results of operations on a 13-week quarter, except for 53-week fiscal years (in which the fourth quarter has 14 weeks).
All dollar amounts are in thousands, unless otherwise noted.
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. A summary of the activity and balances in the gift card liability, net is as follows:
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Beginning Balance
$
11,071
$
10,566
Gift cards issued during the period but not redeemed(1)
1,772
1,590
Revenue recognized from beginning liability
(3,492)
(3,330)
Ending Balance
$
9,351
$
8,826
(1)Net of estimated breakage
The nature of goods the Company transfers to customers at the point of sale are inventories, consisting of merchandise purchased for resale.
The Company does not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current period from performance obligations satisfied in previous periods, any contract performance obligations, or any material costs to obtain or fulfill a contract as of June 29, 2025.
Restricted Cash
Restricted cash primarily relates to the Company's healthcare, general liability and workers’ compensation plan benefits of $2.1 million as of June 29, 2025 and December 29, 2024. These balances are included in prepaid expenses and other current assets in the consolidated balance sheets.
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.
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.
No other new accounting pronouncements issued or effective during the thirteen weeks ended June 29, 2025 had, or are expected to have, a material impact on the Company’s consolidated financial statements.
3. Fair Value Measurements
The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of goodwill, intangible assets and long-lived assets.
The Company did not have any financial liabilities measured at fair value on a recurring basis as of June 29, 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 Finance Lease Liabilities
A summary of long-term debt and finance lease liabilities is as follows:
The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on March 25, 2022 (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $700.0 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 $3.4 million related to the Credit Agreement, which, combined with the remaining $0.5 million debt issuance costs in respect of that certain amended and restated credit agreement entered into on March 27, 2018, by and among the Company, Intermediate Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Former Credit Facility”), which remained outstanding as of the time of Intermediate Holdings’ entry into the Credit Agreement, were recorded to prepaid expenses and other current assets and other assets in the consolidated balance sheets and are being amortized on a straight-line basis to interest expense over the five-year term of the Credit Agreement.
The Credit Agreement provides for a $70.0 million letter of credit sub-facility (the "Letter of Credit Sub-Facility") and a $50.0 million swingline facility. Letters of credit issued under the Credit Agreement reduce the capacity of Intermediate Holdings to borrow under the Revolving Credit Facility. Letters of credit totaling $23.1 million have been issued as of June 29, 2025 under the Letter of Credit Sub-Facility, primarily to support the Company’s insurance programs.
Guarantees
Obligations under the Credit Agreement are guaranteed by the Company and substantially all of its existing and future wholly-owned material domestic subsidiaries, and are secured by first-priority security 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 0.10% SOFR adjustment and 1.00% per annum or 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 diversity and 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 0.10% 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 diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.
As of June 29, 2025, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus a 0.10% SOFR adjustment and 0.95% per annum. The Company had no loans outstanding under the Credit Agreement as of June 29, 2025.
As of June 29, 2025,outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 0.95% per annum and an issuance fee of 0.125% per annum.
Payments and Borrowings
The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on March 25, 2027, subject to extensions as set forth therein.
The Company may prepay loans and permanently reduce commitments under the Credit Agreement at any time in agreed-upon minimum principal amounts, without premium or penalty (except SOFR breakage costs, if applicable).
In connection with the execution of the Credit Agreement, the Company's obligations under the Former Credit Facility were prepaid and terminated.
During the thirteen and twenty-six weeks ended June 29, 2025, the Company made no additional borrowings and had no outstanding debt under the Credit Agreement as of June 29, 2025. During 2024, the Company made no additional borrowings and made principal payments of $125.0 million, resulting in no outstanding debt under the Credit Agreement as of December 29, 2024.
Covenants
The Credit Agreement contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to:
•incur additional indebtedness;
•grant additional liens;
•enter into sale-leaseback transactions;
•make loans or investments;
•merge, consolidate or enter into acquisitions;
•pay dividends or distributions;
•enter into transactions with affiliates;
•enter into new lines of business;
•modify the terms of certain debt or other material agreements; and
•change its fiscal year.
Each of these covenants is subject to customary and other agreed-upon exceptions.
In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00. Each of these covenants is tested as of the last day of each fiscal quarter.
The Company was in compliance with all applicable covenants under the Credit Agreement as of June 29, 2025.
On July 25, 2025, the Company entered into a new credit agreement which provides for a revolving credit facility with an initial aggregate commitment of $600.0 million, maturing on July 25, 2030 (the “New Revolving Credit Facility”). Loans under the New Revolving Credit Facility will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00%) plus 1.00% per annum or an alternate base rate (with a floor of 0.00%) plus 0.00% per annum. The New Revolving Credit Facility refinances and replaces the Company’s previous $700.0 million Revolving Credit Facility.
5. Income Taxes
The Company’s effective tax rate increased to 25.6% for the thirteen weeks ended June 29, 2025, compared to 25.2% for the thirteen weeks ended June 30, 2024. The increase in the effective tax rate was primarily due to an increase in non-deductible executive compensation partially offset by an increase in the benefit for stock-based compensation in the current year. The income tax effect resulting from excess tax
benefits of share-based payment awards was $1.5 million and $0.6 million for the thirteen weeks ended June 29, 2025 and June 30, 2024, respectively.
The Company’s effective tax rate decreased to 22.9% for the twenty-six weeks ended June 29, 2025, compared to 23.8% for the twenty-six weeks ended June 30, 2024. The decrease in the effective tax rate was primarily due to an increase in the benefit in the current year for stock-based compensation partially offset by an increase in the rate detriment in the current year for nondeductible executive compensation and a reduction in the rate benefit for federal employment credits in the current year. The income tax effect resulting from excess tax benefits of share-based payment awards was $14.3 million and $5.1 million for the twenty-six weeks ended June 29, 2025 and June 30, 2024, respectively.
The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three years, following the tax year to which those filings relate.
On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA") was enacted. The OBBBA includes significant provisions that could have income tax implications. The Company is currently evaluating the potential impact on its consolidated financial statements and disclosures.
6. Commitments and Contingencies
The Company is exposed to claims and litigation matters arising in the ordinary course of business and uses various methods to resolve these matters that are believed to best serve the interests of the Company’s stakeholders. The Company’s primary contingencies are associated with self-insurance obligations and litigation matters. Self-insurance liabilities require significant judgment and actual claim settlements and associated expenses may differ from the Company’s current provisions for loss.
Litigation
In February 2025, the Company terminated its agreement with Harvest Sherwood Food Distributors, Inc. (“Harvest Sherwood”) for the distribution of certain meat and seafood products to the Company due to, among other things, Harvest Sherwood’s failure to pay the Company’s vendors for these products. Subsequently, on February 24, 2025, Harvest Sherwood filed a complaint against the Company in the Superior Court for the State of Delaware alleging breach of contract among other claims and seeking monetary damages. On March 6, 2025, the Company filed an answer and counterclaims against Harvest Sherwood, asserting its defenses to the complaint and its claims against Harvest Sherwood for breach of contract, negligent misrepresentation and unjust enrichment, among others. On May 5, 2025, Harvest Sherwood filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court") and filed a substantially similar adversary proceeding against the Company in the Bankruptcy Court. As a result, the Company's litigation against Harvest Sherwood has been stayed in the Superior Court for the State of Delaware, and the adversary proceeding is pending. A trial date has not been set. At this stage of the proceedings, the Company is unable to predict or reasonably estimate any potential loss or effect on the Company. Accordingly, no loss contingency was recorded for this matter.
Commitments
On April 24, 2025, the Company executed a real estate lease for a new corporate headquarters campus and store location that is expected to commence in the third quarter of fiscal year 2026. The initial term of the lease is 10 years and the total non-cancellable lease payments are $110.0 million. In addition, the lease includes a renewal option for a period of 10 years and a purchase option that will result in the Company’s recognition of the land and building assets during and after the construction period. The lease agreement also includes a residual value guarantee provision, the amount of which is to be determined upon completion of construction. The amounts included within the balance sheet and income statement for the periods presented are not material.
On May 22, 2024, the Company's board of directors authorized a $600 million share repurchase program for its common stock. The new authorization replaced the Company's then-existing share repurchase authorization of $600 million that was due to expire on December 31, 2024, of which $119.3 million remained available upon its replacement, and under which no further shares may be repurchased. The following table outlines the common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of June 29, 2025:
Effective date
Expiration date
Amount authorized
Cost of repurchases
Authorization available
March 2, 2022
December 31, 2024
$
600,000
$
480,715
$
—
May 22, 2024
May 22, 2027
$
600,000
$
441,699
$
158,301
The shares under the Company’s repurchase programs 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.The board’s authorization of the share repurchase programs does not obligate the Company to acquire any particular amount of common stock, and the repurchase programs may be commenced, suspended, or discontinued at any time.
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):
Thirteen weeks ended
Twenty-six weeks ended
June 29, 2025
June 30, 2024
June 29, 2025
June 30, 2024
Number of common shares acquired
466,420
639,538
2,034,437
1,597,318
Average price per common share acquired
$
158.99
$
70.07
$
144.88
$
65.86
Total cost of common shares acquired
$
74,155
$
44,812
$
294,749
$
105,192
Shares purchased under the Company’s repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings. The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022.
Subsequent to June 29, 2025 and through July 28, 2025, the Company repurchased an additional 0.1 million shares of common stock for $9.1 million, excluding excise tax.
8. Net Income Per Share
The computation of basic net income per share is based on the number of weighted average shares outstanding during the period. The computation of diluted net income per share includes the dilutive effect of share equivalents consisting of incremental shares deemed outstanding from the assumed exercise of options and unvested restricted stock units ("RSUs"). Performance share awards ("PSAs") are included in the computation of diluted net income per share only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be satisfied if the end of the reporting period were the end of the related performance period, and if the effect would be dilutive.
A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands, except per share amounts):
Thirteen weeks ended
Twenty-six weeks ended
June 29, 2025
June 30, 2024
June 29, 2025
June 30, 2024
Basic net income per share:
Net income
$
133,703
$
95,289
$
313,729
$
209,389
Weighted average shares outstanding - basic
97,858
100,460
98,198
100,765
Basic net income per share
$
1.37
$
0.95
$
3.19
$
2.08
Diluted net income per share:
Net income
$
133,703
$
95,289
$
313,729
$
209,389
Weighted average shares outstanding - basic
97,858
100,460
98,198
100,765
Dilutive effect of share-based awards:
Assumed exercise of options to purchase shares
582
447
579
436
RSUs
242
289
364
446
PSAs
92
—
118
—
Weighted average shares and equivalent shares outstanding - diluted
98,774
101,196
99,259
101,647
Diluted net income per share
$
1.35
$
0.94
$
3.16
$
2.06
For the thirteen weeks ended June 29, 2025, the Company had 0.1 million options and 0.2 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirteen weeks ended June 30, 2024, the Company had 0.1 million options and 0.4 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.
For the twenty-six weeks ended June 29, 2025, the Company had 0.1 million options and 0.2 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the twenty-six weeks ended June 30, 2024, the Company had 0.1 million options and 0.4 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.
9. Segments
The Company has one operating segment and, therefore, one reportable segment: healthy grocery stores. The Company derives all its revenues from the sale of products at its various store locations across the United States. The accounting policies of the segment are the same as described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance and allocates resources based on consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The following table represents the significant expense and key metrics reviewed by the CODM:
(1) Other segment items include non-store selling, general, and administrative expenses, depreciation and amortization, store closure costs, and other overhead expenses.
The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care.
In accordance with ASC 606, the following table represents a disaggregation of revenue for the thirteen and twenty-six weeks ended June 29, 2025 and June 30, 2024:
Thirteen weeks ended
June 29, 2025
June 30, 2024
Perishables
$
1,271,145
57.2
%
$
1,090,974
57.6
%
Non-Perishables
949,457
42.8
%
802,545
42.4
%
Net Sales
$
2,220,602
100.0
%
$
1,893,519
100.0
%
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Perishables
$
2,540,877
57.0
%
$
2,160,704
57.2
%
Non-Perishables
1,916,161
43.0
%
1,616,623
42.8
%
Net Sales
$
4,457,038
100.0
%
$
3,777,327
100.0
%
10. Share-Based Compensation
2022 Incentive Plan
In March 2022, the Company’s board of directors adopted the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Incentive Plan”), which became effective May 25, 2022, upon approval by the Company’s stockholders. The 2022 Incentive Plan provides team members of the Company, certain consultants and advisors who perform services for the Company, and non-employee members of the Company's board of directors with the opportunity to receive grants of equity awards, including stock options, RSUs, PSAs, and other stock-based awards. The 2022 Incentive Plan replaced the 2013 Incentive Plan (as described below).
During the twenty-six weeks ended June 29, 2025, the Company granted the following share-based compensation awards under the 2022 Incentive Plan:
Grant Date
RSUs
PSAs
Options
March 18, 2025
185,228
58,805
61,079
June 3, 2025
333
—
—
Total
185,561
58,805
61,079
Weighted-average grant date fair value
$
137.88
$
137.81
$
51.46
Weighted-average exercise price
$
—
$
—
$
137.81
The aggregate number of shares of common stock that may be issued to team members and directors under the 2022 Incentive Plan may not exceed 6,600,000, subject to the following adjustments. If any awards granted under the 2022 Incentive Plan, terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid in shares, the shares will again be available for purposes of the 2022 Incentive Plan. The number of shares subject to outstanding awards under the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “2013 Incentive Plan”) that terminate, expire, are paid in cash, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Incentive Plan after the effective date of the 2022 Incentive Plan will be available for issuance under the 2022 Incentive Plan. As of June 29, 2025, there were 1,123,804 stock awards outstanding and 5,299,822 shares remaining available for issuance under the 2022 Incentive Plan.
2013 Incentive Plan
Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members. Upon stockholder approval of the 2022 Incentive Plan on May 25, 2022, no further awards will be granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan.
Stock Options
The Company uses the Black-Scholes option pricing model to estimate the fair value of options at grant date. Options vest in accordance with the terms set forth in the grant letter.
Time-based options vest annually over a period of three years.
RSUs
The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date. RSUs generally vest annually over a period of two or three years from the grant date.
PSAs
PSAs granted in 2022 are subject to the Company achieving certain EBIT performance targets for the 2024 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. The performance conditions with respect to fiscal year 2024 EBIT were deemed to have been met, and PSAs vested at 148% pay out level on the third anniversary of the grant date (March 2025). There were no outstanding 2022 PSAs as of June 29, 2025.
PSAs granted in 2023 are subject to the Company achieving certain EBIT performance targets for the 2025 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to
200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2026).
PSAs granted in 2024 are subject to the Company achieving certain EBIT performance targets for the 2026 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2027).
PSAs granted in 2025 are subject to the Company achieving certain EBIT performance targets for the 2027 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0% to 200% of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2028).
Share-based Compensation Expense
The Company presents share-based compensation expense in selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows:
Thirteen weeks ended
Twenty-six weeks ended
June 29, 2025
June 30, 2024
June 29, 2025
June 30, 2024
Share-based compensation expense
$
7,747
$
6,789
$
14,403
$
13,266
The following share-based awards were outstanding under the 2022 and 2013 Incentive Plans as of June 29, 2025 and June 30, 2024:
As of
June 29, 2025
June 30, 2024
(in thousands)
Options
Vested
570
527
Unvested
213
319
RSUs
457
633
PSAs
306
370
As of June 29, 2025, total unrecognized compensation expense and remaining weighted average recognition period related to outstanding share-based awards were as follows:
Unrecognized compensation expense
Remaining weighted average recognition period
Options
$
5,224
1.7
RSUs
33,613
1.8
PSAs
16,827
1.4
Total unrecognized compensation expense at June 29, 2025
$
55,664
During the twenty-six weeks ended June 29, 2025 and June 30, 2024, the Company received $1.2 million and $3.3 million, respectively, in cash proceeds from the exercise of options.
The Company’s goodwill balance was $381.8 million as of June 29, 2025 and December 29, 2024. As of June 29, 2025 and December 29, 2024, the Company had no accumulated goodwill impairment losses. The goodwill is related to the acquisitions of Henry’s Farmers Market and Sunflower Farmers Market in 2011 and 2012, respectively, and the acquisition of Ronald Cohn, Inc. in 2023.
12. Store Closures
No stores were closed during the twenty-six weeks ended June 29, 2025 and all lease costs associated with our closed store locations, for which a lease remains in effect are included within Store closure and other cost, net.
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 2024 fiscal year, filed on February 20, 2025 (“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 455 stores in 24 states as of June 29, 2025, 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 June 29, 2025, we have opened 90 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 financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. 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 June 29, 2025.
•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. 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 Scaleable Growth. We continue to make investments in technology in support of our strategy, with a focus on enhancing efficiency, scalability, and customer experience. While 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.
Recent Developments
On July 17, 2025, we entered into a short-term extension agreement of our distribution agreement, dated as of July 18, 2018 with KeHE Distributors, LLC (“KeHE”), our primary distributor of dry grocery and frozen food products, to extend the term of the agreement beyond the July 18, 2025 expiration date, as we and KeHE continue to work to finalize the terms of a long-term agreement.
Results of Operations for Thirteen Weeks Ended June 29, 2025 and June 30, 2024
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
June 29, 2025
June 30, 2024
Unaudited Quarterly Consolidated Statement of Income Data:
Net sales
$
2,220,602
$
1,893,519
Cost of sales
1,358,002
1,175,154
Gross profit
862,600
718,365
Selling, general and administrative expenses
645,127
556,367
Depreciation and amortization (exclusive of depreciation included in cost of sales)
36,606
31,489
Store closure and other costs, net
1,511
3,192
Income from operations
179,356
127,317
Interest (income) expense, net
(431)
(139)
Income before income taxes
179,787
127,456
Income tax provision
46,084
32,167
Net income
$
133,703
$
95,289
Weighted average shares outstanding - basic
97,858
100,460
Diluted effect of equity-based awards
916
736
Weighted average shares and equivalent shares outstanding - diluted
Comparison of Thirteen Weeks Ended June 29, 2025 to Thirteen Weeks Ended June 30, 2024
Net sales
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Net sales
$
2,220,602
$
1,893,519
$
327,083
17
%
Comparable store sales growth
10.2
%
6.7
%
Net sales during the thirteen weeks ended June 29, 2025 totaled $2.2 billion, an increase of $0.3 billion, or 17%, compared to the thirteen weeks ended June 30, 2024. The sales increase was driven by sales from new stores opened in the last twelve months and a 10.2%increase in comparable store sales. Comparable stores contributed approximately 93% of total sales for the thirteen weeks ended June 29, 2025 and approximately 94% of total sales for the thirteen weeks ended June 30, 2024.
Cost of sales and gross profit
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Net sales
$
2,220,602
$
1,893,519
$
327,083
17
%
Cost of sales
1,358,002
1,175,154
182,848
16
%
Gross profit
862,600
718,365
144,235
20
%
Gross margin
38.8
%
37.9
%
0.9
%
Gross profit totaled $0.9 billion during the thirteen weeks ended June 29, 2025, an increase of $0.1 billion, or 20%, compared to the thirteen weeks ended June 30, 2024, driven by increased sales volume. Gross margin increased by 0.9% to 38.8% for the thirteen weeks ended June 29, 2025, compared to 37.9% for the thirteen weeks ended June 30, 2024, primarily driven by improved inventory management.
Selling, general and administrative expenses
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
%Change
Selling, general and administrative expenses
$
645,127
$
556,367
$
88,760
16
%
Percentage of net sales
29.1
%
29.4
%
(0.3)
%
Selling, general and administrative expenses increased $88.8 million, or 16%, compared to the thirteen weeks ended June 30, 2024. 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 improved slightly as a result of leverage gained from store compensation and occupancy costs.
Depreciation and amortization
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
%Change
Depreciation and amortization
$
36,606
$
31,489
$
5,117
16
%
Percentage of net sales
1.6
%
1.7
%
(0.1)
%
Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $36.6 million for the thirteen weeks ended June 29, 2025, compared to $31.5 million for the thirteen weeks ended June 30, 2024. 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
June 29, 2025
June 30, 2024
Change
% Change
Store closure and other costs, net
$
1,511
$
3,192
$
(1,681)
(53)
%
Percentage of net sales
0.1
%
0.2
%
(0.1)
%
Store closure and other costs, net for the thirteen weeks ended June 29, 2025 of $1.5 million primarily related to ongoing occupancy costs associated with exiting leases related to our closed locations. Store closure and other costs, net for the thirteen weeks ended June 30, 2024 of $3.2 million primarily related to ongoing occupancy costs associated with our closed store locations. See Note 12, “Store Closures” of our unaudited consolidated financial statements.
Interest (income) expense, net
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
%Change
Long-term debt
$
215
$
1,641
$
(1,426)
(87)
%
Finance leases
168
190
(22)
(12)
%
Deferred financing costs
193
193
—
0
%
Interest income and other
(1,007)
(2,163)
1,156
53
%
Total interest income, net
$
(431)
$
(139)
$
(292)
(210)
%
The increase in interest income, net for the thirteen weeks ended June 29, 2025 compared to the thirteen weeks ended June 30, 2024 was primarily due to lower average debt outstanding. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.
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:
Thirteen weeks ended
June 29, 2025
June 30, 2024
Federal statutory rate
21.0
%
21.0
%
Change in income taxes resulting from:
State income taxes, net of federal benefit
5.1
%
4.9
%
Enhanced charitable contributions
(1.0)
%
(1.0)
%
Federal credits
(0.2)
%
(0.4)
%
Share-based payment awards
(0.9)
%
(0.5)
%
Non-deductible Executive Compensation
1.7
%
1.0
%
Other, net
(0.1)
%
0.2
%
Effective tax rate
25.6
%
25.2
%
The effective tax rate increased to 25.6% for the thirteen weeks ended June 29, 2025 from 25.2% for the thirteen weeks ended June 30, 2024. The increase in the effective tax rate was primarily due to an increase in non-deductible executive compensation in the current year partially offset by an increase in the benefit for stock-based compensation in the current year.
Net income increased $38.4 million primarily due to higher gross profit, partially offset by higher selling, general and administrative expenses for the reasons discussed above.
Diluted earnings per share
Thirteen weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Diluted earnings per share
$
1.35
$
0.94
$
0.41
44
%
Diluted weighted average shares outstanding
98,774
101,196
(2,422)
The increase in diluted earnings per share of $0.41 was driven by higher net income and fewer diluted shares outstanding compared to the prior year, due primarily to the share repurchase program.
Results of Operations for Twenty-six Weeks Ended June 29, 2025 and June 30, 2024
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.
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Unaudited Quarterly Consolidated Statement of Income Data:
Net sales
$
4,457,038
$
3,777,327
Cost of sales
2,708,075
2,336,649
Gross profit
1,748,963
1,440,678
Selling, general and administrative expenses
1,268,353
1,096,138
Depreciation and amortization (exclusive of depreciation included in cost of sales)
71,705
63,721
Store closure and other costs, net
3,217
5,236
Income from operations
405,688
275,583
Interest (income) expense, net
(1,355)
679
Income before income taxes
407,043
274,904
Income tax provision
93,314
65,515
Net income
$
313,729
$
209,389
Weighted average shares outstanding - basic
98,198
100,765
Diluted effect of equity-based awards
1,061
882
Weighted average shares and equivalent shares outstanding - diluted
Comparison of Twenty-six Weeks Ended June 29, 2025 to Twenty-six Weeks Ended June 30, 2024
Net Sales
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Net sales
$
4,457,038
$
3,777,327
$
679,711
18
%
Comparable store sales growth
10.9
%
5.4
%
Net sales during the twenty-six weeks ended June 29, 2025 totaled $4.5 billion, an increase of $0.7 billion, or 18%, over the same period of the prior fiscal year. The sales increase was primarily due to new stores opened in the last twelve months and a 10.9% increase in comparable store sales. Comparable stores contributed approximately 93% of total sales for the twenty-six weeks ended June 29, 2025 and approximately 94% of total sales for the twenty-six weeks ended June 30, 2024.
Cost of sales and gross profit
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Net sales
$
4,457,038
$
3,777,327
$
679,711
18
%
Cost of sales
2,708,075
2,336,649
371,426
16
%
Gross profit
1,748,963
1,440,678
308,285
21
%
Gross margin
39.2
%
38.1
%
1.1
%
Gross profit totaled $1.7 billion during the twenty-six weeks ended June 29, 2025, an increase of $0.3 billion, or 21%, compared to the twenty-six weeks ended June 30, 2024, driven by increased sales volume. Gross margin increased to 39.2% for the twenty-six weeks ended June 29, 2025, compared to 38.1%for the twenty-six weeks ended June 30, 2024, due to improved inventory management and continued promotional optimization efforts as well as leverage on our supply chain from higher sales.
Selling, general and administrative expenses
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Selling, general and administrative expenses
$
1,268,353
$
1,096,138
$
172,215
16
%
Percentage of net sales
28.5
%
29.0
%
(0.5)
%
Selling, general and administrative expenses increased by $0.2 billion, or 16%, compared to the twenty-six weeks ended June 30, 2024. The increase was primarily driven by the increase in new stores opened since the prior year period. As a percentage of net sales, selling, general and administrative expenses improved as a result of leverage gained from store compensation and occupancy costs.
Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $71.7 million for the twenty-six weeks ended June 29, 2025, compared to $63.7 million for the twenty-six weeks ended June 30, 2024. Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment.
Store closure and other costs, net
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Store closure and other costs, net
$
3,217
$
5,236
$
(2,019)
(39)
%
Percentage of net sales
0.1
%
0.1
%
—
%
Store closure and other costs, net decreased $2.0 million to $3.2 million, compared to $5.2 million for the twenty-six weeks ended June 30, 2024. Store closure and other costs, net primarily consists of ongoing occupancy costs associated with our closed store locations.
Interest (income) expense, net
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
%Change
Long-term debt
$
425
$
3,843
$
(3,418)
(89)
%
Finance leases
344
386
(42)
(11)
%
Deferred financing costs
386
386
—
—
%
Interest income and other
(2,510)
(3,936)
1,426
36
%
Total interest (income) expense, net
$
(1,355)
$
679
$
(2,034)
(300)
%
Interest (income) expense, net decreased to $1.4 million of income for the twenty-six weeks ended June 29, 2025, compared to $0.7 million of expense for the twenty-six weeks ended June 30, 2024 primarily due to lower average debt outstanding and higher interest income earned as a result of higher interest rates. See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements.
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:
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Federal statutory rate
21.0
%
21.0
%
Change in income taxes resulting from:
State income taxes, net of federal benefit
5.0
%
4.9
%
Enhanced charitable contributions
(0.9)
%
(1.0)
%
Federal Credits
(0.2)
%
(0.4)
%
Share-based payment awards
(3.5)
%
(1.8)
%
Non-deductible Executive Compensation
1.6
%
1.0
%
Other, net
(0.1)
%
0.1
%
Effective tax rate
22.9
%
23.8
%
The effective tax rate decreased to 22.9% for the twenty-six weeks ended June 29, 2025 from 23.8% for the twenty-six weeks ended June 30, 2024. The decrease in the effective tax rate was primarily due to an increase in the benefit in the current year for stock-based compensation partially offset by an increase in the rate detriment in the current year for nondeductible executive compensation and a reduction in the rate benefit for federal employment credits in the current year.
Net income
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Net income
$
313,729
$
209,389
$
104,340
50
%
Percentage of net sales
7.0
%
5.5
%
1.5
%
Net income increased $0.1 billion primarily due to higher gross profit and lower store closure and other costs, partially offset by higher selling, general and administrative expenses for the reasons discussed above.
Diluted earnings per share
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Change
% Change
Diluted earnings per share
$
3.16
$
2.06
$
1.10
53
%
Diluted weighted average shares outstanding
99,259
101,647
(2,388)
The increase in diluted earnings per share of $1.10 was driven by higher net income and fewer diluted shares outstanding compared to the prior year due primarily to the share repurchase program.
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.
Our calculation of ROIC for the fiscal periods indicated was as follows:
Rolling Four Quarters Ended
June 29, 2025
June 30, 2024
(dollars in thousands)
Net income (1)
$
484,941
$
324,751
Special items, net of tax (2), (3)
—
1,780
Interest (income) expense, net of tax (3)
(3,215)
2,122
Net operating profit after tax (NOPAT)
$
481,726
$
328,653
Total rent expense, net of tax (3)
199,181
185,268
Estimated depreciation on operating leases, net of tax (3)
(110,089)
(102,355)
Estimated interest on operating leases, net of tax (3), (4)
89,092
82,913
NOPAT, including effect of operating leases
$
570,818
$
411,566
Average working capital
153,340
193,808
Average property and equipment
880,888
791,193
Average other assets
604,569
602,910
Average other liabilities
(108,197)
(98,037)
Average invested capital
$
1,530,600
$
1,489,874
Average operating leases (5)
1,676,647
1,524,427
Average invested capital, including operating leases
$
3,207,247
$
3,014,301
ROIC, including operating leases
17.8
%
13.7
%
(1)Net income amounts represent total net income for the past four trailing quarters.
(2)Special items related to store closure and supply chain transition, net of tax.
(3)Net of tax amounts are calculated using the normalized effective tax rate for the periods presented.
(4)2025 and 2024 estimated interest on operating leases is calculated by multiplying operating leases by the 7.0% and 7.2% discount rate, respectively, for each lease recorded as rent expense within direct store expense.
(5)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):
Twenty-six weeks ended
June 29, 2025
June 30, 2024
Cash, cash equivalents and restricted cash at end of period
$
263,497
$
179,475
Cash flows from operating activities
$
410,337
$
311,295
Cash flows used in investing activities
$
(120,319)
$
(108,925)
Cash flows used in financing activities
$
(293,734)
$
(226,765)
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 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 2048. 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 increased $99.0 million to $410.3 million for the twenty-six weeks ended June 29, 2025 compared to $311.3 million for the twenty-six weeks ended June 30, 2024. The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $121.9 million and a $0.8 million decrease in payment on our operating lease liabilities partially offset by changes in working capital of $20.8 million.
Cash flows provided by operating activities from changes in working capital were $15.6 million in the twenty-six weeks ended June 29, 2025 compared to $36.4 million in the twenty-six weeks ended June 30, 2024. The $20.8 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) a $14.7 million change in prepaid expenses and other current assets primarily driven by lapsing a prepaid income tax position and (ii) $7.8 million change in accrued salaries and benefits primarily driven by increased corporate bonuses. These decreases were partially offset by a $4.6 million change in accounts payable and accrued liabilities primarily due to timing differences of payments for goods and services. Certain other immaterial items combined to result in an additional $2.9 million net decrease in cash flows from changes in working capital.
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 $120.3 million and $108.9 million, for the twenty-six weeks ended June 29, 2025 and twenty-six weeks ended June 30, 2024, respectively.
We expect capital expenditures to be in the range of $230 - 250 million in 2025, 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 $293.7 million for the twenty-six weeks ended June 29, 2025 compared to $226.8 million for the twenty-six weeks ended June 30, 2024. During the twenty-six weeks ended June 29, 2025, cash flows used in financing activities primarily consisted of $292.2 million for stock repurchases and $$2.1 million for payments of excise tax on stock repurchases partially offset by $1.2 million in proceeds from the exercise of stock options.
During the twenty-six weeks ended June 30, 2024, cash flows used in financing activities primarily consisted of $125.0 million in payments on our Credit Agreement, $104.5 million for stock repurchases partially offset by $3.3 million in proceeds from the exercise of stock options.
Long-Term Debt and Credit Facilities
The Company had no long-term debt outstanding as of June 29, 2025 and December 29, 2024.
See Note 4, “Long-Term Debt and Finance Lease Liabilities” of our unaudited consolidated financial statements for a description of our Credit Agreement and our Former Credit Facility (each as defined therein), as well as our new credit agreement entered into on July 25, 2025.
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 June 29, 2025:
Effective date
Expiration date
Amount authorized
Cost of repurchases
Authorization available
March 2, 2022
December 31, 2024
$
600,000
$
480,715
$
—
May 22, 2024
May 22, 2027
$
600,000
$
441,699
$
158,301
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
Twenty-six weeks ended
June 29, 2025
June 30, 2024
June 29, 2025
June 30, 2024
Number of common shares acquired
466,420
639,538
2,034,437
1,597,318
Average price per common share acquired
$
158.99
$
70.07
$
144.88
$
65.86
Total cost of common shares acquired
$
74,155
$
44,812
$
294,749
$
105,192
Shares purchased under our repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings. The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022.
Subsequent to June 29, 2025 and through July 28, 2025, we repurchased an additional 0.1 million shares of common stock for $9.1 million, excluding excise tax.
Contractual Obligations
Our principal contractual obligations and commitments arising in the normal course of business consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Except as otherwise disclosed in Note 4, “Long-Term Debt and Finance Lease Liabilities” and Note 6, "Commitments and Contingencies" of our unaudited consolidated financial statements, there have been no material changes outside the normal course of business as of June 29, 2025 in our contractual obligations and commitments from those reported in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
Impact of Inflation and Deflation
Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross margin. Food inflation, when combined with reduced consumer spending, could also reduce sales, gross profit margins and comparable store sales. Inflationary pressures on compensation, utilities, commodities, equipment and supplies may also impact our profitability. Food deflation or declining levels of inflation across multiple categories, particularly in produce, could reduce sales growth and earnings, particularly if our competitors react by lowering their retail pricing and expanding their promotional activities, which can lead to retail deflation higher than cost deflation that could reduce our sales, gross profit margins and comparable store sales. The short-term impact of inflation and deflation is largely dependent on whether or not the effects are passed through to our customers, which is subject to competitive market conditions.
Food inflation and deflation is affected by a variety of factors and our determination of whether to pass on the effects of inflation or deflation to our customers is made in conjunction with our overall pricing and marketing strategies, as well as our competitors’ responses. Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, cash flow and related disclosure of contingent assets and liabilities. Our critical accounting estimates include inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
There have been no substantial changes to these estimates, or the policies related to them during the thirteen and twenty-six weeks ended June 29, 2025. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
Recently Issued Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies” to our accompanying unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As described in Note 4, “Long-Term Debt and Finance Lease Liabilities” to our unaudited consolidated financial statements located elsewhere in this Quarterly Report on Form 10-Q, our Credit Agreement bears interest at a rate based in part on SOFR. Accordingly, we could be exposed to fluctuations in interest rates. As of June 29, 2025, we had no outstanding borrowings under our Credit Agreement.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of June 29, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
During the quarterly period ended June 29, 2025, there were no changes in our internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
From time to time we are a party to legal proceedings, including matters involving personnel and employment issues, product liability, personal injury, intellectual property and other proceedings arising in the ordinary course of business, which have not resulted in any material losses to date. Although management does not expect that the outcome in these proceedings will have a material adverse effect on our financial condition or results of operations, litigation is inherently unpredictable. Therefore, we could incur judgments or enter into settlements of claims that could materially impact our results.
See Note 6, “Commitments and Contingencies” to our unaudited consolidated financial statements for information regarding certain legal proceedings in which we are involved.
Item 1A. Risk Factors.
Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should carefully consider the risks and uncertainties referenced below, together with all of the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes. Any of those risks could materially and adversely affect our business, operating results, financial condition, or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment.
There have been no material changes to the Risk Factors described under “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The following table provides information about our share repurchase activity during the thirteen weeks ended June 29, 2025.
Period (1)
Total number of shares purchased
Average
price paid
per share(2)
Total number of shares purchased as part of publicly announced plans or programs
Approximate
dollar value
of shares that
may yet be
purchased under
the plans or
programs (3)
March 31, 2025 - April 27, 2025
331,262
$
153.88
331,262
$
180,787,000
April 28, 2025 - May 25, 2025
78,720
$
167.29
78,720
$
167,618,000
May 26, 2025 - June 29, 2025
56,438
$
165.09
56,438
$
158,301,000
Total
466,420
466,420
(1)Periodic information is presented by reference to our fiscal periods during the second quarter of fiscal year 2025.
(2)Average price paid per share includes costs associated with the purchases, but excludes the excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022.
(3)On May 22, 2024, our board of directors authorized a $600 million share repurchase program of our common stock. The shares may be purchased on a discretionary basis from time to time through May 22, 2027, 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.
During the second quarter of 2025, none of our directors or executive officers adopted or terminated a Rule 10b5-1 Trading Plan, or a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).
The following financial information from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2025, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
