What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-19 compared with 2025-02-20 · 236 added, 177 removed, 850 unchanged (33% of the section changed)

6 unchanged sentences

Consolidated Balance Sheets as of December 2 8 , 202 5 and December 29 , 202 4

Consolidated Statements of Income for the fiscal years ended December 29 , 202 4 , December 31 , 2023 and January 1, 2023

Consolidated Statements of Comprehensive Income for the fiscal years ended December 29 , 202 4 , December 3 1, 2023 and January 1 , 202 3

Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 29 , 202 4 , December 3 1, 2023 and January 1, 2023

Consolidated Statements of Cash Flows for the fiscal years ended December 29 , 202 4 , December 3 1, 2023 and January 1, 2023

Consolidated Statements of Income for the fiscal years ended December 28, 2025, December 29, 2024 a nd December 31, 2023

Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 2 8, 2025, December 29, 2024 and December 31, 2023

Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023

Notes to Consolidated Financial Statements

3 unchanged sentences

We have audited the accompanying consolidated balance sheets of Sprouts Farmers Market, Inc.

and its subsidiaries (the "Company") as of December 29, 2024 and December 31, 2023, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 29, 2024, including the related notes (collectively referred to as the "consolidated financial statements").

and its subsidiaries (the "Company") as of December 28, 2025 and December 29, 2024, and the related consolidated statements of income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 28, 2025, including the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

24 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of General Liability and Workers’ Compensation Self-Insurance Reserves

As described in Notes 3 and 15 to the consolidated financial statements, the Company is self-insured for costs related to workers’ compensation, general liability and employee health benefits up to certain stop-loss limits.

As of December 29, 2024, the Company’s recorded amounts for general liability, workers’ compensation and team member health benefit liabilities was $53.2 million, of which a significant portion is related to the general liability and workers’ compensation self-insurance reserves.

Management estimates the self-insurance reserves based on independent actuarial estimates, which are based on historical information and assumptions about future events.

Management utilizes various techniques, including analysis of historical trends and actuarial valuation methods, to estimate the cost to settle reported claims and claims incurred but not yet reported as of the balance sheet date.

When estimating the self-insurance reserves, several factors are considered by management, including (i) loss development factors, which include the development time frame and expected claim reporting and settlement patterns, and (ii) expected loss costs, which include the expected frequency and severity of claim activity.

The principal considerations for our determination that performing procedures relating to the valuation of the general liability and workers’ compensation self-insurance reserves is a critical audit matter are (i) the significant judgment by management when developing the estimates of the general liability and workers’ compensation self-insurance reserves;

(ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the loss development factors and expected loss costs;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Determination of Lease Classification

As described in Notes 3, 7 and 12 to the consolidated financial statements, the Company leases its stores, distribution centers and administrative offices.

Operating leases are included in operating lease assets, current portion of operating lease liabilities, and noncurrent portion of operating lease liabilities and were $1,653 million, $177 million, and $1,682 million, respectively, as of December 28, 2025.

Finance leases are included in property, plant, equipment, net, current portion of finance lease liabilities, long-term debt and other finance obligations were $11 million, $2 million, $12 million, and $69 million, respectively, as of December 28, 2025.

The Company’s lease assets represent a right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

As disclosed by management, significant lease assumptions used by management in determining whether the lease is accounted for as an operating lease or a finance lease include the expected lease term, the incremental borrowing rate, and the fair market value of the leased asset.

The principal considerations for our determination that performing procedures relating to lease classification is a critical audit matter are (i) the significant judgment by management when determining the classification of leases and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures related to the expected lease term and incremental borrowing rate used by management in its determination of the lease classification.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s valuation of the general liability and workers’ compensation self-insurance reserves, including controls over the significant assumptions.

These procedures also included, among others (i) reading management’s general liability and workers’ compensation self-insurance program agreements and (ii) testing the completeness and accuracy of the underlying historical claims data used in management’s estimates.

Professionals with specialized skill and knowledge were used to assist in testing management’s process for estimating the valuation of the general liability and workers’ compensation self-insurance reserves, including (i) evaluating the appropriateness of the actuarial valuation methods used by management and (ii) evaluating the reasonableness of significant assumptions used by management related to loss development factors and expected loss costs by considering (a) current and past claim and settlement activity and (b) whether the assumptions were consistent with evidence obtained in other areas of the audit.

These procedures included testing the effectiveness of controls relating to management’s assessment of the classification of leases, including controls over the determination of expected lease term and incremental borrowing rates.

These procedures also included, among others, for a sample of leases (i) reading source documents, such as lease agreements;

(ii) testing the completeness and accuracy of underlying data used in management’s lease classification assessment;

and (iii) evaluating the reasonableness of significant assumptions used by management related to expected lease term and incremental borrowing rate.

Evaluating management’s assumptions involved evaluating whether the assumptions used by management were reasonable by considering (i) the current and past experience of the Company;

(ii) whether the assumptions were consistent with evidence obtained in other areas of the audit;

and (iii) for the incremental borrowing rate, the consistency with external market data.

/s/ PricewaterhouseCoopers LLP

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Current portion of operating lease liabilities 177,263 150,400

Current portion of finance lease liabilities 1,321 1,032

Current portion of finance lease and other finance obligations 2,071 1,321

Total current liabilities 870,803 679,968

Long-term operating lease liabilities 1,682,425 1,520,272

Long-term debt and finance lease liabilities 7,248 133,685

Long-term debt and other finance obligations 81,585 7,248

Other long-term liabilities 40,283 38,259

18 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Net sales $ 8,806,159 $ 7,719,290 $ 6,837,384

18 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS)

December 29, 2024 December 31, 2023 January 1, 2023

Net income $ 380,601 $ 258,856 $ 261,164

Other comprehensive income, net of tax

Unrealized gains on cash flow hedging activities, net of income tax of $ 1,819 in fiscal 2022

Reclassification of net losses on cash flow hedges to net income, net of income tax of ($ 520 ) in fiscal 2022

— — ( 1,501 )

Total other comprehensive income — — 3,758

Comprehensive income $ 380,601 $ 258,856 $ 264,922

The accompanying notes are an integral part of these consolidated financial statements.

SPROUTS FARMERS MARKET, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

3 unchanged sentences

Capital Retained

Earnings Accumulated

Comprehensive

Earnings Total

Stockholders’

1 unchanged sentence

Net income — — — 258,856 258,856

Other comprehensive income — — — — 3,758 3,758

Issuance of shares under stock plans 1,449,116 1 11,453 — 11,454

Repurchase and retirement of common stock ( 6,897,082 ) ( 6 ) — ( 199,974 ) — ( 199,980 )

Repurchase and retirement of common stock, including excise tax ( 5,864,246 ) ( 6 ) — ( 205,256 ) ( 205,262 )

Share-based compensation — — 18,898 — 18,898

Balances at January 1, 2023 105,072,756 105 726,345 320,012 — 1,046,462

Issuance of shares for acquisition 554,358 1 18,138 — 18,139

Balances at December 31, 2023 101,211,984 101 774,834 373,612 1,148,547

Net income — — — 380,601 380,601

2 unchanged sentences

Share-based compensation — — 28,417 — 28,417

Issuance of shares for acquisition 554,358 1 18,138 — — 18,139

Balances at December 29, 2024 99,255,036 99 808,140 513,654 1,321,893

9 unchanged sentences

(IN THOUSANDS)

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Operating activities

23 unchanged sentences

Financing activities

Proceeds from revolving credit facilities — — 62,500

Payments on revolving credit facilities — ( 125,000 ) ( 125,000 )

5 unchanged sentences

Cash flows used in financing activities ( 474,050 ) ( 351,496 ) ( 318,048 )

Increase/(Decrease) in cash, cash equivalents, and restricted cash 63,343 ( 91,322 ) 48,188

(Decrease)/Increase in cash, cash equivalents, and restricted cash ( 6,319 ) 63,343 ( 91,322 )

Cash, cash equivalents, and restricted cash at beginning of the period 267,213 203,870 295,192

9 unchanged sentences

Leased assets obtained in exchange for new finance lease liabilities 6,266 — 809

Property acquired through financing obligations 69,839 — —

The accompanying notes are an integral part of these consolidated financial statements.

11 unchanged sentences

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

All material intercompany accounts and transactions have been eliminated in consolidation.

All intercompany accounts and transactions have been eliminated in consolidation.

The Company has one operating segment, and therefore, one reportable segment:

12 unchanged sentences

Fiscal year 2024 ended on December 29, 2024 and included 52 weeks.

Fiscal year 2022 ended on January 1, 2023 and included 52 weeks.

Fiscal year 2023 ended on December 31, 2023 and included 52 weeks.

Fiscal years 2025, 2024 and 2023 are referred to as 2025, 2024 and 2023, respectively.

12 unchanged sentences

Restricted Cash

Restricted cash relates to the Company’s defined benefit plan forfeitures and the Company’s healthcare, general liability and workers’ compensation plan benefits of approximately $ 2.1 million as of December 29, 2024 and December 31, 2023, and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

Restricted cash primarily relates to the Company’s healthcare, general liability and workers’ compensation plan benefits of approximately $ 3.6 million and $ 2.1 million as of December 28, 2025 and December 29, 2024, respectively.

These balances are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

Accounts Receivable

40 unchanged sentences

The Company has determined its business consists of a single reporting unit.

The Company has had no goodwill impairment charges for the past three fiscal years.

The Company has had no goodwill or indefinite-lived intangible asset impairment charges for the past three fiscal years.

See Note 8, “Intangible Assets” and Note 9, “Goodwill” for further discussion.

8 unchanged sentences

The fair value of the asset group is estimated based on the discounted future cash flows using a discount rate commensurate with the related risk or comparable market values, if available.

The Company recorded an impairment loss of $ 0.4 million and $ 8.1 million in 2024 and 2022, respectively, as part of the normal course of business primarily related to the write-down of right-of-use assets and leasehold improvements.

No impairment was recorded during fiscal 2025.

The Company recorded an impairment loss of $ 0.4 million in 2024, as part of the normal course of business primarily related to the write-down of right-of-use assets and leasehold improvements.

The Company recorded an impairment loss of $ 30.5 million in 2023 of which $ 27.8 million was in connection with the decision to close certain underperforming stores (see Note 23, "Store Closures") and $ 2.7 million was in the normal course of business primarily related to the write-down of right-of-use assets and leasehold improvements.

3 unchanged sentences

Deferred financing costs are amortized to interest expense over the term of the debt using the effective interest method.

For the Credit Agreement and Former Credit Facility (as defined in Note 13, “Long-Term Debt and Finance Lease Liabilities”), deferred financing costs are amortized on a straight-line basis over the term of the facility.

For the Credit Agreement and Former Credit Facility (as defined in Note 12, “Long-Term Debt and Other Finance Obligations”), deferred financing costs are amortized on a straight-line basis over the term of the facility.

Upon prepayment, redemption or conversion of debt, the Company accelerates the recognition of an appropriate amount of financing costs as loss on extinguishment of debt.

3 unchanged sentences

Operating leases are included in operating lease assets, current portion of operating lease liabilities and noncurrent portion of operating lease liabilities in the accompanying consolidated balance sheets.

Finance leases are included in property, plant, equipment, net, current portion of finance lease liabilities, and long-term debt and finance lease liabilities in the accompanying consolidated balance sheets.

Finance leases are included in property, plant, equipment, net, current portion of finance lease liabilities, and long-term debt and other finance obligations in the accompanying consolidated balance sheets.

Operating lease payments are charged on a straight-line basis to rent expense, a component of selling, general and administrative expenses, over the lease term and finance lease payments are charged to interest expense and depreciation and amortization expense using a debt model over the lease term.

16 unchanged sentences

The Company recognizes sublease income on a straight-line basis.

Financing Lease Obligations

The Company has recorded a financing lease obligation for an office building lease.

Based on certain criteria and the existence of a purchase option, the Company has been determined to be the owner during the construction period under ASC 842.

Further, there is no evidence of an accounting sale to the landlord upon construction completion, which precludes sale-leaseback accounting.

As a result, the building assets and corresponding financial obligation will remain on the Company’s balance sheet and will be amortized over the life of the underlying building asset.

Monthly lease payments are allocated between the land component of the lease (which is accounted for as an finance lease) and the financing obligation.

The financing obligation is amortized using the effective interest method and the interest rate is determined in accordance with the requirements of sale-leaseback accounting.

Lease payments less the portion allocated to the land element of the lease and that portion considered to be interest expense decrease the financing liability.

Additionally, this lease includes a residual value guarantee and purchase option.

The final amount of the guarantee is to be determined based upon final construction costs.

At the end of the initial lease term, should the Company decide not to renew the lease or exercise the purchase option, the net book value of the asset and the corresponding financing obligation would be reversed.

The outflows associated with the financing obligation principal payments will be classified as financing activities in the consolidated statements of cash flows upon rent commencement.

Fair Value Measurements

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The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes share-based compensation cost as expense over the vesting period.

As share-based

compensation expense recognized in the consolidated statements of income is based on awards ultimately expected to vest, the amount of expense has been reduced for actual forfeitures as they occur.

As share-based compensation expense recognized in the consolidated statements of income is based on awards ultimately expected to vest, the amount of expense has been reduced for actual forfeitures as they occur.

The Company uses the Black-Scholes option-pricing model to determine the grant date fair value for each option grant.

8 unchanged sentences

Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.

A summary of the activity and balances in the gift card liability, net is as follows:

December 29, 2024 December 31, 2023 January 1, 2023

The outstanding gift card liability balance is included within accrued liabilities in the accompanying consolidated balance sheets.

Beginning in July 2025, the Company implemented a customer loyalty program under which customers earn points on qualifying purchases.

Points may be redeemed in future periods for rewards to be used for discounts on the Company's products.

The loyalty points represent a material right to the customer and are accounted for as a separate performance obligation.

At the time of purchase, the Company allocates a portion of the transaction price to a deferred loyalty liability based on their estimated standalone selling price, net of estimated breakage.

Revenue allocated to the points is deferred and recognized when the points are redeemed or expire.

Points expire approximately 6 months after issuance, and points that have been converted to rewards expire 60 days following conversion.

The outstanding liability balance at period end, which the Company classifies as a current liability due to the short expiration period, is included within accrued liabilities in the accompanying consolidated balance sheets.

A summary of the activity and balances in the gift card and loyalty program liabilities is as follows:

December 28, 2025 December 29, 2024 December 31, 2023

Beginning Balance $ 11,071 $ 10,566 $ 10,906

1 unchanged sentence

5,296 4,727 4,271

Loyalty value deferred during the period, net of amount redeemed or expired (1)

Revenue recognized from beginning liability ( 4,361 ) ( 4,222 ) ( 4,611 )

10 unchanged sentences

The Company charges certain vendors to place advertisements in the Company’s in-store guide and circulars under a cooperative advertising program.

The Company records rebates received from vendors in connection with cooperative advertising programs as a reduction to advertising costs when the allowance

represents a reimbursement of a specific incremental and identifiable cost.

The Company records rebates received from vendors in connection with cooperative advertising programs as a reduction to advertising costs when the allowance represents a reimbursement of a specific incremental and identifiable cost.

Advertising costs are expensed as incurred.

6 unchanged sentences

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company’s deferred tax assets are subject to periodic recoverability assessments.

The Company’s deferred tax assets are subject to periodic recoverability

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.

16 unchanged sentences

Comprehensive Income

Comprehensive income consists of net income and the unrealized gains or losses on derivative instruments that qualify for and have been designated as cash flow hedges, for all periods presented.

Comprehensive income consists of net income and the unrealized gains or losses on derivative instruments that qualify for and have been designated as cash flow hedges.

The Company had no other comprehensive income for the past three fiscal years.

Recently Adopted Accounting Pronouncements

Segment Reporting – Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU no.

2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures." The amendments in this update increased required disclosures about a public entity's reportable segments, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the Company’s chief operating decision maker (“CODM”).

In addition, ASU 2023-07 requires the Company to disclose the title and position of its CODM.

The Company adopted this standard effective December 29, 2024 and accordingly updated its segment disclosures (see Note 24, “Segments”) but there was no impact on the Company’s results of operations, cash flows and financial condition.

Recently Issued Accounting Pronouncements Not Yet Adopted

Income Taxes – Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU no.

2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures." The amendments in this update enhance a public entity's annual income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The guidance will be effective for the Company for its fiscal year 2025.

Early adoption is permitted, and the guidance should be applied prospectively, with an option to apply it retrospectively.

The Company expects this update to impact its income tax disclosures but does not anticipate that this update will impact its results of operations, cash flows or financial condition.

2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures." The amendments in this update enhanced a public entity's annual income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The Company has prospectively adopted this standard effective December 28, 2025 and accordingly updated its income tax disclosures but there was no impact on the Company's results of operations, cash flows or financial condition.

Recently Issued Accounting Pronouncements Not Yet Adopted

Disaggregation of Income Statement Expenses

In November 2024, the FASB issues ASU no.

In November 2024, the FASB issued ASU no.

2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

4 unchanged sentences

The Company is currently evaluating the potential impact of this ASU on its consolidated financial statements and disclosures.

Intangibles — Goodwill and Other — Internal-Use Software

In September 2025, the FASB issued ASU no.

2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)".

The standard clarifies and modernizes the accounting for costs related to the internal-use software in Accounting Standards Codification (ASC) 350-40.

The guidance removes all references to project stages throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs.

The guidance is effective for the Company for its fiscal year 2028.

Early adoption is permitted, as of the beginning of an annual reporting period.

The Company is currently evaluating the potential impact of this ASU on its consolidated financial statements and disclosures.

Interim Reporting (Topic 270) - Narrow Scope Improvements

In December 2025, the FASB issued ASU no.

2025-11, "Interim Reporting (Topic 270) - Narrow Scope Improvements".

The standard clarifies the interim reporting requirements by improving navigability of Topic 270 and more clearly specifying what disclosures are required in an interim reporting period.

It is not intended to significantly change interim reporting or expand or reduce interim disclosure requirements.

The guidance is effective for the Company for its interim reporting period beginning in fiscal year 2028.

Early adoption is permitted, and the guidance can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the potential impact of this ASU on its consolidated financial statements and disclosures.

No other new accounting pronouncements issued or effective during 2025 had, or are expected to have, a material impact on the Company’s consolidated financial statements.

8 unchanged sentences

Total $ 65,221 $ 30,901

The Company recorded allowances for certain vendor receivables of $ 1.3 million at December 29, 2024 and December 31, 2023.

The Company recorded allowances for certain vendor receivables of $ 7.5 million and $ 1.3 million at December 28, 2025 and December 29, 2024, respectively.

Prepaid Expenses and Other Current Assets

18 unchanged sentences

Depreciation expense is primarily reflected in Depreciation and amortization on the consolidated statements of income.

Impairment expense was $ 0.4 million, $ 30.5 million and $ 8.1 million for 2024, 2023 and 2022, respectively.

No impairment was recorded in 2025.

Impairment expense was $ 0.4 million and $ 30.5 million for 2024 and 2023, respectively.

Impairment expense is reflected in Store closure and other costs, net on the consolidated statements of income.

1 unchanged sentence

The components of lease cost are as follows:

Classification December 29, 2024 December 31, 2023 January 1, 2023

Classification December 28, 2025 December 29, 2024 December 31, 2023

Operating lease cost:

22 unchanged sentences

Operating Long-term operating lease liabilities 1,682,425 1,520,272

Finance L ong-term debt and finance lease liabilities 7,248 8,685

Finance L ong-term debt and other finance obligations 12,165 7,248

Total lease liabilities $ 1,873,506 $ 1,679,241

7 unchanged sentences

Supplemental cash flow and other information related to leases is as follows:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Cash paid for amounts included in measurement of lease liabilities:

22 unchanged sentences

A summary of the activity and balances in intangible assets is as follows:

Balance at January 1, 2023 Additions/Adjustments Balance at December 31, 2023

Balance at December 31, 2023 Additions/Adjustments Balance at December 29, 2024

Indefinite-lived trade names $ 182,937 $ — $ 182,937

8 unchanged sentences

There was no amortization expense in 2025, 2024 and 2023.

The Company’s goodwill balance was $ 381.8 million and $ 381.7 million as of December 29, 2024 and December 31, 2023, respectively.

The Company’s goodwill balance was $ 381.8 million as of December 28, 2025 and December 29, 2024.

As of December 28, 2025 and December 29, 2024, the Company had no accumulated goodwill impairment losses.

1 unchanged sentence

For further details, see Note 24, "Business Combination."

As of December 29, 2024 and December 31, 2023, other assets of $ 13.2 million and $ 12.3 million, respectively, primarily consisted of deferred software as a service, capitalized durable supplies, self insurance receivables associated with general liability and workers’ compensation, utilities deposits, deferred financing costs, and miscellaneous other assets.

Accrued Liabilities

1 unchanged sentence

December 28, 2025 December 29, 2024

Accrued transferable federal tax credit $ 60,244 $ —

Self-insurance reserves 31,555 28,927

Accrued occupancy related (CAM, property taxes, etc.) 26,556 25,971

Gift cards, net of breakage 11,071 10,566

Gift card and loyalty program liabilities, net of breakage 21,099 11,071

Accrued sales, use and excise tax 19,508 16,550

9 unchanged sentences

Total $ 96,017 $ 97,991

Long-Term Debt and Finance Lease Liabilities

A summary of long-term debt and finance lease liabilities is as follows:

Long-Term Debt and Other Finance Obligations

A summary of long-term debt and other finance obligations is as follows:

Facility Maturity Interest Rate December 28, 2025 December 29, 2024

Senior secured debt

$ 700.0 million Credit Agreement

$ 700.0 million Former Credit Facility (1)

March 25, 2027 Variable $ — $ —

$ 600.0 million Credit Agreement

July 25, 2030 Variable — —

Finance Obligations September 30, 2036 n/a 69,420 —

Finance lease liabilities Various n/a 12,165 7,248

Long-term debt and finance lease liabilities $ 81,585 $ 7,248

Credit Agreement

The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on March 25, 2022 (the “Credit Agreement”).

(1) The Former Credit Facility was replaced by the $ 600.0 million Credit Agreement as discussed below.

New Credit Agreement

The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on July 25, 2025 (the “Credit Agreement”).

The Credit Agreement provides for a revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $ 600.0 million.

Amounts outstanding under the Credit Agreement may be increased from time to time in accordance with an expansion feature set forth in the Credit Agreement.

The Company capitalized debt issuance costs of $ 3.4 million related to the Credit Agreement, which, combined with the remaining $ 0.5 million debt issuance costs in respect of that certain amended and restated credit agreement entered into on March 27, 2018, by and among the Company, Intermediate Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Former Credit Facility”), which remained outstanding as of the time of Intermediate Holdings’ entry into the Credit Agreement, are being amortized on a straight-line basis to interest expense over the five-year term of the Credit Agreement.

The Company capitalized debt issuance costs of $ 1.6 million related to the Credit Agreement, which, combined with the remaining $ 1.1 million debt issuance costs in respect of that certain amended and restated credit agreement entered into on March 25, 2022 (the “Former Credit Facility”), by and among the Company, Intermediate Holdings, certain lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, which remained outstanding as of the time of Intermediate Holdings’ entry into the Credit Agreement, are being amortized on a straight-line basis to interest expense over the five-year term of the Credit Agreement.

The Credit Agreement provides for a $ 100.0 million letter of credit sub-facility (the "Letter of Credit Sub-Facility") and a $ 50.0 million swingline facility.

3 unchanged sentences

Interest and Fees

Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00 %) plus a 0.10 % SOFR adjustment and 1.00 % per annum or base rate (with a floor of 0.00 %) plus 0.00 % per annum.

The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company’s total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05 % based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00 %) plus a 1.00 % per annum or alternate base rate (with a floor of 0.00 %) plus 0.00 % per annum.

The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company’s total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement.

Under the terms of the Credit Agreement, the Company is obligated to pay a commitment fee on the available unused amount of the commitments, which commitment fee ranges between 0.09 % to 0.225 % per annum, pursuant to a pricing grid based on the Company’s total net leverage ratio.

The commitment fees are subject to upward or downward adjustments of up to 0.01 % based upon the achievement of certain diversity and sustainability-linked metric thresholds, as set forth in the Credit Agreement.

As of December 29, 2024, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus a 0.10 % SOFR adjustment and 0.95 % per annum.

As of December 29, 2024, outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 0.95 % per annum and an issuance fee of 0.125 % per annum.

The commitment fees are subject to upward or downward adjustments of up to 0.01 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement.

As of December 28, 2025, loans outstanding under the Credit Agreement bore interest at Term SOFR (as defined in the Credit Agreement) plus 1.00 % per annum.

The Company had no loans outstanding under the Credit Agreement as of December 28, 2025.

As of December 28, 2025, outstanding letters of credit issued under the Credit Agreement were subject to a participation fee of 1.00 % per annum and a fronting fee of 0.125 % per annum.

Payments and Borrowings

The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on March 25, 2027, subject to extensions as set forth therein.

The Credit Agreement is scheduled to mature, and the commitments thereunder will terminate on July 25, 2030, subject to extensions as set forth therein.

The Company may prepay loans and permanently reduce commitments under the Credit Agreement at any time in agreed-upon minimum principal amounts, without premium or penalty (except SOFR breakage costs, if applicable).

In connection with the execution of the Credit Agreement, the Company's obligations under the Former Credit Facility were prepaid and terminated.

During 2024, the Company made no additional borrowings and made principal payments of $ 125.0 million, resulting in no outstanding debt under the Credit Agreement of as of December 29, 2024.

During 2023, the Company made no additional borrowings and principal payments of $ 125.0 million, resulting in total outstanding debt under the Credit Agreement of $ 125.0 million as of December 31, 2023.

During 2025, the Company made no borrowings and had no outstanding debt under the Credit Agreement or the Former Credit Facility as of December 28, 2025.

During 2024, the Company made no additional borrowings and principal payments of $ 125.0 million, resulting in no outstanding debt under the Former Credit Facility as of December 29, 2024.

The Credit Agreement contains financial, affirmative and negative covenants.

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Each of these covenants is subject to customary and other agreed-upon exceptions.

with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00.

In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00.

Each of these covenants is tested on the last day of each fiscal quarter.

The Company was in compliance with all applicable covenants under the Credit Agreement as of December 28, 2025.

Finance Obligations

On April 24, 2025, the Company executed a real estate lease for a new corporate headquarters campus and store location that has since commenced.

The initial term of the lease is 10 years and the total non-cancellable lease payments are $ 110.0 million.

These payments have been allocated to the building and land components based on the relative standalone fair value.

In addition, the lease includes a renewal option for a period of 10 years.

Monthly payments commence on completion of construction, increase annually by a nominal amount, and continue through end of the initial term.

Based on certain criteria and the existence of a purchase option, the Company has been determined to be the owner during the construction period under ASC 842.

Further, there is no evidence of an accounting sale to the landlord upon construction completion, which precludes sale-leaseback accounting.

As a result, the building assets and corresponding financial obligation will remain on the Company’s balance sheet and will be amortized over the life of the underlying building asset.

As of December 28, 2025, the Company has recorded $ 69.4 million in both construction in progress assets and finance obligations.

There will be no material impact to the statements of income until construction completion, which is expected in the latter half of 2026.

Additionally, this lease includes a residual value guarantee.

amount of the guarantee is to be determined based upon final construction costs.

As of December 28, 2025, no amounts related to this residual value guarantee have been deemed probable.

A summary of maturities of financing obligations is as follows:

Financing Obligations

Thereafter 60,697

Total $ 100,769

The maturities shown in the table above include additional obligations expected to be incurred as construction is completed during 2026.

Other Long-Term Liabilities

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The following table summarizes the changes in the Company's self-insurance reserves through December 28, 2025:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Beginning Balance $ 53,228 $ 47,838 $ 47,612

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Employee 401(k) Savings Plan (the “Plan”), which is a defined contribution plan covering all eligible team members.

Under the provisions of the Plan, participants may direct the Company to defer a portion of their compensation to the Plan, subject to the Internal

Revenue Code limitations.

Under the provisions of the Plan, participants may direct the Company to defer a portion of their compensation to the Plan, subject to the Internal Revenue Code limitations.

The Company provides for an employer matching contribution equal to 50 % of each dollar contributed by the participants up to 6 % of their eligible compensation.

The following table outlines the total expense recorded for the matching under the Plan, which is reflected in Selling, general and administrative expenses on the consolidated statements of income:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

$ 10,742 $ 9,570 $ 8,496

1 unchanged sentence

The income tax provision consists of the following:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Federal—current $ 118,558 $ 87,601 $ 67,898

8 unchanged sentences

federal income tax rate to pre-tax income as a result of the following:

December 29, 2024 December 31, 2023 January 1, 2023

The table below provides the updated requirements of ASU no.

2023-09 for 2025.

Significant Accounting Policies—Recently adopted accounting pronouncements for additional details on the adoption of ASU no.

December 28, 2025

Federal statutory rate $ 144,645 21.0 %

1 unchanged sentence

State income taxes, net of federal benefit (1)

$ 32,336 4.7 %

Nontaxable or nondeductible items:

Enhanced charitable contribution impact $ ( 6,133 ) ( 0.9 ) %

Non-deductible Executive Compensation $ 11,657 1.7 %

Excess tax benefits from share based payments $ ( 13,123 ) ( 1.9 ) %

Other $ 207 — %

Benefit of federal tax credit $ ( 1,649 ) ( 0.2 ) %

Transferable Tax Credit Benefit $ ( 3,506 ) ( 0.5 ) %

Other, net (2)

Effective income tax rate $ 165,114 24.0 %

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

(2) Includes valuation allowance, uncertain tax position, and other items that are all immaterial individually.

December 29, 2024 December 31, 2023

Federal statutory rate 21.0 % 21.0 %

Increase (decrease) in income taxes resulting from:

State income taxes, net of federal benefit 4.8 5.4

Enhanced charitable contribution impact ( 0.9 ) ( 1.0 )

Non-deductible Executive Compensation 1.4 1.4

Benefit of federal tax credit ( 0.3 ) ( 0.7 )

Excess tax benefits from share based payments ( 1.1 ) ( 1.2 )

1 unchanged sentence

Effective income tax rate 24.9 % 24.7 %

The effective income tax rate decreased to 24.0 % in 2025 from 24.9 % in 2024 primarily due to an increased benefit for stock-based compensation in the current year and benefit for purchase discount on tax credits partially offset by an increase in nondeductible officer compensation and the rate benefit in prior year due to receipt of interest related to the 2017 amended federal return refund.

The effective income tax rate increased to 24.9 % in 2024 from 24.7 % in 2023 primarily due to a reduction in federal credits and reduced impact of other permanent items due to higher pre-tax income, offset by a reduction in state taxes due to a state valuation allowance recorded in the prior year.

The effective income tax rate decreased to 24.7 % in 2023 from 25.2 % in 2022 primarily due to excess tax benefits related to the exercise or vesting of share-based awards partially offset by an increase in nondeductible executive compensation.

Excess tax benefits or detriments associated with share-based payment awards are recognized as income tax benefits or expense in the income statement.

The tax effects of exercised or vested awards are

treated as discrete items in the reporting period in which they occur.

The income tax benefit resulting from share-based awards was $ 7.0 million, $ 5.0 million and $ 1.7 million for 2024, 2023 and 2022, respectively, and is reflected as a reduction to the 2024, 2023 and 2022 income tax provision.

The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur.

The total income tax benefit resulting from

share-based awards was $ 16.1 million, $ 7.0 million and $ 5.0 million for 2025, 2024 and 2023, respectively, and is reflected as a reduction to the 2025, 2024 and 2023 income tax provision.

Deferred Taxes

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Employee benefits $ 23,233 $ 22,163

Tax credits — 105

Operating leases 477,940 429,362

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

The valuation allowance was $ 4.5 million and $ 3.3 million as of December 29, 2024 and December 31, 2023, respectively, related to contribution carryforwards that management does not believe will ultimately be realized.

The valuation allowance was $ 4.5 million as of December 28, 2025 and December 29, 2024, related to contribution carryforwards that management does not believe will ultimately be realized.

The Company has evaluated all available positive and negative evidence and believes it is probable that all other the deferred tax assets will be realized and has not recorded any other valuation allowance against the Company’s deferred tax assets as of December 28, 2025 and December 29, 2024.

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A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Beginning balance $ 232 $ 477 $ 1,119

Additions based on tax positions related to the current year — — 58

Additions based on tax positions related to prior years — — —

Reductions for settlements with taxing authorities — — ( 694 )

Reduction due to lapse of applicable statute of limitations ( 232 ) ( 245 ) ( 700 )

Ending balance $ — $ 232 $ 477

The Company had unrecognized tax benefits (tax effected) of $ 0.2 million and $ 0.5 million as of December 29, 2024 and December 31, 2023, respectively.

These would impact the effective tax rate if recognized.

The Company had no unrecognized tax benefits as of December 28, 2025.

The Company had unrecognized tax benefits (tax effected) of $ 0.2 million as of December 29, 2024.

The Company’s policy is to recognize accrued interest and penalties as a component of income tax expense.

The Company anticipates a decrease in the total amount of unrecognized tax benefits in the amount of $ 0.2 million during the next twelve months related to the passing of the applicable statute of limitations.

The Company files income tax returns with federal and state tax authorities within the United States.

The general statute of limitations for income tax examinations remains open for federal tax returns for tax years 2022 through 2024 and state tax returns for the tax years 2021 through 2024 with few exceptions.

Total Income taxes paid (net of refunds):

December 28, 2025

Federal $ 82,000

Total $ 120,076

Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdiction:

December 28, 2025

California $ 23,150

On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA") was enacted.

The OBBBA includes significant provisions that could have income tax implications.

The Company has evaluated the potential impact on its consolidated financial statements and disclosures and has determined that no material impact is expected pending further guidance that may be issued by the Internal Revenue Service.

Pursuant to provisions under the Inflation Reduction Act (“IRA”), the Company executed agreements to purchase transferable federal tax credits of $ 63.8 million.

Such federal tax credits are purchased at negotiated discounts, allowing the Company to reduce its 2025 federal income taxes payable by the amount of credits it expects to claim on its 2025 tax return.

The Company has included a tax benefit of $ 3.5 million in its effective tax rate for the year ended December 28, 2025 for the difference between the tax credit and negotiated price for expected current year tax credits.

Commitments and Contingencies

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See Note 14, “Self-Insurance Programs” for more information.

The Company records an accrual for legal contingencies when it determines that it is probable that the Company has incurred a liability and can reasonably estimate the amount of the loss.

However, predicting the outcomes of legal matters involves substantial uncertainties.

While management currently believes that estimated liabilities recorded are reasonable and not material to the Company, differences in actual outcomes or changes in management's evaluation of estimated liabilities could arise that could be material to the Company's results of operations.

Harvest Sherwood

In February 2025, the Company terminated its agreement with Harvest Sherwood Food Distributors, Inc.

(“Harvest Sherwood”) for the distribution of certain meat and seafood products to the Company due to, among other things, Harvest Sherwood’s failure to pay the Company’s vendors for these products.

Subsequently, on February 24, 2025, Harvest Sherwood filed a complaint against the Company in the Superior Court for the State of Delaware alleging breach of contract among other claims and seeking monetary damages of approximately $ 42.0 million.

On March 6, 2025, the Company filed an answer and counterclaims against Harvest Sherwood, asserting its defenses to the complaint and its claims against Harvest Sherwood for breach of contract, negligent misrepresentation and unjust enrichment, among others, and seeking monetary damages of approximately $ 65.0 million.

On May 5, 2025, Harvest Sherwood filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court") and filed a substantially similar adversary proceeding against the Company in the Bankruptcy Court.

As a result, the Company's litigation against Harvest Sherwood has been stayed in the Superior Court for the State of Delaware, and the adversary matter is proceeding.

Discovery has substantially concluded, and a trial date has been set for June 2026.

Stockholder Actions

On November 24, 2025, a complaint was filed in the United States District Court for the District of Arizona against the Company and certain of its officers by Singh Family Revocable Trust u/a dtd 02/18/2019 on behalf of a purported class of the Company's stockholders.

The complaint purports to state claims under Sections 10 and 20 of the Securities Exchange Act of 1934, as amended, based on allegedly false and misleading statements made by certain of the Company's officers regarding the resilience of its customers against macroeconomic pressures.

The complaint seeks damages on behalf of the purported class in an unspecified amount and an award of reasonable costs and attorneys’ fees.

On December 16, 2025, stockholder Fraser MacDonald filed a separate complaint in the United States District Court for the District of Arizona, purporting to assert derivatively on behalf of the Company claims under federal and state law against nine of the Company’s directors and officers.

This complaint echoes many of the

substantive allegations in the securities class action and, in addition to unspecified damages and attorneys’ fees, seeks corporate governance reforms by the Company.

The Company and its executives intend to defend these cases vigorously, but at this stage of the proceedings, the Company is unable to predict or reasonably estimate any potential loss or effect on the Company.

Accordingly, no loss contingency was recorded for these actions.

Capital Stock

2 unchanged sentences

The following table outlines the options exercised in exchange for the issuance of shares of common stock during 2025, 2024 and 2023:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Options exercised 96,939 210,312 637,387

1 unchanged sentence

Share Repurchases

On May 22, 2024, the Company's board of directors authorized a new $ 600 million share repurchase program for its common stock.

The new authorization replaced the Company's then-existing share repurchase authorization of $ 600 million that was due to expire on December 31, 2024, of which $ 119.3 million remained available upon its replacement, and under which no further shares may be repurchased.

On August 13, 2025, the Company's board of directors authorized a new $ 1 billion share repurchase program for its common stock.

The new authorization replaced the Company's then-existing share repurchase authorization of $ 600 million that was due to expire on May 22, 2027, of which $ 142.6 million remained available upon its replacement, and under which no further shares may be repurchased.

The following table outlines the common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of December 28, 2025:

4 unchanged sentences

May 22, 2024 May 22, 2027 $ 600,000 $ 457,408 $ —

August 13, 2025 N/A $ 1,000,000 $ 163,995 $ 836,005

The shares under the Company’s repurchase programs may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans.

1 unchanged sentence

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

December 29, 2024 December 31, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Number of common shares acquired 3,955,324 2,656,058 5,864,246

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A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands, except per share amounts):

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Basic net income per share:

11 unchanged sentences

Diluted net income per share $ 5.31 $ 3.75 $ 2.50

For the year ended December 28, 2025, the Company had 0.1 million options and 0.2 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

For the year ended December 29, 2024 the Company had 0.2 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

For the year ended December 31, 2023, the Company had 0.2 million options and 0.4 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

For the year ended January 1, 2023, the Company had 0.2 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met.

Derivative Financial Instruments

The Company did no t have any outstanding interest rate swap agreements as of December 29, 2024 and December 31, 2023.

In December 2017, the Company entered into an interest rate swap agreement to manage its cash flow associated with variable interest rates.

This forward contract was designated and qualified as a cash flow hedge, and its change in fair value was recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurred.

The forward contract consisted of five cash flow hedges with a notional dollar amount of $ 250.0 million, and each had a length of one year and matured annually from 2018 to 2022.

The gain or loss on these derivative instruments was recognized in other comprehensive income, net of tax, with the portion related to current period interest payments reclassified to Interest expense, net on the consolidated statements of income.

The following table summarizes these losses classified on the consolidated statements of income:

December 29, 2024 December 31, 2023 January 1, 2023

Consolidated Statements of Income Classification

Interest expense, net $ — $ — $ 2,021

Comprehensive Income

The Company did no t have any changes in accumulated other comprehensive income for the years ended December 29, 2024, or December 31, 2023.

The following table presents the changes in accumulated other comprehensive income (loss) for the year ended January 1, 2023:

Balance at January 2, 2022 $ ( 3,758 )

Other comprehensive income, net of tax

Unrealized gains on cash flow hedging activities, net of income tax of $ 1,819

Reclassification of net losses on cash flow hedges to net income, net of income tax of ($ 520 )

Total other comprehensive income 3,758

Balance at January 1, 2023 $ —

Amounts reclassified from accumulated other comprehensive income (loss) to net income were included within Interest expense, net on the consolidated statements of income.

Fair Value Measurements

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Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of goodwill, intangible assets, and long-lived assets.

The Company did not have any financial liabilities measured at fair value on a recurring basis as of December 29, 2024.

The following table presents the Company’s fair value hierarchy for the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023:

December 31, 2023 Level 1 Level 2 Level 3 Total

Long-term debt $ — $ 125,000 $ — $ 125,000

Total financial liabilities $ — $ 125,000 $ — $ 125,000

The Company did not have any financial liabilities measured at fair value on a recurring basis as of December 28, 2025 and December 29, 2024.

The determination of fair values of certain tangible and intangible assets for purposes of the Company’s goodwill or long-lived asset impairment evaluation as described above is based upon Level 3 inputs.

2 unchanged sentences

Cash, cash equivalents, and restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued salaries and benefits approximate fair value because of the short maturity of those instruments.

Based on comparable open market transactions, the fair value of the long-term debt approximated carrying value as of December 31, 2023.

The Company has one operating segment, and therefore, one reportable segment:

6 unchanged sentences

In accordance with ASC 280, the following table represents the significant expense and key metrics reviewed by the CODM:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Net Sales $ 8,806,159 $ 7,719,290 $ 6,837,384

3 unchanged sentences

520,139 478,602 447,884

Interest expense, net ( 2,201 ) 6,491 9,047

Interest (income) expense, net ( 2,626 ) ( 2,201 ) 6,491

Income tax provision 165,114 126,097 84,884

5 unchanged sentences

In accordance with ASC 606, the following table represents a disaggregation of revenue for 2025, 2024 and 2023:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Perishables $ 5,020,140 57.0 % $ 4,424,762 57.3 % $ 3,915,971 57.3 %

12 unchanged sentences

June 3, 2025 333 — —

September 4, 2024 15,024 — —

November 10, 2025 8,087 — —

Total 193,648 58,805 61,079

3 unchanged sentences

March 19, 2024 272,855 103,584 135,783

May 1, 2023 2,931 — —

June 4, 2024 1,538 — —

September 4, 2024 15,024 — —

September 11, 2023 10,204 — —

October 30, 2023 1,512 — —

Total 289,417 103,584 135,783

4 unchanged sentences

In addition, the number of shares subject to outstanding awards under the Sprouts Farmers Market, Inc.

2013 Incentive Plan (the “2013 Incentive Plan”) that terminate, expire, are paid in cash, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Incentive Plan after the effective date of the 2022 Incentive Plan will be available for issuance

under the 2022 Incentive Plan.

As of December 28, 2025, there were 1,094,114 stock awards outstanding and 5,300,371 shares remaining available for issuance under the 2022 Incentive Plan.

1 unchanged sentence

Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members.

Upon stockholder approval of the 2022 Incentive Plan on May 25, 2022, no further awards will be granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan.

Upon stockholder approval of the 2022 Incentive Plan on May 25, 2022, no further awards were granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan.

The RSUs generally vest either one-third each year for three years or one-half each year for two years for team members.

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The grant date weighted average fair value of the 0.2 million options issued but not vested as of December 28, 2025 was $ 28.38 .

The grant date weighted average fair value of the 0.3 million options issued

but not vested as of December 29, 2024 was $ 16.90 .

The grant date weighted average fair value of the 0.4 million options issued but not vested as of December 31, 2023 was $ 10.84 .

The grant date weighted average fair value of the 1.0 million options issued but not vested as of January 1, 2023 was $ 6.66 .

The following table summarizes grant date weighted average fair value of options granted and options forfeited:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Grant date weighted average fair value of options granted $ 51.46 $ 23.50 $ 12.63

1 unchanged sentence

Expected volatility for option grants and modifications are calculated based upon the Company’s historical volatility data over a time frame consistent with the expected life of the awards.

The expected term is estimated based on the expected period that the options are anticipated to be outstanding after initial grant until

exercise or expiration based upon various factors including the contractual terms of the awards and vesting schedules.

The expected term is estimated based on the expected period that the options are anticipated to be outstanding after initial grant until exercise or expiration based upon various factors including the contractual terms of the awards and vesting schedules.

The expected risk-free rate is based on the U.S.

1 unchanged sentence

Dividend yield was estimated at zero as the Company does not anticipate making regular future distributions to stockholders.

The total intrinsic value of options exercised was $ 12.2 million for each of fiscal 2024 and 2023 and $ 1.8 million for fiscal 2022.

The total intrinsic value of options exercised was $ 10.9 million for fiscal 2025 and $ 12.2 million for each of fiscal 2024 and 2023.

The following table summarizes option activity during 2025:

16 unchanged sentences

The following table summarizes the weighted average grant date fair value of RSUs awarded during 2025, 2024 and 2023:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

RSUs awarded $ 135.42 $ 63.14 $ 33.21

6 unchanged sentences

Outstanding at December 28, 2025 433,125 $ 88.11

PSAs granted in 2020 were subject to the Company achieving certain earnings before taxes (“EBT”) performance targets for the 2022 fiscal year.

The criteria was based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted.

The performance conditions with respect to fiscal year 2022 EBT were deemed to have been met, and the PSAs vested at the maximum pay out level on the third anniversary of the grant date (March 2023).

During the year ended December 31, 2023, 268,699 of the 2020 PSAs vested.

There were no outstanding 2020 PSAs as of December 29, 2024.

PSAs granted in 2021 are subject to the Company achieving certain EBIT performance targets for the 2023 fiscal year.

The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted.

The performance conditions with respect to 2023 EBIT were deemed not to have been met.

The performance conditions with respect to fiscal year 2023 EBIT were deemed not to have been met.

Accordingly, no performance shares vested on the third anniversary of the grant date (March 2024).

2 unchanged sentences

The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted.

Subsequent to December 29, 2024, the performance conditions with respect to 2024 EBIT were deemed to have been met, and PSAs will vest at 150 % payout level on the third anniversary of the grant date (March 2025).

The performance conditions with respect to fiscal year 2024 EBIT were deemed to have been met, and PSAs vested at 148 % payout level on the third anniversary of the grant date (March 2025).

During the year ended December 28, 2025, 182,560 of the 2022 PSAs vested.

There were no outstanding 2022 PSAs as of December 28, 2025.

PSAs granted in 2023 are subject to the Company achieving certain EBIT performance targets for the 2025 fiscal year.

The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted.

Subsequent to December 28, 2025, the performance conditions with respect to fiscal year 2025 EBIT were deemed to have been met, and PSAs will vest at 200 % payout level on the third anniversary of the grant date (March 2026).

PSAs granted in 2024 are subject to the Company achieving certain EBIT performance targets for the 2026 fiscal year.

The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted.

If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2027).

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The PSAs only become immediately vested in the event of a change in control (as defined in the applicable team member award agreement) if the awards are not continued or assumed by the acquirer on a substantially equivalent basis.

If the awards continue or are assumed on a substantially equivalent basis, but employment is terminated by the Company or an acquirer without cause or by the team member for good reason (as such terms are defined in the applicable team member award agreement) within 24 months following the change in control, such awards will become immediately vested upon such termination.

the change in control, such awards will become immediately vested upon such termination.

Under all other scenarios, the awards continue to vest per the schedule outlined in the applicable team member award agreement.

2 unchanged sentences

The total grant date fair value of PSAs granted during 2025 was $ 8.1 million.

The total grant date fair value of PSAs vested during 2025 was $ 5.8 million.

No PSAs were forfeited during 2025.

The total grant date fair value of the 0.3 million PSAs issued but not released as of December 28, 2025 was $ 19.2 million.

The total grant date fair value of PSAs granted during 2024 was $ 6.3 million.

No PSAs vested during 2024.

5 unchanged sentences

The total grant date fair value of the 0.4 million PSAs issued but not released as of December 31, 2023 was $ 12.9 million.

The total grant date fair value of PSAs granted during 2022 was $ 5.1 million.

The total grant date fair value of PSAs vested during 2022 was $ 4.1 million.

The total grant date fair value of performance shares forfeited or not earned during 2022 was $ 0.8 million.

The total grant date fair value of the 0.5 million PSAs issued but not released as of January 1, 2023 was $ 11.1 million.

The following table summarizes PSA activity during 2025:

2 unchanged sentences

Awarded 58,805 137.81

Vested ( 182,560 ) 31.54

Forfeited — —

PSAs earned 59,206 31.49

PSAs not earned ( 145,574 ) 24.42

Outstanding at December 28, 2025 305,729 $ 62.67

2 unchanged sentences

The amount recognized was as follows:

December 29, 2024 December 31, 2023 January 1, 2023

December 28, 2025 December 29, 2024 December 31, 2023

Share-based compensation expense $ 31,103 $ 28,417 $ 18,898

16 unchanged sentences

Severance expense during 2023 was immaterial.

No stores were closed during 2024 and all lease costs associated with our closed locations, for which a lease remains in effect, are included within Store closure and other costs, net.

See Note 7, "Leases", for amounts incurred during 2024.

No stores were closed during 2025 or 2024 and all lease costs associated with our closed locations, for which a lease remains in effect, are included within Store closure and other costs, net.

See Note 7, "Leases", for amounts incurred during 2025 and 2024.

Business Combination

9 unchanged sentences

The goodwill is not expected to be deductible for tax purposes.

The final allocation of the purchase price consideration to the assets acquired and liabilities assumed has been completed and included an immaterial amount of measurement period adjustments.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data