−Removed: Sprouts Farmers Market offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store.
−Removed: Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people.
+Added: Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store.
+Added: 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.
−Removed: Headquartered in Phoenix with 386 stores in 23 states as of January 1, 2023, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.
−Removed: In 2002, we opened the first Sprouts Farmers Market store in Chandler, Arizona.
−Removed: From our founding in 2002 through January 1, 2023, we have grown rapidly, significantly increasing our sales, store count and profitability, including successfully rebranding 43 Henry’s Farmers Market and 39 Sunflower Farmers Market stores added in 2011 and 2012, respectively, to the Sprouts banner through acquisitions.
−Removed: These three businesses all trace their lineage back to Henry’s Farmers Market and were built with similar store formats and operations including a strong emphasis on value, produce and service in smaller, convenient locations.
+Added: From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability.
+Added: Headquartered in Phoenix with 407 stores in 23 states as of December 31, 2023, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.
Our Growth Strategy
−Removed: Since 2020, we have focused on a long-term growth strategy that we believe is transforming our company and driving profitable growth.
+Added: Since 2020, we have focused on our long-term growth strategy that we believe is transforming our company and driving profitable growth.
We continue to execute on this strategy, focusing on the following areas:
• Win with Target Customers .
−Removed: We are focusing attention on our target customers, identified through research as ‘health enthusiasts’
−Removed: and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments.
+Added: 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.
• Update Format and Expand in Select Markets.
−Removed: 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.
−Removed: In 2021, we opened three stores and remodeled one store featuring our new format, and in 2022, we opened nine new format stores.
−Removed: 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 at least 10% annual unit growth beginning in 2024.
+Added: 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.
+Added: From 2021 through 2023, we have opened 42 new stores and remodeled one store featuring our new format.
+Added: 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 Fresh Supply Chain.
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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.
−Removed: With the opening of two fresh distribution centers in 2021, we now have more than 85% of our stores within 250 miles of a distribution center.
+Added: Following the opening of two fresh distribution centers in fiscal 2021 and the relocation of our Southern California distribution center, closure of our Georgia distribution center and partnership with a third-party fresh distribution center in the Northeast in fiscal 2023, 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 December 31, 2023.
• Refine Brand and Marketing Approach.
We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation.
−Removed: We are investing savings from largely removing our weekly promotional print ad into increasing engagement and personalization with our target customers through digital and social connections, driving additional sales growth and loyalty.
+Added: We are increasing our use of data analytics and insights.
+Added: 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 Create a Best Place to Work.
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• Store Design and Experience.
−Removed: Our stores are organized in a “flipped”
−Removed: conventional food retail store model, positioning our produce at the center of the store surrounded by a specialty grocery offering.
−Removed: Produce remains the heart of our stores, as we typically dedicate approximately 20% of a store’s selling square footage to produce, which we believe is significantly higher than many of our peers.
−Removed: The stores are designed with open layouts and low displays, intended to provide an easy-to-shop environment that invokes a farmers’
−Removed: market experience and allows our customers to view the entire store.
+Added: Our stores are organized in a “flipped” conventional food retail store model, positioning our produce at the center of the store surrounded by a specialty grocery offering.
+Added: Produce remains the heart of our stores, as we typically dedicate approximately 20% of a store’s selling square footage to produce, which we believe is significantly higher than many of our peers.
+Added: The stores are designed with open layouts and low displays, intended to provide an easy-to-shop environment that invokes a farmers’ market experience and allows our customers to view the entire store.
Our small box format allows for quick in-and-out service, and our curated assortment of innovative, responsibly and locally sourced items offer treasure hunt shopping experiences.
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In addition, we continue to expand mobile and digital opportunities to further engage with our customers and provide a full omnichannel offering as many customers use both in-store and online for their grocery needs.
−Removed: Currently, our stores average approximately 28,000 square feet, which we believe is smaller than many of our peers’
−Removed: average stores.
+Added: • Store Size .
+Added: Currently, our stores average approximately 28,000 square feet, which we believe is smaller than many of our peers’ average stores.
Under our long-term growth strategy, our new format stores feature a smaller box size, generally between 21,000 and 25,000 square feet, that stay true to our fresh-focused, farmers market heritage but are less expensive to build, reduce non-selling space, reduce occupancy and operating costs and leverage the strengths of our older, highly productive stores.
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Our stores are typically staffed with 75 to 100 full and part-time team members.
−Removed: We strive to create a strong and unified company culture and develop team members throughout the entire organization, and we assist our store teams with our store support office and regional teams.
−Removed: We have prioritized making investments in training development that we believe enhances our team members’
−Removed: knowledge, particularly with respect to our expanded and evolving product offerings, so our team members can continue to engage and assist our customers.
+Added: We strive to create a strong and unified company culture and develop team members throughout the entire organization, and we take pride in assisting our store teams through our store support office and regional teams.
+Added: We have prioritized making investments in training development that we believe enhances our team members’ knowledge, particularly with respect to our expanded and evolving product offerings, so our team members can continue to engage and assist our customers.
We also support leadership and career opportunities for our team members at Sprouts.
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Our Product Offering
−Removed: We are a specialty natural and organic food retailer that offers a unique shopping experience for our customers.
+Added: We are a specialty natural and organic food retailer offering a unique shopping experience for our customers.
To offer the right assortment of healthy alternatives and good-for-you options, we curate our product mix to differentiated fresh, natural and organic foods and healthier options throughout all of our departments, with innovative products that feature lifestyle friendly ingredients.
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We focus our product offerings on fresh, natural and organic foods.
−Removed: Foods are generally considered “fresh”
−Removed: if they are minimally processed or in their raw state not subject to any type of preservation or freezing.
+Added: Foods are generally considered “fresh” if they are minimally processed or in their raw state not subject to any type of preservation or freezing.
Natural foods can be broadly defined as foods that are minimally processed and are free of synthetic preservatives, artificial sweeteners, colors, flavors and other additives, growth hormones, antibiotics, hydrogenated oils, stabilizers and emulsifiers.
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We categorize the varieties of products we sell as perishable and non-perishable.
−Removed: Perishable product categories include produce, meat, seafood, deli, bakery, floral and dairy and dairy alternatives.
+Added: 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.
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While we focus on providing an abundant and affordable offering of natural and organic produce, our stores also include the following departments that enable customers to have a full grocery shopping experience:
−Removed: packaged groceries, meat and seafood, deli, vitamins and supplements, dairy and dairy alternatives, bulk items, baked goods, frozen foods, natural health and body care, and beer and wine.
+Added: packaged groceries, meat and meat alternatives, seafood, deli, vitamins and supplements, dairy and dairy alternatives, bulk items, baked goods, frozen foods, natural health and body care, and beer and wine.
Our departments reflect our unique selling proposition featuring intentional curation of responsibly and locally sourced products.
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We started a program in 2022 to update and redesign all Sprouts branded products, and we are expecting to complete this in 2024.
−Removed: Though early in the rollout of the new design, we are seeing positive impact in terms of sales and recognition.
+Added: We are seeing positive impact in terms of sales and recognition from the new design.
The Sprouts Brand program accounted for just over 20% of our revenue in fiscal 2023.
−Removed: We believe our Sprouts Brand products build and enhance the overall Sprouts brand and allow us to distinguish ourselves from our competitors, promoting customer loyalty and creating a destination shopping experience.
+Added: We believe our Sprouts Brand products build and enhance the overall Sprouts brand and allow us to distinguish ourselves from our competitors, promoting customer loyalty and creating a destination shopping experience for products only available at our stores.
Product Innovation
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As a pillar of our long-term growth strategy, we expect to create an advantaged supply chain and aspire to locate our distribution centers within 250 miles of the majority of our stores.
−Removed: We currently have seven distribution centers, with two located in California and one located in each of Arizona, Texas, Georgia, Colorado and Florida.
+Added: We currently have six produce distribution centers, with two located in California and one located in each of Arizona, Texas, Colorado and Florida.
+Added: In, 2023, we entered into a partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores.
+Added: As of December 31, 2023, approximately 80% of our stores were within 250 miles of a distribution center.
The increased proximity of our distribution centers to our stores has allowed us to deliver on our fresh commitment to our customers, by sourcing more products from local farmers and improving efficiencies in our distribution process.
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For all non-produce products, we use third-party distributors and vendors to distribute products directly to our stores following specifications and quality control standards that are set by us.
−Removed: KeHE Distributors, LLC (“KeHE”), is our primary supplier of dry grocery and frozen food products, accounting for approximately 45%, 44% and 42% of our total purchases in fiscal 2022, 2021, and 2020, respectively.
+Added: KeHE Distributors, LLC (“KeHE”), is our primary supplier of dry grocery and frozen food products, accounting for approximately 47%, 45% and 44% of our total purchases in fiscal 2023, 2022, and 2021, respectively.
Another 3% of our total purchases in each of fiscal 2023, 2022 and 2021 were made through our secondary supplier, United Natural Foods, Inc.
−Removed: (“UNFI”).
−Removed: Our primary supplier of meat and seafood accounted for approximately 13% of our total purchases in each of fiscal 2022, 2021 and 2020.
−Removed: See “Risk Factors—Disruption of significant supplier relationships could negatively affect our business.”
+Added: Our primary supplier of meat and seafood accounted for approximately 14% of our total purchases in fiscal 2023 and 13% of our total purchases in each of fiscal 2022 and 2021.
+Added: See “Risk Factors—Disruption of significant supplier relationships could negatively affect our business.”
Our Pricing, Marketing and Advertising
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We position our prices with everyday value for our customers within our margin structure, with regular promotions that drive traffic and trial.
−Removed: Our brands products offer entry-level price points in certain categories, but also focuses on innovation, treasure hunt experience, wellness or health benefits and quality.
+Added: Our Sprouts Brand products offer entry-level price points in certain categories, but also focus on innovation, treasure hunt experience, wellness or health benefits and quality.
Marketing and Advertising
As part of our long-term growth strategy to refine our brand and marketing approach, we have pivoted our marketing strategy to attempt to drive more profitable growth and create more meaningful connections with our customers.
−Removed: Our digital-first marketing program is focused on connecting with our most important, higher value target customers via precision geographic targeting, data-driven media and focusing on personal relevance to tap into our target audience’s needs and affinities.
−Removed: We believe our story telling through broadcast and digital media will reach more customers than our prior approach utilizing weekly paper flyers, which we largely discontinued.
−Removed: During 2022, we garnered more than 20 million weekly digital flyer impressions, demonstrating that our leverage of digital media to reach customers and share what is new and unique at Sprouts resonates with the habits of today’s shoppers.
−Removed: We experienced a 27% increase in SMS subscribers and a 16% increase in email subscribers in 2022 compared to 2021.
−Removed: Additionally, digital, TV and radio ads reached shoppers with 4.3 billion impressions, and we ended the year with 2.2 million followers across all social platforms.
+Added: Our digital-first marketing program is focused on connecting with our most important, higher value target customers via precision geographic targeting, data-driven media and focusing on personal relevance to tap into our target audience’s needs and affinities.
+Added: We believe our story telling through digital media will reach more customers than our prior approach utilizing weekly paper flyers, which we largely discontinued.
+Added: During 2023, we garnered more than 20 million weekly digital flyer views, demonstrating that our leverage of digital media to reach customers and share what is new and unique at Sprouts resonates with the habits of today’s shoppers.
+Added: We experienced an 8% increase in email subscribers in 2023 compared to 2022.
+Added: Additionally, digital, streaming and radio ads reached shoppers with 14 billion impressions, and through our influencer efforts, we ended the year with 26.1 million followers across all social platforms.
Leveraging digital communications targeted to specific geographic areas also provides us with greater flexibility to offer different promotions and respond to local competitive activity and allows us to make our customers aware of what is new and different in our stores in real time.
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Among our 2023 highlights:
−Removed: We worked with 270 social influencers from coast-to-coast last year who shared what they love about Sprouts in their own words to their unique followers.
−Removed: In June, we announced our long-term commitment to and investment in collegiate women’s athletics through partnerships with the Big 12 and Pac 12 conferences along with supporting 50 individual Name, Image and Likeness (NIL) deals with female athletes from multiple schools from both conferences, becoming the first grocery retailer to make such a commitment.
−Removed: In conjunction with our partnerships with the Big 12 and Pac 12 conferences, in September we announced individual sponsorship agreements with the athletics departments at Arizona State University, University of California, Los Angeles, University of Southern California and University of Texas, pursuant to which we will continue our commitment to women’s athletics by sponsorship of season-long activities and entitlement games.
−Removed: Sprouts first ever back-of-jersey sponsorship with the Angel City Football Club took flight as the club began play in the National Women’s Soccer League in 2022.
−Removed: A portion of the partnership funds are being allocated to support local causes that provide fresh food access and further children’s nutrition education throughout Los Angeles.
+Added: • We continued our long-term commitment to and investment in collegiate women’s athletics through partnerships with the Big 12 and Pac 12 conferences along with supporting 50 individual Name, Image and Likeness ("NIL") deals with female athletes from multiple schools from both conferences, becoming the first grocery retailer to make such a commitment.
+Added: • In conjunction with our partnerships with the Big 12 and Pac 12 conferences, as well as individual agreements with Arizona State University, University of California, Los Angeles, University of Southern California and University of Texas, Sprouts expanded our NIL portfolio by 20 athletes, thus having 104 deals to date, 98 of which are with female athletes.
+Added: • Sprouts continued its first ever back-of-jersey sponsorship with the Angel City Football Club in 2023, leading to almost 80 million impressions across multiple platforms.
+Added: As a portion of the partnership, funds are allocated to support local causes that provide fresh food access and further children’s nutrition education throughout Los Angeles.
+Added: In 2023, Sprouts donated more than 49,000 pounds of produce and over 400 collective service hours into the local Los Angeles community.
We have developed and maintain the Sprouts app on which we include digital coupons and in-store scan features, and our website, www.sprouts.com , on which we display our weekly sales flyers, highlight our product offerings and offer special deals.
Our website and app also feature online ordering for delivery and pickup.
−Removed: We offer home deliveries from our stores through partner services in all of our markets nationwide, as well as “click and collect”
−Removed: pickup service at all of our stores.
+Added: We offer home deliveries from our stores through delivery service providers, including Instacart, DoorDash and UberEats in all of our markets nationwide.
We will continue to explore mobile and digital opportunities to further connect with our customers and leverage data for better customer insights.
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Our target customer over-indexes on lifestyle choices and seeks better-for-you grocery options and innovative, quality products to support their healthy lifestyle.
−Removed: We believe they are engaged and connected to what they eat –
−Removed: how it makes them feel, where it comes from and the role it can play in their lives.
−Removed: Our target customer covers a wide range of incomes and age demographics –
−Removed: from Baby Boomers to Generation Z –
−Removed: and seek a variety of healthy and organic options in addition to a great store experience.
+Added: We believe they are engaged and connected to what they eat – how it makes them feel, where it comes from and the role it can play in their lives.
+Added: Our target customer covers a wide range of incomes and age demographics – from Baby Boomers to Generation Z – and seek a variety of healthy and organic options in addition to a great store experience.
We believe we only serve a small portion of these target customers at present and have an opportunity to gain a larger proportion of their market share of food-at-home purchases by targeting and identifying those innovative, attribute-driven, quality products and providing the in-store experience and support in living a healthy lifestyle that they are seeking.
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We work collaboratively with our supply chain partners, community organizations, and industry experts to understand our material impacts and prioritize where we direct our environmental, social and governance ("ESG") efforts to maximize our influence.
−Removed: Through this materiality review with internal and external stakeholders, we intend to focus our efforts on sustainable and responsible sourcing, plastics and packaging reduction and carbon emission reduction.
+Added: Through this materiality review with internal and external stakeholders, our efforts are focused on sustainable and responsible sourcing, plastics and packaging reduction and carbon emission reduction.
Our 2023 ESG highlights included:
−Removed: Nearly 26% of total sales from organic products;
−Removed: Approximately $200M in sales of products produced by women, minority, veteran, or LGBTQ-owned suppliers;
−Removed: $145M in local produce sales;
−Removed: 21% increase in less carbon intensive plant-based product sales;
−Removed: Recovered 87% of food waste, and donated the equivalent of 27 million meals;
−Removed: Recycled more than 800,000 pounds of plastic from customer returned bags and product shipping wrap.
+Added: • 27% of total sales from organic products;
+Added: • 22% increase in less carbon intensive plant-based product sales from 2022;
+Added: • Recovered more than 90% of food waste generated, and donated the equivalent of 29 million meals to local food banks;
+Added: • Removed single-use plastic and paper grocery bags at nearly all locations.
Based on our ESG accomplishments, we received a rating of AAA in the 2023 MSCI ESG Ratings assessment.
The AAA rating represents the highest on the scale and signifies a company leading its industry in managing the most significant ESG risks and opportunities.
−Removed: Sprouts was also named as one of the 100 most sustainable companies in the world by Corporate Knights.
−Removed: For more information on our ESG efforts and reporting, including our most recent ESG reports, please visit about.sprouts.com/sustainability/.
+Added: For more information on our ESG efforts and reporting, including our most recent ESG reports, please visit:
+Added: sprouts.com/about/sustainability/ .
The information contained on or accessible through our website and in our ESG reports is not incorporated by reference into this Annual Report on Form 10-K.
The Sprouts Healthy Communities Foundation
−Removed: I n 2015, we formed the Sprouts Healthy Communities Foundation (referred to as our “Foundation”), a registered 501(c)(3) organization focused on promoting nutrition education and increasing access to fresh, nutritious food in communities where Sprouts operates.
−Removed: Since the Foundation’s inception, it has awarded approximately $18.5 million in donations to more than 440 nonprofit organizations and hosted an estimated 270 volunteer service projects.
+Added: In 2015, we formed the Sprouts Healthy Communities Foundation (referred to as our “Foundation”), a registered 501(c)(3) organization focused on promoting nutrition education and increasing access to fresh, nutritious food in communities where Sprouts operates.
+Added: Since the Foundation’s inception, it has awarded approximately $20.7 million in donations to more than 480 nonprofit organizations and hosted an estimated 335 volunteer service projects.
Our Foundation's 2023 highlights included:
• Invested over $2.4 million into programs to provide an estimated three million students with school garden and nutrition education programming;
−Removed: Hosted annual Sprouts’
−Removed: Day of Service, where 700 team members donated 3,000 volunteer hours.
−Removed: In total, the Foundation hosted 59 volunteer activities that resulted in 4,000 service hours in 2022;
+Added: • Hosted over 65 volunteer events with team members who donated 5,500 service hours;
• Awarded $1.4 million in high-impact capacity grants to empower nonprofit organizations to expand their program operations;
−Removed: United more than 400 educators for the first-ever Sprouts’
−Removed: School Garden Summit, a national four-day learning event dedicated to strengthening the school garden and outdoor education movement.
−Removed: For more information on our Foundation, please visit about.sprouts.com/sprouts-foundation/.
+Added: • United over 600 volunteers for its 24 Gardens Grant program service days, during which Sprouts team members, families and staff from the 24 Gardens Grant schools built or refreshed 24 learning gardens.
+Added: An estimated 12,000 students will receive hands-on instruction this school year in these gardens.
+Added: For more information on our Foundation, please visit:
+Added: sprouts.com/about/sprouts-foundation/ .
Human Capital Management
−Removed: At Sprouts, our culture is rooted in our values of “Care”, “Own it”, and “Love Being Different”.
+Added: At Sprouts, our culture is rooted in our values of “Care”, “Own it”, and “Love Being Different”.
We remain focused on improving the health of the communities we serve.
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We build on our targeted recruitment efforts with robust training on customer engagement and product knowledge to ensure there is friendly, knowledgeable staff in every store.
−Removed: As of January 1, 2023, we had approximately 31,000 team members.
+Added: As of December 31, 2023, we had approximately 32,000 team members.
None of our team members are subject to collective bargaining agreements.
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• We engaged in leadership development sessions across the organization with a focus on behaviors aligned to our values.
−Removed: As one of the fastest growing specialty retailers of fresh, natural and organic food in the country, we created 1,600 new jobs in 2022 through new store openings.
−Removed: Additionally, we promoted 7,350 team members and filled 64% of store manager positions with internal candidates.
+Added: • As one of the fastest growing specialty retailers of fresh, natural and organic food in the country, we created approximately 3,000 new jobs in 2023 through new store openings.
+Added: • Additionally, we promoted over 6,600 team members and filled 64% of store manager positions with internal candidates.
• Team members saved approximately $21.2 million through store discounts.
• We awarded 50 scholarships to team members and dependents in 2023.
−Removed: Since the scholarship program’s inception, we have awarded more than $1.7 million in scholarships.
+Added: Since the scholarship program’s inception, we have awarded more than $1.8 million in scholarships.
Total Rewards.
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• We have a quarterly bonus plan for which all store team members are eligible.
−Removed: All team members over 18 can enroll in our 401(k) plan the first of the month following three months of service, and we offer a contribution matching program.
+Added: • All team members over 18 can enroll in our 401(k) plan on the first of the month following three months of service, and we offer a contribution matching program.
• We offer a paid sick time policy for all team members and offer generous leave programs.
• All hourly team members are eligible for semi-annual reviews and merit increases.
−Removed: We offer team members the opportunity to participate in the Western Association of Food Chains’
−Removed: Retail Management Certificate Program that provides the core skills and knowledge to move into a management role in the retail industry.
+Added: • We offer team members the opportunity to participate in the Western Association of Food Chains’ Retail Management Certificate Program that provides the core skills and knowledge to move into a management role in the retail industry.
During 2023, 31 Sprouts team members enrolled in this program, and 20 team members graduated from the program.
−Removed: We participated in the McKinsey Connected Leaders Academy, for the second year, engaging high performing leaders in programs designed to develop diverse leaders at Sprouts.
+Added: • We participated in the McKinsey Connected Leaders Academy, for the third year, engaging high performing leaders in programs designed to develop diverse leaders at Sprouts.
We had 33 participants in 2023, which included leaders participating in Hispanic, Black & Asian Executive level and Manager level programs.
• We offer The Henry Boney Memorial Scholarship, which is designed to offer team members or their dependents a $2,000 scholarship to achieve their college dreams.
+Added: • We also embarked on mentor circles offered as a program created and executed by our Inspiring Women at Sprouts team member resource group.
• All Sprouts team members can save at our stores, with a 15% Work Perk Discount.
−Removed: This year we offered a 30% discount to all team members over the course of six days aligned with our holiday celebrations.
+Added: This year we offered a 30% discount to all team members over the course of five days aligned with our holiday celebrations.
+Added: We also offered team members an additional three days with a 25% discount.
Education, Training and Safety.
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We introduced a college fast-track program in stores in 2022 to train college graduates for assistant store management roles, with 18 graduates in the program.
+Added: In addition, we reimagined our Assistant Store Manager training program to accelerate internal promotions.
+Added: The first cohort supported 31 team members.
Our store team members completed over 815,000 hours of in-store training in 2023.
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Our stores implement various programs to reduce and eliminate hazards, resulting in a safer workplace and improved shopping experience.
−Removed: In 2022, our stores reported a 12% reduction in non-COVID worker compensation claims and a 15% reduction in general liability claims over the prior year.
+Added: In 2023, our stores reported a 4% reduction in worker compensation claims and a 5% reduction in general liability claims over the prior year.
Diversity and Inclusion.
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In 2022, we launched three additional team member resource groups representing affinity team members and allies:
−Removed: “Sabor”
−Removed: our Hispanic & Latin resource group, “Soul”
−Removed: our Black/African American resource group and “Rainbow Alliance”
−Removed: our LBGTQIA+ resource group.
+Added: “Sabor” our Hispanic & Latin resource group, “Soul” our Black/African American resource group and “Rainbow Alliance” our LBGTQIA+ resource group.
Growing Our Business
−Removed: As part of our long-term growth plan, we plan to expand our store base with at least 10% annual unit growth beginning in 2024.
+Added: As part of our long-term growth plan, we plan to expand our store base with approximately 10% annual unit growth.
Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, providing a long runway for us to achieve our growth target.
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We have opened 30, 16 and 12 new stores in fiscal 2023, 2022 and 2021, respectively.
−Removed: We expect to continue to expand our store base with approximately 30 store openings planned for fiscal 2023.
−Removed: Beyond 2023, we expect to target at least 10% annual unit growth, subject to the impact of supply chain disruptions which delayed a number of our new store openings in 2020- 2022.
−Removed: See “Item 2.
−Removed: Properties”
−Removed: for additional information with respect to our planned store closures in 2023.
−Removed: The below diagram shows our store footprint, by state, as of January 1, 2023.
+Added: We expect to continue to expand our store base with approximately 35 store openings planned for fiscal 2024, all of which will be in our new format.
+Added: Properties” for additional information with respect to our store closures in 2023.
+Added: The below diagram shows our store footprint, by state, as of December 31, 2023.
New Store Development
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We expect these cost reductions will allow us to deliver higher returns than our larger stores and continue to accelerate our growth.
−Removed: See “Item 2.
−Removed: Properties”
−Removed: for additional information with respect to our store locations.
+Added: Properties” for additional information with respect to our store locations.
Our business is subject to modest seasonality.
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As a result, food retailers are offering an increased assortment of fresh, natural and organic foods as well as vitamins and supplements to meet this demand.
−Removed: Our competitors primarily include other specialty food retailers such as Whole Foods, Trader Joe’s, and smaller local or regional operators, conventional supermarkets such as Kroger, Albertsons, Safeway, H-E-B and Publix, as well as mass or discount retailers such as Target and Wal-Mart, warehouse membership clubs, online retailers such as Amazon, specialty stores, restaurants, home delivery and meal solution companies, and any other outlets offering food and similar products as those found in our stores.
+Added: Our competitors primarily include other specialty food retailers such as Whole Foods, Trader Joe’s, and smaller local or regional operators, conventional supermarkets such as Kroger, Albertsons, Safeway, H-E-B and Publix, as well as mass or discount retailers such as Target and Walmart, warehouse membership clubs, online retailers such as Amazon, specialty stores, restaurants, home delivery and meal solution companies, and any other outlets offering food and similar products as those found in our stores.
We believe Sprouts offers consumers a compelling value and differentiated products relative to our competitors and will continue to benefit from increasing consumer focus on health, wellness and value, as well as their emphasis on an enhanced shopping experience featuring a broad selection of attribute-driven products along with exceptional customer engagement.
Insurance and Risk Management
−Removed: We use a combination of insurance and self-insurance to provide for potential liability for workers’
−Removed: compensation, general liability, product liability, director and officers’
−Removed: liability, team member healthcare benefits, and other casualty and property risks.
+Added: We use a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, general liability, product liability, director and officers’ liability, team member healthcare benefits, and other casualty and property risks.
Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect ultimate settlements of claims.
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We believe that our intellectual property has substantial value and has contributed to the success of our business.
−Removed: In particular, our trademarks, including our registered SPROUTS FARMERS MARKET ® and SPROUTS ® trademarks, are valuable assets that we believe reinforce our customers’
−Removed: favorable perception of our stores.
+Added: In particular, our trademarks, including our registered SPROUTS FARMERS MARKET ® and SPROUTS ® trademarks, are valuable assets that we believe reinforce our customers’ favorable perception of our stores.
In addition to our trademarks, we believe that our trade dress, which includes the human-scale design, arrangement, color scheme and other physical characteristics of our stores and product displays, is a large part of the farmers market atmosphere we create in our stores and enables customers to distinguish our stores and products from those of our competitors.
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Information Technology Systems
−Removed: We have made significant investments in information technology infrastructure and business systems, including point-of-sale, data warehouse, labor management, purchasing, inventory control, demand forecasting, and financial and reporting systems.
−Removed: Our recent investments have focused on solutions to enhance our operational productivity, optimize our labor, maintain our in-stock positions and forecast our customer demand, while maintaining our high quality and value proposition.
−Removed: All of our stores operate under one integrated information technology platform which allows for our current and future store growth.
−Removed: We will continue making investments in our current information technology infrastructure and invest in systems that scale to support our growth and add efficiencies to our growing operations.
+Added: We have made significant investments in Information Technology infrastructure and business systems, including enterprise data management, business intelligence, labor management, purchasing, store replenishment, demand forecasting, financial and reporting systems, and in-store technologies.
+Added: Recent investments focus on solutions to increase operational productivity, optimize our labor, maintain our in-stock positions, forecast our customer demand, automate our supply chain, and enhance the customer’s experience in-store and online, while maintaining our high quality and value proposition.
+Added: We will continue making investments in our current Information Technology infrastructure to support our growth while evaluating how new and emerging technologies can increase efficiencies to our operations and improve customer engagement.
+Added: Our stores operate under one integrated Information Technology platform which facilitates agility and scalability to support our current and future store growth.
In addition, we continue our focused efforts on limiting risk of cyber-security incidents by investing in IT security technology tools, resources, penetration assessments, third-party security audits and employee training.
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Our stores and online retail operations are subject to various local, state and federal laws, regulations and administrative practices affecting our business.
−Removed: We must comply with provisions regulating health, sanitation and food safety standards, food labeling, equal employment, minimum wages, data privacy, environmental protection, licensing for the manufacture, preparation and sale of food and, in many stores, licensing for beer and wine or other alcoholic beverages, and cannabidiol (“CBD”) products.
−Removed: Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products by us and our vendors are subject to regulation by various federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the U.S.
−Removed: Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”) and the Environmental Protection Agency (“EPA”).
−Removed: The FDA has comprehensive authority to regulate the manufacture, labeling, distribution, sale, marketing and safety of food and food ingredients (other than meat, poultry, catfish and certain egg products), as well as dietary supplements under the Federal Food, Drug, and Cosmetic Act (“FDCA”).
−Removed: Similarly, the USDA’s Food Safety Inspection Service (“FSIS”) is the public health agency responsible for ensuring that the nation’s commercial supply of meat, poultry, catfish and certain egg products is safe, wholesome and correctly labeled and packaged under the Federal Meat Inspection Act and the Poultry Products Inspection Act.
−Removed: Congress amended the FDCA in 2011 through passage of the Food Safety Modernization Act (“FSMA”), which greatly expanded FDA’s regulatory obligations over all actors in the supply chain.
−Removed: Industry actors continue to determine the best pathways to implement FSMA’s regulatory mandates and FDA’s promulgating regulations throughout supply chains, as most requirements are now in effect.
−Removed: Such regulations mandate participation in USDA's Hazard Analysis and Critical Control Points (“HACCP”) program or FDA's Hazard Analysis and Risk-Based Prevention Controls (“HARPC”) program, as applicable, which require that risk-based preventive controls be observed by the majority of food producers.
+Added: We must comply with provisions regulating health, sanitation and food safety standards, food labeling, equal employment, minimum wages, data privacy, environmental protection, licensing for the manufacture, preparation and sale of food and, in many stores, licensing for beer and wine or other alcoholic beverages, and cannabidiol (“CBD”) products.
+Added: Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products by us and our vendors are subject to regulation by various state and federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the U.S.
+Added: Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”) and the Environmental Protection Agency (“EPA”).
+Added: The FDA has comprehensive authority to regulate the manufacture, labeling, distribution, sale, marketing and safety of food and food ingredients (other than meat, poultry, catfish and certain egg products), as well as dietary supplements under the Federal Food, Drug, and Cosmetic Act (“FDCA”).
+Added: Similarly, the USDA’s Food Safety Inspection Service (“FSIS”) is the public health agency responsible for ensuring that the nation’s commercial supply of meat, poultry, catfish and certain egg products is safe, wholesome and correctly labeled and packaged under the Federal Meat Inspection Act and the Poultry Products Inspection Act.
+Added: Congress amended the FDCA through passage of the Food Safety Modernization Act (“FSMA”), which greatly expanded FDA’s regulatory oversight over all actors in the food product supply chain.
+Added: FDA regulations mandate participation in USDA's Hazard Analysis and Critical Control Points (“HACCP”) program or FDA's Hazard Analysis and Risk-Based Prevention Controls (“HARPC”) program, as applicable, which require that risk-based preventive controls be observed by the majority of food producers.
This authority applies to all domestic food facilities and, by way of imported food supplier verification requirements, to all foreign facilities that supply food products.
The FDA and FSIS also exercise broad jurisdiction over the labeling and promotion of food.
−Removed: Labeling is a broad concept that, under certain circumstances, extends even to product-related claims and representations made on a company’s website or similar printed or graphic medium.
+Added: Labeling is a broad concept that, under certain circumstances, extends even to product-related claims and representations made on a company’s website or similar printed or graphic medium.
All foods, including dietary supplements, must bear labeling that provides consumers with essential information with respect to standards of identity, net quantity, nutrition facts labeling, ingredient statement, and allergen disclosures.
−Removed: The agencies also regulate the use of structure/function claims, health claims and nutrient content claims.
+Added: The agencies also regulate the use of structure/function claims, health claims and nutrient content claims for food products.
Additional in-store labeling requirements, such as disclosure of calories and other nutrient information for frequently sold items are now in effect.
−Removed: In addition, various nutrition initiatives that will impact many actors in our supply chain, such as the elimination of certain partially hydrogenated oils and the adoption of a new nutritional labeling format, began to go into effect in 2020.
−Removed: USDA’s Agricultural Marketing Service (“AMS”) oversees compliance with the National Organic Standards Program and related labeling activity.
+Added: In addition, various nutrition initiatives that will impact many actors in our supply chain, such as the elimination of certain partially hydrogenated oils and brominated vegetable oil went into effect in 2023.
+Added: USDA’s Agricultural Marketing Service (“AMS”) oversees compliance with the National Organic Standards Program and related labeling activity.
In addition, AMS has responsibility for newly enacted requirements surrounding the disclosure of the presence of bioengineered ingredients in food.
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The FDA has comprehensive authority to regulate the safety of dietary supplements, dietary ingredients, labeling and current good manufacturing practices.
−Removed: Congress amended the FDCA in 1994 through passage of the Dietary Supplement Health and Education Act (“DSHEA”), which greatly expanded FDA’s regulatory authority over dietary supplements.
+Added: Congress amended the FDCA in 1994 through passage of the Dietary Supplement Health and Education Act (“DSHEA”), which greatly expanded FDA’s regulatory authority over dietary supplements.
Through DSHEA, dietary supplements became a separately defined FDA-regulated product that is also subject to the general food regulations.
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However, no statement on a dietary supplement may expressly or implicitly represent that it will diagnose, cure, mitigate, treat or prevent a disease.
−Removed: The FDA has comprehensive authority to regulate cosmetics under the FDCA and the Fair Packaging and Labeling Act (“FPLA”).
+Added: The FDA has comprehensive authority to regulate cosmetics under the FDCA and the Fair Packaging and Labeling Act (“FPLA”).
No cosmetic product labeling or marketing may advertise any therapeutic use, such as treating or preventing disease, or claim to affect the structure or function of the body.
+Added: The Modernization of Cosmetics Regulation Act of 2022 (MoCRA), which was enacted in December 2022, creates a comprehensive regulatory framework that imposes new FDA registration and listing requirements, adverse event reporting obligations, labeling rules, enforcement authority, and good manufacturing practices (GMP) requirements, among other regulatory obligations, on cosmetic manufacturers, packers or distributors of cosmetic products whose name appears on the label of the product.
Homeopathic Products .
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FDA has approved one drug product containing CBD as an active ingredient.
−Removed: Consequently, because CBD has been approved as a drug active ingredient, FDA’s current legal position is that CBD cannot be legally contained in a dietary supplement or food product.
+Added: Consequently, because CBD has been approved as a drug active ingredient, FDA’s current legal position is that CBD cannot be legally contained in a dietary supplement or food product.
This restriction only applies to dietary supplements and foods.
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The FTC exercises jurisdiction over the advertising of foods, cosmetics, homeopathic and CBD products, and dietary supplements.
−Removed: The FTC has the power to institute monetary sanctions and the imposition of consent decrees and penalties that can severely limit a company’s business practices.
+Added: The FTC has the power to institute monetary sanctions and the imposition of consent decrees and penalties that can severely limit a company’s business practices.
In recent years, the FTC has instituted numerous enforcement actions against companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims.
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In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products and we have revised certain provisions of our sales and marketing program.
−Removed: COVID-19 Pandemic
−Removed: Our operations have generally stabilized since the onset of the COVID-19 pandemic in 2020.
−Removed: However, we continue to experience varying levels of inflation through increased product costs attributable in part due to the effects of the pandemic, which we continue to pass through to retail pricing.
−Removed: In addition, due to continued difficulties in obtaining necessary equipment from third parties and inflationary pressures due to supply chain delays complicated by the COVID-19 pandemic, we have experienced and may continue to experience increased costs and delays in our planned new store openings.
−Removed: See “Risk Factors—The coronavirus (COVID-19) pandemic has disrupted our business and could negatively impact our financial condition.”
−Removed: for additional information.
Corporate Offices
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Our website address is www.sprouts.com .
−Removed: The information on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
+Added: The information on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
Available Information
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The retail food business is sensitive to changes in general economic conditions.
−Removed: In addition to the impact of the COVID-19 pandemic, inflation, recessionary economic cycles, increases in interest rates, higher prices for commodities, raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other macroeconomic factors that affect consumer spending and confidence or buying habits may materially adversely affect the demand for and prices of products we sell in our stores.
+Added: Inflation, recessionary economic cycles, increases in interest rates, higher prices for commodities, raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other macroeconomic factors that affect consumer spending and confidence or buying habits may materially adversely affect the demand for and prices of products we sell in our stores.
As a result, consumers may be more cautious and could reduce their spending in our stores or shift their spending to lower-priced competition, such as warehouse membership clubs, dollar stores, online retailers or extreme value formats, which could have a material and adverse effect on our operating results and financial condition.
In addition, prolonged inflation or deflation can impact our business.
−Removed: Food inflation, such as the elevated levels we experienced during 2022, when combined with reduced consumer spending, could also reduce sales, gross profit margins and comparable store sales.
+Added: Food inflation, such as the elevated levels we experienced beginning in 2022 and continuing into 2023, when combined with reduced consumer spending, could also reduce sales, gross profit margins and comparable store sales.
As a result, our operating results and financial condition could be materially adversely affected.
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We compete on a combination of factors, primarily differentiated product selection, quality, convenience, shopping experience, customer engagement, store format, location, price and delivery options.
−Removed: Our failure to offer products or services that appeal to our customers’
−Removed: preferences or to effectively market these products or services could lead to a decrease in our sales.
+Added: Our failure to offer products or services that appeal to our customers’ preferences or to effectively market these products or services could lead to a decrease in our sales.
To the extent that our competitors offer lower prices or similar products, our ability to maintain profit margins and sales levels may be negatively impacted.
In addition, some competitors are aggressively expanding their number of stores or their product offerings, increasing the space allocated to perishable, prepared and specialty foods, including fresh, natural and organic foods, and enhancing options of engaging with and delivering their products to customers.
−Removed: Some of these competitors may have been in business longer or may have greater financial or marketing resources than we do and may be able to devote greater resources to sourcing, promoting and selling their products.
+Added: Some of these competitors may have greater financial or marketing resources than we do and may be able to devote greater resources to sourcing, promoting and selling their products.
As competition in certain areas or platforms intensifies or competitors open stores or expand delivery options within close proximity to our stores, our results of operations and cash flows may be negatively impacted through a loss of sales, decrease in customer traffic and market share, reduction in margin from competitive price changes or greater operating costs.
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We have a significant focus on perishable products, including fresh produce and natural and organic products.
−Removed: Sales of produce accounted for approximately 20% and 21% of our net sales in fiscal 2022 and
−Removed: 2021, respectively.
+Added: Sales of produce accounted for approximately 19% and 20% of our net sales in fiscal 2023 and 2022, respectively.
Despite temporary challenges related to the COVID-19 pandemic, we have generally not experienced significant difficulty to date in maintaining the supply of our produce and fresh, natural and organic products that meet our quality standards.
However, there is no assurance that these products will be available to meet our needs in the future.
−Removed: The availability of such products at competitive prices depends on many factors beyond our control, including the number and size of farms that grow natural or organic crops or raise livestock that meet our quality, welfare and production standards, tariffs and import regulations or restrictions on foreign-sourced products and the ability of our vendors to maintain organic, non-genetically modified or other applicable third-party certifications for such products.
+Added: The availability of such products at competitive prices depends on many factors beyond our control, including the number and size of farms that grow natural or organic crops or raise livestock that meet our quality, welfare and production standards, tariffs and import regulations or restrictions on foreign-sourced products and the ability of our vendors to maintain required attributes or organic, non-genetically modified or other applicable third-party certifications for such products.
Produce is also vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, storms, frosts, wildfires, earthquakes, hurricanes, pestilences and other extreme or abnormal environmental conditions, including the potential effects of climate change, any of which can lower crop yields and reduce crop size and quality.
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If our competitors significantly increase these types of product offerings due to increases in consumer demand or otherwise, we and our suppliers may not be able to obtain a sufficient supply of such products on favorable terms, or at all, and our sales may decrease, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
−Removed: We could also suffer significant inventory losses in the event of disruption of our supply chain network or extended power outages in our stores or distribution centers.
+Added: We could also suffer significant inventory losses in the event of disruption of our supply chain network or extended power outages or other damaging events in our stores or distribution centers.
If we are unable to maintain inventory levels suitable for our business needs, it would materially adversely affect our financial condition, results of operations and cash flows.
The current geographic concentration of our stores creates an exposure to local or regional downturns or catastrophic occurrences and the impact of climate change.
−Removed: As of January 1, 2023, we operated 130 stores in California, making California our largest market representing 34% of our total stores in fiscal 2022.
−Removed: We also have store concentration in Texas, Arizona and Colorado, operating 51, 44 and 32 stores in those states, respectively, and representing 13%, 11% and 8% of our total stores in fiscal 2022, respectively.
−Removed: As we execute our long-term growth strategy, we may become even more concentrated in these markets, as well as identified expansion markets such as Florida, in which we operated 35 stores in fiscal 2022.
+Added: As of December 31, 2023, we operated 139 stores in California, making California our largest market representing 34% of our total stores in fiscal 2023.
+Added: We also have store concentration in Texas, Arizona, Florida and Colorado, operating 50, 45, 43 and 33 stores in those states, respectively, and representing 12%, 11%, 11% and 8% of our total stores in fiscal 2023, respectively.
+Added: As we execute our long-term growth strategy, we may become even more concentrated in these markets, as well as other identified expansion markets.
In addition, we source a large portion of our produce from California, ranging from approximately 40% to approximately 70% depending on the time of year.
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Such conditions may result in reduced customer traffic and spending in our stores, physical damage to our stores, full or partial loss of power in our stores, loss of inventory, closure of one or more of our stores, inadequate work force in our markets, temporary disruption in the supply of products whether from self or third-party distribution, delays in the delivery of goods to our stores and a reduction in the availability of products in our stores.
−Removed: Any of these factors, particularly in areas with significant geographic concentration of our stores or produce grocers on which we rely, may disrupt our business and materially adversely affect our financial condition, results of operations and cash flows.
+Added: Any of these factors, particularly in areas with significant geographic concentration of our stores or produce growers on which we rely, may disrupt our business and materially adversely affect our financial condition, results of operations and cash flows.
Fluctuations in commodity prices and availability may impact profitability.
Many products we sell include ingredients such as wheat, corn, oils, milk, sugar, cocoa, nuts and other key commodities.
−Removed: Many commodity prices are subject to significant fluctuations and may be
−Removed: impacted by economic factors such as inflation and tariffs, and availability of commodities may be impacted by weather events and catastrophic occurrences.
+Added: Many commodity prices are subject to significant fluctuations and may be impacted by economic factors such as inflation and tariffs, and availability of commodities may be impacted by weather events and catastrophic occurrences.
Any increase in prices of such key ingredients may cause our vendors to seek price increases from us, and price decreases may result in our competitors reducing retail prices on items containing such ingredients.
If we are unable to mitigate these fluctuations, our profitability may be impacted either through increased costs to us or lower prices and loss of customers due to competitive conditions, which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.
−Removed: The coronavirus (COVID-19) pandemic has disrupted our business and could negatively impact our financial condition.
−Removed: The unprecedented global outbreak of the novel coronavirus (COVID-19) that began in the first quarter of 2020 had a significant impact on all aspects of our business, including strains on our entire supply chain, store operations and merchandising functions.
−Removed: While our operations have generally stabilized since the peak of the pandemic, our operations may continue to be impacted by any continuing effects of COVID-19, including resurgences and variants of COVID-19 or outbreaks of any new viruses or contagions.
−Removed: These impacts may include difficulties and delays in sourcing, transporting and stocking products, inabilities to staff our stores and distribution centers at adequate levels to conduct our operations resulting in store closures or operating hour reductions, and incurring significant costs in support of our front-line store team members for enhanced benefits, safety measures and government-mandated wage increases.
−Removed: Measures taken by governmental authorities to reduce the transmission of COVID-19 or any new viruses, including vaccine and testing mandates, may cause additional costs and disruptions in workforce availability, as well as costly litigation, enforcement actions and penalties.
−Removed: In addition, the COVID-19 pandemic has required and COVID-19 or new viruses may in the future again require us to make controversial decisions and recommendations about precautionary measures such as facial coverings, vaccinations and testing that could impact our results, including by impacting our brand, team member retention and satisfaction, and the willingness of customers to visit our stores.
−Removed: Store traffic may further decline as customers shop less frequently, choose other retail or online outlets to minimize potential exposure to COVID-19 or return to restaurants and other outlets to purchase and consume food.
−Removed: We have incurred incremental ecommerce fees from pre-pandemic levels as more customers adopt our digital solutions.
−Removed: The full extent to which the COVID-19 pandemic impacts our business and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the pandemic, emergence of variants and the actions necessary to contain COVID-19 or treat its impact.
−Removed: Supply chain disruptions have delayed our store growth plans.
−Removed: Due to continued difficulties in obtaining necessary equipment from third parties due to supply chain delays complicated by the COVID-19 pandemic, we may continue to experience delays in our new store openings until disruptions to the global supply chain have been resolved, the timing of which is uncertain.
+Added: Supply chain disruptions may delay our store growth plans.
+Added: We experienced difficulties in obtaining necessary equipment from third parties due to supply chain delays complicated by the COVID-19 pandemic.
+Added: Further disruptions to the global supply chain due to events beyond our control, such as pandemics or wars, may cause us to experience shortages of necessary products or equipment resulting in delays in our future new store openings.
Another widespread health epidemic or other incidents beyond our control could materially impact our business.
−Removed: As evidenced by the ongoing COVID-19 pandemic, our business could be severely impacted by other widespread regional, national or global health epidemics or other incidents beyond our control such as terrorism, riots, acts of violence and other crimes.
+Added: As evidenced by the COVID-19 pandemic, our business could be severely impacted by other widespread regional, national or global health epidemics or other incidents beyond our control such as terrorism, riots, acts of violence and other crimes.
Such events may cause customers to avoid public gathering places such as our stores or otherwise change their shopping behaviors.
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We utilize natural gas, water, sewer and electricity in our stores and our transportation providers use gasoline and diesel in trucks that deliver products to our stores.
−Removed: We have been adversely impacted by the
−Removed: increased costs of energy and may be further adversely impacted if costs continue to increase.
+Added: We have been adversely impacted by the increased costs of energy and may be further adversely impacted if costs continue to increase.
We may also be required to pay certain adjustments or other amounts pursuant to our supply and delivery contracts in connection with increases in fuel prices.
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If we are ineffective in performing these activities, then our efforts to open and operate new stores may be unsuccessful or unprofitable, and we may be unable to execute our growth strategy.
−Removed: We opened 16 and 12 stores in fiscal 2022 and 2021, respectively, and we currently expect to open approximately 30 new stores in 2023.
−Removed: Beyond 2023, we expect to achieve 10% annual unit growth, including penetration of new markets with a greater concentration of new stores.
+Added: In fiscal 2023, we opened 30 new stores and acquired two stores.
+Added: In fiscal 2022, we opened 16 new stores.
+Added: We currently expect to achieve approximately 10% annual unit growth and to open approximately 35 new stores in 2024, including penetration of new markets with a greater concentration of new stores.
However, we may not achieve this expected level of new store growth due to inability to find suitable sites, supply chain disruptions or otherwise.
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Further, new store openings in markets where we have existing stores may result in reduced sales volumes at our existing stores in those markets.
−Removed: If we experience a decline in performance, we may slow or discontinue store openings, or we may decide to close stores that we are unable to
−Removed: operate in a profitable manner.
+Added: If we experience a decline in performance, we may slow or discontinue store openings, or we may decide to close stores that we are unable to operate in a profitable manner.
If we fail to successfully implement our growth strategy, including by opening new stores, our financial condition, results of operations and cash flows may be adversely affected.
−Removed: We may be unable to maintain or increase comparable store sales, which could negatively impact our business and stock price.
−Removed: We may not be able to achieve or improve the levels of comparable store sales that we have experienced in the past.
−Removed: Our comparable store sales growth could be lower than our historical average for many reasons, including general economic conditions, competition, cycling prior year performance and the other matters discussed in these Risk Factors.
−Removed: These factors may cause our comparable store sales results to be materially lower than in recent periods, which could harm our business and result in a decline in the price of our common stock.
Real or perceived concerns that products we sell could cause unexpected illness, side effects, injury or death could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation.
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Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to deliver our produce and other products in a timely manner.
−Removed: We self-distribute our produce through seven distribution centers located in Arizona, Texas, northern California, southern California, Georgia, Colorado and Florida.
−Removed: As we further expand our geographic footprint, we may require additional distribution centers.
−Removed: Any unanticipated or unusual expenses or significant interruption or failure in the operation of our distribution center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers into our supply chain network, inability of our new distribution centers to perform as expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute produce and other products to our stores.
+Added: We self-distribute our produce through six distribution centers located in Arizona, Texas, northern California, southern California, Colorado and Florida.
+Added: We also have entered into a partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores.
+Added: As we further expand our geographic footprint, we may require additional distribution centers or expansion of our existing distribution centers.
+Added: Any unanticipated or unusual expenses or significant interruption or failure in the operation of our distribution center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, cyberattacks, network or power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers into our supply chain network, inability of our new distribution centers to perform as expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute produce and other products to our stores.
Such interruptions could result in lost sales and a loss of customer loyalty to our brand, as well as increased costs from third-party service providers.
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In addition, unexpected delays in deliveries from vendors that ship directly to our stores or increases in distribution and transportation costs (including through increased labor or fuel costs) could have a material adverse effect on our financial condition, results of operations and cash flows.
−Removed: Labor shortages, work stoppages or wage increases in the transportation or other industries, long-term disruptions to the national and international transportation infrastructure, reduction in capacity and industry-specific
−Removed: regulations such as hours-of-service rules that lead to delays or interruptions of deliveries or increased costs could negatively affect our business.
+Added: Labor shortages, work stoppages or wage increases in the transportation or other industries, long-term disruptions to the national and international transportation infrastructure, reduction in capacity and industry-specific regulations such as hours-of-service rules that lead to delays or interruptions of deliveries or increased costs could negatively affect our business.
Disruption of significant supplier relationships could negatively affect our business.
1 unchanged sentence
Our current primary contractual relationship with KeHE continues through July 18, 2025 and provides that KeHE will be our primary supplier for all of our stores.
−Removed: Our primary supplier of meat and seafood products accounted for approximately 13% of our total purchases in both fiscal 2022 and 2021, respectively.
+Added: Our primary supplier of meat and seafood products accounted for approximately 14% and 13% of our total purchases in fiscal 2023 and 2022, respectively.
Due to this concentration of purchases from a small number of third-party suppliers, the cancellation of our distribution arrangements or the disruption, delay or inability of our suppliers to timely deliver product to our stores in quantities or within service parameters that meet our requirements may materially and adversely affect our operating results while we establish alternative supply chain channels.
Another 3% of our total purchases in both fiscal 2023 and 2022, respectively, were made through our secondary supplier of dry grocery and frozen food products, UNFI.
−Removed: Our current contractual relationship with UNFI continues through March 31, 2023, and we are engaging in discussions regarding a renewal.
+Added: Our current contractual relationship with UNFI continues through April 30, 2024.
There is no assurance UNFI or other distributors will be able to fulfill our needs on favorable terms or at all.
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Our information technology systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, including tampering with hardware and breaches of our transaction processing or other systems that could result in the compromise of confidential customer or team member data, ransomware attacks, catastrophic events, and usage errors by our team members.
−Removed: Phishing attacks have emerged as particularly pervasive, including as a means for ransomware attacks, which have increased both in frequency and breadth.
+Added: Phishing attacks have emerged as
+Added: particularly pervasive, including as a means for ransomware attacks, which have increased both in frequency and breadth.
Point-of-sale hardware in our stores has also been targeted by individuals attempting to install skimmer devices or conduct other tampering to illicitly obtain payment card information.
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Significant expenditures could be required to remedy future cybersecurity problems and protect against future breaches.
−Removed: Additionally, compliance with current and future applicable U.S.
−Removed: privacy, cybersecurity and related laws, including for example the California Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), can be costly and time-consuming.
+Added: Additionally, compliance with current and future applicable federal and state privacy, cybersecurity and related laws, including for example the California Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), can be costly and time-consuming.
These costs could have a material adverse effect on our business, and our efforts may not meaningfully limit the success of future attempts to breach our information technology systems.
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and our brand and reputation with our customers may be harmed.
−Removed: Various third parties, such as our suppliers and payment processors and their suppliers (i.e., our fourth parties), also rely heavily on information technology systems, and any failure of these systems for any reason (e.g., cybersecurity
−Removed: attack, software glitch, human or system error or omission), could also cause loss of sales, transactional or other data and significant interruptions to our business.
−Removed: Any security breach or other material interruption in the information technology systems we rely on may have a material adverse effect on our business, operating results and financial condition.
+Added: Various third parties, such as our suppliers, including our most significant suppliers, and payment processors and their suppliers ( i.e.
+Added: , our fourth parties), also rely heavily on information technology systems, and any failure of these systems for any reason ( e.g.
+Added: , cybersecurity attack, software glitch, human or system error or omission), could also cause loss of sales, transactional or other data and significant interruptions to our business.
+Added: Any security breach or other material interruption in the information technology systems we rely on, particularly those required for point-of-sale payment processing in our stores, may have a material adverse effect on our business, operating results and financial condition.
In addition, many of our store support team members remain in a remote or hybrid work environment in response to changes in the work environment due to the COVID-19 pandemic.
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Our performance is impacted by trends regarding healthy lifestyles, product attributes, dietary preferences, convenient options, fresh, natural and organic products, meal solutions, ingredient transparency and sustainability, and vitamins and supplements, as well as new and evolving methods of engaging with and delivering our products to our customers.
−Removed: Consumer preferences towards vitamins, supplements or fresh, natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, scientific research or findings regarding the benefits or efficacy of such products, national media attention and the cost, attributes or sustainability of these products.
+Added: Consumer preferences towards vitamins, supplements or fresh, natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, scientific research or findings
+Added: regarding the benefits or efficacy of such products, national media attention and the cost, attributes or sustainability of these products.
Our store offerings currently include fresh, natural and organic products and dietary supplements.
6 unchanged sentences
New store openings may negatively impact our financial results in the short-term due to the effect of store opening costs and lower sales and contribution to overall profitability during the initial period following opening.
−Removed: New stores build their sales volume and their customer base over time and, as a result, generally have lower margins and higher operating expenses, as a percentage of net sales, than our more mature stores.
+Added: New stores typically build their sales volume and their customer base over time and, as a result, generally have lower margins and higher operating expenses, as a percentage of net sales, than our more mature stores.
New stores may not achieve sustained sales and operating levels consistent with our more mature store base on a timely basis or at all.
This may result in store closures or otherwise have an adverse effect on our financial condition and operating results.
−Removed: Further, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to
−Removed: new, closer locations.
+Added: Further, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to new, closer locations.
If our new stores are less profitable than our existing stores, or if we experience sales volume transfer from our existing stores, our financial condition and operating results may be adversely affected.
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Any reductions of landlord contributions could have an adverse impact on our new store cash-on-cash returns and our operating results.
+Added: We may be unable to maintain or increase comparable store sales, which could negatively impact our business and stock price.
+Added: We may not be able to achieve or improve the levels of comparable store sales that we have experienced in the past.
+Added: Our comparable store sales growth could be lower than our historical average for many reasons, including general economic conditions, competition, cycling prior year performance and the other matters discussed in these Risk Factors.
+Added: These factors may cause our comparable store sales results to be materially lower than in recent periods, which could harm our business and result in a decline in the price of our common stock.
We may be unable to maintain or improve our operating margins, which could adversely affect our financial condition and ability to grow.
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Our brand could be adversely affected if we fail to achieve these objectives, or if our public image or reputation were to be tarnished by negative publicity.
+Added: If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected.
+Added: Our business depends on our ability to effectively manage our inventory.
+Added: We have historically experienced loss of inventory (also called shrink) due to damage, theft, spoilage, inventory management and other causes.
+Added: Sustained elevated levels of inventory shrink could adversely affect our results of operations and financial condition.
+Added: To protect against the possibility of rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our results of operations.
+Added: In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-lived assets.
The loss of key management could negatively affect our business.
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Our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which we are located, unemployment levels within those markets, unionization of the available work force, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation.
−Removed: In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our customer engagement to suffer, while increasing our wages could
−Removed: cause our earnings to decrease.
+Added: In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our customer engagement to suffer, while increasing our wages could cause our earnings to decrease.
If we are unable to hire, train and retain team members capable of meeting our business needs and expectations, our business and brand image may be impaired.
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Claims under our insurance plans may differ from our estimates, which could materially impact our results of operations.
−Removed: We use a combination of insurance and self-insurance plans to provide for potential liabilities, including for workers’
−Removed: compensation, general liability (including, in connection with legal proceedings described under “—Legal proceedings could materially impact our business, financial condition, results of operations and cash flows”
−Removed: below), property insurance, director and officers’
−Removed: liability insurance, automobile liability insurance, environmental liability insurance, and team member health-care benefits.
+Added: We use a combination of insurance and self-insurance plans to provide for potential liabilities, including for workers’ compensation, general liability (including, in connection with legal proceedings described under “—Legal proceedings could materially impact our business, financial condition, results of operations and cash flows” below), property insurance, director and officers’ liability insurance, automobile liability insurance, environmental liability insurance, and team member health-care benefits.
Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions.
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We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could adversely impact our business.
−Removed: As of January 1, 2023, we had outstanding indebtedness of $250.0 million under our credit agreement (referred to as the “Credit Agreement”).
+Added: As of December 31, 2023, we had outstanding indebtedness of $125.0 million under our credit agreement (referred to as the “Credit Agreement”).
We may incur additional indebtedness in the future, including borrowings under our Credit Agreement.
−Removed: Our indebtedness, any additional indebtedness we
−Removed: may incur, or any hedging arrangements related to such indebtedness could require us to divert funds identified for other purposes for debt service and impair our liquidity position.
+Added: Our indebtedness, any additional indebtedness we may incur, or any hedging arrangements related to such indebtedness could require us to divert funds identified for other purposes for debt service and impair our liquidity position.
If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds.
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Our operations, which are characterized by a high volume of customer traffic and data collection and by transactions involving a wide variety of product selections, carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in some other industries.
−Removed: Consequently, we may be a party to individual personal injury, product liability, intellectual property, data security and privacy, accessibility and other legal actions in the ordinary course of our business, including litigation arising from the COVID-19 pandemic, food-related illness or product labeling.
+Added: Consequently, we may be a party to individual personal injury, product liability, intellectual property, data security and privacy, accessibility and other legal actions in the ordinary course of our business, including litigation arising from food-related illness or product labeling.
In addition, our team members may, from time to time, bring lawsuits against us regarding injury, hostile work environment, discrimination, wage and hour disputes, sexual harassment, or other employment issues.
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We, as well as our vendors, are subject to numerous laws and regulations and our compliance with these laws and regulations may increase our costs, limit or eliminate our ability to sell certain products, raise regulatory enforcement risks, or otherwise adversely affect our business, reputation, results of operations, cash flows and financial condition.
−Removed: Both FDA and USDA have broad authority to enforce their applicable provisions relating to the safety, labeling, manufacturing, distribution and promotion of foods, cosmetics, homeopathic and CBD products, and dietary supplements, including powers to issue a public warning letter to a company, publicize information about adulterated or misbranded products, institute an administrative detention of products, request or order a recall of food from the market, impose import restrictions and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution.
+Added: Both FDA and USDA have broad authority to enforce their applicable statutes and regulations relating to the safety, labeling, manufacturing, distribution and promotion of foods, cosmetics, homeopathic and CBD products, and dietary supplements, including powers to issue a public warning letter to a company, publicize information about adulterated or misbranded products, institute an administrative detention of products, request or order a recall from the market, impose import restrictions and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution.
+Added: Enforcement actions may also lead to follow-on consumer class action litigation.
Dietary Supplement, CBD and Homeopathic Product Risks.
Our sales of dietary supplements are regulated by FDA.
−Removed: However, other public and private actors are increasingly targeting dietary supplement
−Removed: retailers and manufacturers for selling products that fail to adhere to requirements under FDCA, as amended by DSHEA.
−Removed: While the FDCA provides FDA with the authority to remove products from the market that are adulterated or misbranded, state actors, and the Plaintiffs’
−Removed: Bar have been targeting retailers and manufacturers of dietary supplements for failing to adhere to current good manufacturing practices and for false or misleading product statements.
+Added: However, other public and private actors are increasingly targeting dietary supplement retailers and manufacturers for selling products that fail to adhere to requirements under the FDCA, as amended by DSHEA.
+Added: While the FDCA provides FDA with the authority to remove products from the market that are adulterated or misbranded, state actors, and the Plaintiffs’ Bar have been targeting retailers and manufacturers of dietary supplements for failing to adhere to current good manufacturing practices and for false or misleading product statements.
As a retailer of certain topical or ingestible CBD products, the FDA also has the authority to remove from the market any CBD product if it is adulterated, its labeling is false or misleading, it is otherwise misbranded, or if it violates any other FDCA or FDA requirement or regulation.
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The FDCA also provides FDA with the authority to remove homeopathic products from the market that are adulterated or misbranded or contain improper or excessive amounts of active ingredients.
−Removed: Further marketing homeopathic and CBD products with misbranding, misleading claims or quality issues have also been targets for litigation.
+Added: Further, companies have also been targets for litigation on the basis of marketing homeopathic and CBD products with misbranding, misleading claims or quality issues.
Advertising and Product Claims Risks.
−Removed: In connection with the marketing and advertisement of products we sell, we could be the target of claims relating to false or deceptive advertising, including under the oversight of the FTC and pursuant to the consumer protection statutes of some states.
+Added: In connection with the marketing and advertisement of products we sell, we could be the target of claims relating to false or deceptive advertising, including under the oversight of the FTC and pursuant to the FTC Act and consumer protection statutes of some states.
Furthermore, in recent years, the FDA has been aggressive in enforcing its regulations with respect to nutrient content claims ( e.g.
−Removed: , “low fat,”
−Removed: “good source of,”
−Removed: “calorie free,”
−Removed: etc.), unauthorized “health claims”
−Removed: (claims that characterize the relationship between a food or food ingredient and a disease or health condition), and other claims that impermissibly suggest therapeutic benefits for certain foods or food components.
−Removed: These events could interrupt the marketing and sales of products in our stores, including our private label products, severely damage our brand reputation and public image, increase the cost of products in our stores, result in product recalls or costly litigation, and impede our ability to deliver merchandise in sufficient quantities or quality to our stores, which could result in a material adverse effect on our business, financial condition, results of operations and cash flows.
−Removed: Our reputation could also suffer from real or perceived issues involving the labeling or marketing of products we sell as “natural.”
−Removed: Although the FDA and the USDA have each issued statements regarding the appropriate use of the word “natural,”
−Removed: there is no single, U.S.
−Removed: government-regulated definition of the term “natural”
−Removed: for use in the food industry.
+Added: , “low fat,” “good source of,” “calorie free,” etc.), unauthorized “health claims” (claims that characterize the relationship between a food or food ingredient and a disease or health condition), and other claims that impermissibly suggest therapeutic benefits for certain foods or food components.
+Added: Regulatory enforcement actions could interrupt the marketing and sales of products in our stores, including our private label products, severely damage our brand reputation and public image, increase the cost of products in our stores, result in product recalls or costly litigation, and impede our ability to deliver merchandise in sufficient quantities or quality to our stores, which could result in a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: Our reputation could also suffer from real or perceived issues involving the labeling or marketing of products we sell as “natural.” Although the FDA and the USDA have each issued statements regarding the appropriate use of the word “natural,” there is no single, U.S.
+Added: government-regulated definition of the term “natural” for use in the food industry.
The resulting uncertainty has led to consumer confusion, distrust and legal challenges.
−Removed: Plaintiffs have commenced legal actions against a number of food companies and retailers that market “natural”
−Removed: or similarly labeled products, asserting false, misleading and deceptive advertising and labeling claims, including claims related to genetically modified ingredients.
+Added: Plaintiffs have commenced legal actions against a number of food companies and retailers that market “natural” or similarly labeled products, asserting false, misleading and deceptive advertising and labeling claims, including claims related to genetically modified ingredients.
Should we become subject to similar claims, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded.
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Organic and GMO Claims.
−Removed: We are also subject to the USDA’s Organic Rule, which facilitates interstate commerce and the marketing of organically produced food, and provides assurance to our customers that such products meet consistent, uniform standards.
−Removed: Compliance with the USDA’s Organic Rule also places a significant burden on some of our suppliers, which may cause a disruption in some of our product offerings.
−Removed: Additionally, the USDA has promulgated regulations that require disclosure of whether food offered for sale contains bioengineered (GMO) ingredients.
+Added: We are also subject to the USDA’s Organic Rule, which facilitates interstate commerce and the marketing of organically produced food, and provides assurance to our customers that such products meet consistent, uniform standards.
+Added: Compliance with the USDA’s Organic Rule also places a significant burden on some of our suppliers, which may cause a disruption in some of our product offerings.
+Added: Additionally, the USDA has promulgated regulations that require disclosure of whether food offered for sale contains bioengineered (GMO) ingredients or detectable genetic material that has been modified through certain lab techniques and cannot be created through conventional breeding or found in nature.
Implementation began in January 2022.
−Removed: FSMA Implementation Costs.
+Added: Mandatory compliance will begin on July 21, 2025.
+Added: Food and FSMA Implementation Costs.
+Added: While the FDA has authorized certain per and polyfluoroalkyl substances (PFAS) for use in specific food contact applications, a growing number of states have passed legislation or issued policies restricting food contact articles with intentionally added PFAS, such as certain single-use food packaging and foodware items.
+Added: For example, a California law that became effective in 2023 bans intentionally added PFAS in fiber-based food packaging, mandates online chemical disclosures, and limits claims about PFAS-free and other hazard groups.
+Added: As more states impose similar restrictions, it is possible that additional states in which we operate will also implement bans on PFAS.
FSMA directed an historic shift at FDA from the agency reacting to and solving problems in the food supply chain to preventing contamination of food before it occurs.
−Removed: FSMA accomplished this goal by overhauling FDA’s current food safety program to require all actors in the food supply chain to expand their safety programs and record keeping processes.
−Removed: FSMA’s continued implementation, such as the rule on Additional Traceability Records for Certain Foods established in its Section 204(d) and finalized November 15, 2022, and FDA’s own development in understanding effective ways to enforce FSMA provisions could delay the supply of certain products, result in certain products being unavailable to us for sale, see an increase in price of certain products, and/or increase the expenditure of company resources to ensure compliance (e.g., technology, consultants, employees, etc.).
+Added: FSMA accomplished this goal by overhauling FDA’s current food safety program to require all actors in the food supply chain to expand their safety programs and record keeping processes.
+Added: FSMA’s continued implementation, such as the rule on Additional Traceability Records for Certain Foods , and FDA’s own development in understanding effective ways to enforce FSMA provisions could delay the supply of certain products, result in certain products being unavailable to us for sale, see an increase in price of certain products, and/or increase the expenditure of company resources to ensure compliance (e.g., technology, consultants, employees, etc.).
+Added: As a retailer of private label cosmetic products, we are subject to new registration and listing requirements, adverse event reporting obligations, labeling rules, enforcement authority, and GMP
+Added: requirements under MoCRA.
+Added: Our failure to comply with these requirements could result in enforcement actions, such as recalls, administrative detentions, or injunctions that may disrupt the promotion and sale of these products, significantly harm our brand’s reputation and image, and subject us to product recalls or follow-on consumer class action litigation.
Ecommerce Platform and Third-Party Risks.
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Compliance with or changes to such laws and regulations may increase our costs, limit or eliminate our ability to sell certain products or otherwise adversely affect our business, reputation, results of operations, financial condition or cash flows.
−Removed: We are subject to laws and regulations more generally applicable to retailers, including those related to labor and employment, taxation, zoning and land use, environmental protection, workplace safety, public health, community right-to-know, data privacy, hazardous waste disposal, consumer protection and alcoholic beverage sales.
−Removed: Due to the COVID-19 pandemic, we are subject to additional governmental regulations and health guidelines, as well as other voluntary safety protocols.
−Removed: Our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated “critical”
−Removed: violations, closure of the store until a re-inspection demonstrates that we have remediated the problem.
+Added: We are subject to laws and regulations more generally applicable to retailers, including those related to labor and employment, taxation, zoning and land use, environmental protection, workplace safety, public health, community right-to-know, data privacy, waste diversion and hazardous waste disposal, packaging labels and content, consumer protection and alcoholic beverage sales, as well as other voluntary safety protocols such as those that arose as a result of the COVID-19 pandemic.
+Added: Our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated “critical” violations, closure of the store until a re-inspection demonstrates that we have remediated the problem.
Further, our new store openings could be delayed or prevented, or our existing stores could be impacted by difficulties or failures in our ability to obtain or maintain required permits, approvals or licenses.
−Removed: In addition, we are subject to environmental laws pursuant to which we could be held responsible for all of the costs or liabilities relating to any contamination at our or our predecessors’
−Removed: past or present facilities and at third-party waste disposal sites, regardless of our knowledge of, or responsibility for, such contamination, and such costs may exceed our environmental liability insurance coverage.
+Added: In addition, we are subject to environmental laws pursuant to which we could be held responsible for all of the costs or liabilities relating to any contamination at our or our predecessors’ past or present facilities and at third-party waste disposal sites, regardless of our knowledge of, or responsibility for, such contamination, and such costs may exceed our environmental liability insurance coverage.
As is common in our industry, we rely on our suppliers and contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements.
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or require us to discontinue certain operations.
−Removed: Any or all of such requirements could have a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: Any or all of such
+Added: requirements could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may be unable to adequately protect our intellectual property rights, which could harm our business.
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There can be no assurance that our intellectual property rights can be successfully asserted against such third parties or will not be invalidated, circumvented or challenged.
−Removed: Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and resources.
+Added: Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and resources.
If we are unable to prevent our competitors from using names, logos and domain names similar to ours, consumer confusion could result, the perception of our brand and products could be negatively affected, and our sales and profitability could suffer as a result.
−Removed: We also license the SPROUTS FARMERS MARKETS trademark to a third party for use in operating two grocery stores.
−Removed: If the licensee fails to maintain the quality of the goods and services used in connection with this trademark, our rights to, and the value of, this and similar trademarks could potentially be harmed.
−Removed: Negative publicity relating to the licensee could also be incorrectly associated with us, which could harm the business.
−Removed: Failure to protect our proprietary information could also have a material adverse effect on our business.
We may also be subject to claims that our intellectual property, activities or the products we sell infringe, misappropriate or otherwise violate the intellectual property rights of others.
−Removed: Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit.
+Added: Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit.
Such claims may also require us to enter into costly settlement or license agreements (which could, for example, prevent us from using our trademarks in certain geographies or in connection with certain products and services), pay costly damage awards, and face a temporary or permanent injunction prohibiting us from marketing or providing the affected products and services, any of which could have a material adverse effect on our business.
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We have a significant amount of goodwill and other intangible assets.
−Removed: As of January 1, 2023, we had goodwill and intangible assets of approximately $368.9 million and $185.0 million, respectively, which represented approximately 12% and 6% of our total assets as of such date, respectively.
+Added: As of December 31, 2023, we had goodwill and intangible assets of approximately $381.7 million and $208.1 million, respectively, which represented approximately 11.5% and 6.3% of our total assets as of such date, respectively.
Goodwill is reviewed for impairment on an annual basis in the fourth fiscal quarter or whenever events occur or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount.
3 unchanged sentences
We provide nutrition-oriented information to our customers, and these activities may be subject to state and federal regulation and oversight by professional organizations.
−Removed: In the past, the FDA has expressed concerns regarding summarized health and nutrition-related information that it (i) does not, in the FDA’s view, accurately present such information, (ii) diverts a consumer’s attention and focus from FDA-required nutrition labeling and information or (iii) impermissibly promotes drug-type disease-related benefits.
+Added: In the past, the FDA has expressed concerns regarding summarized health and nutrition-related information that it (i) does not, in the FDA’s view, accurately present such information, (ii) diverts a consumer’s attention and focus from FDA-required nutrition labeling and information or (iii) impermissibly promotes drug-type disease-related benefits.
If our team members or third parties we engage to provide this information do not act in accordance with regulatory requirements, we may become subject to penalties or litigation that could have a material adverse effect on our business.
Our business and reputation may be adversely impacted by evolving environmental, social and governance matters.
−Removed: Increasingly, investors, customers, government agencies, non-governmental organizations, team members, communities and other stakeholders are focusing on environmental, social and governance (ESG) matters and related disclosures.
+Added: Increasingly, investors, customers, government agencies, non-governmental organizations, team members, communities and other stakeholders are focusing on ESG matters and related disclosures.
Many of these stakeholders evaluate and measure the performance of companies based on a variety of ESG metrics.
3 unchanged sentences
If our ESG-related reporting is incomplete or inaccurate or fails to comply with regulatory requirements, or if we fail to achieve significant progress with respect to our ESG goals on a timely basis, or at all, our business, financial performance, growth and reputation with our investors, customers and other stakeholders could be adversely affected.
+Added: In addition, there also exists certain “anti-ESG” sentiment among some individuals and government institutions, and we may also face scrutiny and reputational harm from these parties regarding our ESG initiatives.
Common Stock Ownership Risks
11 unchanged sentences
These include, without limitation, the following provisions:
−Removed: a classified board of directors (referred to as the “Board”) whose members serve staggered three-year terms;
−Removed: “blank check”
−Removed: preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;
+Added: • a classified board of directors (referred to as the “Board”) whose members serve staggered three-year terms;
+Added: • “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;
• inability of our stockholders to call special meetings of stockholders, which may delay the ability of our stockholders to force consideration of a proposal or the ability of holders controlling a majority of our capital stock to take action, including the removal of directors;
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Unresolve d Staff Comments
+Added: Cybersecurity
+Added: We believe cybersecurity is of critical importance to our success.
+Added: We are susceptible to a number of significant and persistent cybersecurity threats, including those common to most industries as well as those we face as a retailer, operating in an industry characterized by a high volume of customer transactions and collection of sensitive data.
+Added: These threats, which are constantly evolving, include data breaches, ransomware, and phishing attacks.
+Added: We, and our vendors and suppliers, regularly face attempts by malicious actors to breach our security and compromise our information technology systems, and a cybersecurity incident impacting us or any vendor or supplier could significantly disrupt our operations and result in damage to our reputation, costly litigation and/or government enforcement action.
+Added: Accordingly, we are committed to maintaining robust cybersecurity and data protection and continuously evaluate the impact of cybersecurity threats, considering both immediate and potential long-term effects of these threats on our business strategy, operations, and financial condition.
+Added: Under the oversight of our Board of Directors, and the Board’s risk committee, our management has established comprehensive processes for identifying, assessing and managing material risks from cybersecurity threats, and these processes are integrated into our overall enterprise risk management program.
+Added: Our approach is proactive and adaptive, featuring regular security assessments, third-party audits, team member training, and continuous improvement of our cybersecurity infrastructure.
+Added: We work to align our practices with industry best practices and regulatory standards.
+Added: Our processes include detailed response procedures to be followed in the event of a cybersecurity incident, which outline steps to be followed from detection to assessment to notification and recovery, including internal notifications to management, the risk committee and the Board, as appropriate.
+Added: The risk committee of our Board is primarily responsible for oversight of risks, including those from cybersecurity threats, and is currently chaired by a director with extensive functional expertise in cybersecurity matters.
+Added: Members of management, including our Chief Technology Officer, provide the risk committee updates on cybersecurity risk matters on a quarterly basis and more frequently if circumstances dictate.
+Added: In these updates, members of the risk committee are apprised of cybersecurity incidents that are deemed to have had a moderate or higher impact even if immaterial to us.
+Added: In addition, the risk committee reviews and actively discusses with management and among themselves the risks related to cybersecurity and critical systems in order to provide input on the appropriate level of risk for our company and reviews management’s strategies for adequately mitigating and managing the identified risks.
+Added: The risk committee and management regularly update our full Board with respect to cybersecurity matters.
+Added: Our Chief Technology Officer is primarily responsible for managing material risks from cybersecurity threats, and is supported by our Vice President of Information Technology, Operations and Security, along with a dedicated team of internal cybersecurity specialists.
+Added: The Information Technology leaders participate in periodic training and education on cybersecurity related topics, while members of our internal security team also maintain industry certifications, such as Certified Information Systems Security Professional (CISSP).
+Added: Our current Chief Technology Officer has more than 35 years of experience in information technology.
+Added: Our Chief Technology Officer is informed about and monitors prevention, detection, mitigation, and remediation efforts through regular communication and reporting from the internal team.
+Added: We also engage specialized cybersecurity consultants and leverage third-party expertise to bolster our cybersecurity defenses.
+Added: Our enterprise risk management program is designed to identify, prioritize and assess a broad range of risks, including risks from cybersecurity threats, that may affect our ability to execute our corporate strategy and fulfill our business objectives.
+Added: Our Vice President of Risk Management oversees this program and works with our information technology leadership team to formulate plans to mitigate the effects of risks from cybersecurity threats.
+Added: In addition, we have an escalation process in place to inform senior management and the Board of Directors of material issues.
+Added: In addition, our third-party vendors and service providers play a role in our cybersecurity.
+Added: These third parties are integral to our operations but pose cybersecurity challenges due to their access to our data and our reliance for various aspects of our operations, including our supply chain.
+Added: We have developed a third-party vendor risk management program to assess and manage the risks associated with third-party partnerships, particularly in data security and cybersecurity.
+Added: We conduct due diligence before onboarding new vendors and maintain ongoing evaluations to ensure compliance with our security standards.
+Added: As of the date of this report, no cybersecurity incidents have had, either individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
+Added: Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
+Added: While we maintain cyber risk insurance, the costs relating to certain kinds of security incidents could be substantial, and our insurance may not be sufficient to cover all losses related to any future incidents involving our data or systems.
+Added: “Risk Factors – Disruptions to, security breaches or non-compliance involving, our information technology systems could harm our ability to run our business and expose us to potential liability and loss of revenues.” for a discussion of cybersecurity risks that may materially impact us.
We seek to select sites for our store locations in markets with growth potential where our target customers and supply chain capabilities intersect.
−Removed: As of January 1, 2023, we had 386 stores located in 23 states, as shown in the chart below:
+Added: As of December 31, 2023, we had 407 stores located in 23 states, as shown in the chart below:
Number of Stores
2 unchanged sentences
South Carolina
−Removed: In fiscal 2022, we opened 16 new stores.
+Added: In fiscal 2023, we opened 30 new stores and acquired two stores.
In fiscal 2022, we opened 16 new stores.
3 unchanged sentences
In addition to new store openings, we remodel or relocate stores periodically in order to improve performance.
−Removed: See “Business –
−Removed: New Store Development”
−Removed: for additional information with respect to our store site selection process.
−Removed: As of January 1, 2023, we utilized seven distribution centers.
+Added: See “Business – New Store Development” for additional information with respect to our store site selection process.
+Added: As of December 31, 2023, we utilized six distribution centers.
Information about such facilities, as well as our current corporate office in Phoenix, Arizona, is set forth in the table below:
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Distribution Center
−Removed: Distribution Center
* Rounded to the nearest 1,000 square feet
−Removed: We lease our corporate office and our distribution centers in Arizona, Colorado, Florida and Texas from unaffiliated third parties;
−Removed: our remaining three distribution centers are leased or owned by our third-party logistics providers.
+Added: We lease our corporate office and our distribution centers in Arizona, Southern California, Colorado, Florida and Texas from unaffiliated third parties;
+Added: our Northern California distribution center is leased by a third-party logistics provider.
We expect to expand our distribution center network to support our growth.
−Removed: See “Business –
−Removed: Sourcing and Distribution”
−Removed: for additional information with respect to our distribution centers.
+Added: See “Business – Sourcing and Distribution” for additional information with respect to our distribution centers.
We believe our portfolio of long-term leases is a valuable asset supporting our retail operations, but we do not believe that any individual store property or distribution center lease is material to our financial condition or results of operations.
−Removed: In February 2023 as part of our real estate portfolio review, we determined to close 11 stores during 2023.
−Removed: These stores, on average, are approximately 30% larger than our current prototype format and are underperforming financially.
−Removed: See Note 28, “Subsequent Events”
−Removed: to our Consolidated Financial Statements for additional information regarding these store closures.
+Added: In fiscal 2023 as part of our real estate portfolio review, we closed 11 stores.
+Added: These stores, on average, were approximately 30% larger than our current prototype format and were underperforming financially.
+Added: See Note 27, “Store Closures” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information regarding these store closures.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.