Sprouts Farmers Market, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Consolidated Financial Statements for Sprouts Farmers Market, Inc. and Subsidiaries: Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 53 Consolidated Balance Sheets as of December 2 8 , 202 5 and December 29 , 202 4 55 Consolidated Statements of Income for the fiscal years ended December 28, 2025, December 29, 2024 a nd December 31, 2023 56 Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 2 8, 2025, December 29, 2024 and December 31, 2023 57 Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023 58 Notes to Consolidated Financial Statements 59 52 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Sprouts Farmers Market, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Sprouts Farmers Market, Inc. 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). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 53 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. 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. 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 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 Phoenix, Arizona February 19, 2026 We have served as the Company’s auditor since 2011. 54 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) December 28, 2025 December 29, 2024 ASSETS Current assets: Cash and cash equivalents $ 257,282 $ 265,159 Accounts receivable, net 65,221 30,901 Inventories 427,095 343,329 Prepaid expenses and other current assets 60,306 36,131 Total current assets 809,904 675,520 Property and equipment, net of accumulated depreciation 1,085,356 895,189 Operating lease assets, net 1,652,732 1,466,903 Intangible assets 208,215 208,094 Goodwill 381,750 381,750 Other assets 20,692 13,243 Total assets $ 4,158,649 $ 3,640,699 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 291,033 $ 213,414 Accrued liabilities 304,419 216,842 Accrued salaries and benefits 96,017 97,991 Current portion of operating lease liabilities 177,263 150,400 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 other finance obligations 81,585 7,248 Other long-term liabilities 40,283 38,259 Deferred income tax liability 80,479 73,059 Total liabilities 2,755,575 2,318,806 Commitments and contingencies (Note 17) Stockholders’ equity: Undesignated preferred stock; $ 0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding — — Common stock, $ 0.001 par value; 200,000,000 shares authorized, 95,926,024 shares issued and outstanding, December 28, 2025; 99,255,036 shares issued and outstanding, December 29, 2024 96 99 Additional paid-in capital 841,848 808,140 Retained earnings 561,130 513,654 Total stockholders’ equity 1,403,074 1,321,893 Total liabilities and stockholders’ equity $ 4,158,649 $ 3,640,699 The accompanying notes are an integral part of these consolidated financial statements. 55 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Net sales $ 8,806,159 $ 7,719,290 $ 6,837,384 Cost of sales 5,389,770 4,777,799 4,315,543 Gross profit 3,416,389 2,941,491 2,521,841 Selling, general and administrative expenses 2,574,687 2,291,350 2,000,437 Depreciation and amortization (exclusive of depreciation included in cost of sales) 149,969 132,748 131,893 Store closure and other costs, net 5,575 12,896 39,280 Income from operations 686,158 504,497 350,231 Interest (income) expense, net ( 2,626 ) ( 2,201 ) 6,491 Income before income taxes 688,784 506,698 343,740 Income tax provision 165,114 126,097 84,884 Net income $ 523,670 $ 380,601 $ 258,856 Net income per share: Basic $ 5.36 $ 3.79 $ 2.53 Diluted $ 5.31 $ 3.75 $ 2.50 Weighted average shares outstanding: Basic 97,687 100,363 102,479 Diluted 98,704 101,379 103,390 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Shares Common Stock Additional Paid-in Capital Retained Earnings Total Stockholders’ Equity Balances at January 1, 2023 105,072,756 $ 105 $ 726,345 $ 320,012 $ 1,046,462 Net income — — — 258,856 258,856 Issuance of shares under stock plans 1,449,116 1 11,453 — 11,454 Repurchase and retirement of common stock, including excise tax ( 5,864,246 ) ( 6 ) — ( 205,256 ) ( 205,262 ) Share-based compensation — — 18,898 — 18,898 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 Issuance of shares under stock plans 699,110 1 4,889 — 4,890 Repurchase and retirement of common stock, including excise tax ( 2,656,058 ) ( 3 ) — ( 240,559 ) ( 240,562 ) Share-based compensation — — 28,417 — 28,417 Balances at December 29, 2024 99,255,036 99 808,140 513,654 1,321,893 Net income — — — 523,670 523,670 Issuance of shares under stock plans 626,312 1 2,605 — 2,606 Repurchase and retirement of common stock, including excise tax ( 3,955,324 ) ( 4 ) — ( 476,194 ) ( 476,198 ) Share-based compensation — — 31,103 — 31,103 Balances at December 28, 2025 95,926,024 $ 96 $ 841,848 $ 561,130 $ 1,403,074 The accompanying notes are an integral part of these consolidated financial statements. 57 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Operating activities Net income $ 523,670 $ 380,601 $ 258,856 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 157,722 140,164 137,811 Operating lease asset amortization 146,599 133,923 127,208 Impairment of assets — 406 30,549 Share-based compensation 31,103 28,417 18,898 Deferred income taxes 7,420 10,691 ( 4,915 ) Other non-cash items 4,722 5,610 1,086 Changes in operating assets and liabilities, net of effects from acquisition: Accounts receivable 27,216 30,007 3,173 Inventories ( 83,766 ) ( 20,131 ) ( 10,857 ) Prepaid expenses and other current assets 36,672 11,903 2,210 Other assets ( 5,433 ) ( 45 ) 3,482 Accounts payable 11,198 27,986 12,215 Accrued liabilities 25,246 39,305 11,746 Accrued salaries and benefits ( 1,975 ) 23,240 12,880 Operating lease liabilities ( 166,206 ) ( 168,538 ) ( 138,795 ) Other long-term liabilities 1,810 1,675 ( 479 ) Cash flows from operating activities 715,998 645,214 465,068 Investing activities Purchases of property and equipment ( 248,267 ) ( 230,375 ) ( 225,310 ) Payments for acquisition, net of cash acquired — — ( 13,032 ) Cash flows used in investing activities ( 248,267 ) ( 230,375 ) ( 238,342 ) Financing activities Payments on revolving credit facilities — ( 125,000 ) ( 125,000 ) Payments on finance lease liabilities ( 1,017 ) ( 1,148 ) ( 1,006 ) Payments of deferred financing costs ( 1,622 ) — — Repurchase of common stock ( 471,926 ) ( 228,472 ) ( 203,496 ) Payments of excise tax on repurchases of common stock ( 2,091 ) ( 1,766 ) — Proceeds from exercise of stock options 2,606 4,890 11,454 Cash flows used in financing activities ( 474,050 ) ( 351,496 ) ( 318,048 ) (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 Cash, cash equivalents, and restricted cash at the end of the period $ 260,894 $ 267,213 $ 203,870 Supplemental disclosure of cash flow information Cash paid for interest $ 1,809 $ 5,008 $ 12,561 Cash paid for income taxes 120,076 102,226 96,633 Supplemental disclosure of non-cash activities Property and equipment in accounts payable and accrued liabilities $ 63,625 $ 36,682 $ 29,592 Issuance of shares for acquisition — — 18,139 Excise tax accrued on repurchase of common stock 4,172 2,091 1,766 Leased assets obtained in exchange for new operating lease liabilities, net of lease terminations 332,427 278,230 364,997 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. 58 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Description of Business Sprouts Farmers Market, Inc., a Delaware corporation, through its subsidiaries, offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. The Company continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. As of December 28, 2025, the Company operated 477 stores in 24 states. For convenience, the “Company” is used to refer collectively to Sprouts Farmers Market, Inc. and, unless the context requires otherwise, its subsidiaries. The Company’s store operations are conducted by its subsidiaries. 2. Basis of Presentation 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 intercompany accounts and transactions have been eliminated in consolidation. The Company has one operating segment, and therefore, one reportable segment: healthy grocery stores. The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. The following is a breakdown of the Company’s perishable and non-perishable sales mix: 2025 2024 2023 Perishables 57.0 % 57.3 % 57.3 % Non-Perishables 43.0 % 42.7 % 42.7 % All dollar amounts are in thousands, unless otherwise indicated. 3. Significant Accounting Policies Fiscal Years The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. Fiscal year 2025 ended on December 28, 2025 and included 52 weeks. Fiscal year 2024 ended on December 29, 2024 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. Significant Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s critical accounting estimates include inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes. Actual results could differ from those estimates. 59 Table of Contents Cash and Cash Equivalents The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. The Company’s cash and cash equivalents are maintained at financial institutions in the United States of America. Deposits in transit include sales through the end of the period, the majority of which were paid with credit and debit cards and settle within a few days of the sales transactions. The amounts due from banks for these transactions at each reporting date were as follows: As Of December 28, 2025 December 29, 2024 Due from banks for debit and credit card transactions $ 107,630 $ 80,409 Restricted Cash 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 Accounts receivable primarily represents billings to vendors for scan, advertising and other rebates, receivables from ecommerce sales, billings to landlords for tenant allowances, manufacturer coupons and other miscellaneous receivables. Accounts receivable also includes receivables from the Company’s insurance carrier for payments expected to be made in excess of self-insured retentions. The Company provides an allowance for doubtful accounts when a specific account is determined to be uncollectible. Inventories Inventories consist of merchandise purchased for resale, which are stated at the lower of cost or net realizable value. The cost method is used for distribution center and store perishable department inventories by assigning costs to each of these items based on a first-in, first-out (FIFO) basis (net of vendor discounts). The Company’s non-perishable inventory is valued at the lower of cost or net realizable value using weighted averaging, the use of which approximates the FIFO method. Inventories are reduced for estimated losses related to shrinkage. The Company believes that all inventories are saleable and no allowances or reserves for obsolescence were recorded as of December 28, 2025 and December 29, 2024. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for major additions and improvements to facilities as well as significant component replacements are capitalized. All other maintenance and repairs are charged to expense as incurred. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements of income. Depreciation expense, which includes the amortization of assets recorded as finance leases, is computed using the straight-line method over the estimated useful lives of the individual assets. Terms of leases used in the determination of estimated useful lives may include renewal options if the exercise of the renewal option is determined to be reasonably certain. 60 Table of Contents The following table includes the estimated useful lives of certain of the Company’s asset classes: Computer hardware and software 3 to 5 years Furniture, fixtures and equipment 3 to 20 years Leasehold improvements up to 15 years Buildings 40 years Store development costs, which include costs associated with the selection and procurement of real estate sites, are also included in property and equipment. These costs are included in leasehold improvements and are amortized over the remaining lease term of the successful sites with which they are associated. Self-Insurance Reserves The Company uses a combination of insurance and self-insurance programs to provide for costs associated with general liability, workers’ compensation and team member health benefits. Liabilities for self-insurance reserves are estimated based on independent actuarial estimates, which are based on historical information and assumptions about future events. The Company 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. The actuarial valuation methods consider loss development factors, which include the development time frame and expected claim reporting and settlement patterns, and expected loss costs, which include the expected frequency and severity of claim activity. Amounts expected to be recovered from insurance companies are included in the liability, with a corresponding amount recorded in accounts receivable. Goodwill and Intangible Assets Goodwill represents the cost of acquired businesses in excess of the fair value of assets and liabilities acquired. The Company’s indefinite-lived intangible assets consist of trade names related to “Sprouts Farmers Market,” liquor licenses and reacquired rights recognized in connection with the acquisition of Ronald Cohn, Inc. in 2023. See Note 24, “Business Combination” for more information on this acquisition. Goodwill and indefinite-lived intangible assets are evaluated for impairment on an annual basis during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company’s impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company’s qualitative assessment considered factors including changes in the competitive market, budget-to-actual performance, trends in market capitalization for the Company and its peers, turnover in key management personnel and overall changes in the macroeconomic environment. If this qualitative assessment indicates it is more likely than not that the estimated fair value of the reporting unit exceeds its carrying value, no further analysis is required, and goodwill is not impaired. Otherwise, the Company compares the estimated fair value of the reporting unit to its carrying amount with an impairment loss recognized for the amount, if any, by which carrying value exceeds estimated fair value. The impairment evaluation for the Company’s indefinite-lived intangible assets consists of a qualitative assessment, similar to that for goodwill. If the qualitative assessment indicates it is more likely than not that the estimated fair value exceeds its carrying value, no further analysis is required, and the asset is not impaired. Otherwise, the Company compares the estimated fair value of the asset to its carrying amount with an impairment loss recognized for the amount, if any, by which carrying value exceeds estimated fair value. The Company has determined its business consists of a single reporting unit. 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. Impairment of Long-Lived Assets The Company assesses its long-lived assets, including property and equipment and right-of-use assets, for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an 61 Table of Contents asset group may not be recoverable. These events primarily include current period losses combined with a history of losses or a projection of continuing losses, a significant decrease in the market value of an asset or a decision to close or relocate a store. The Company groups and evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which independent identifiable cash flows are available. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to the future undiscounted cash flows expected to be generated by that asset group. The Company’s impairment analysis contains management assumptions about key variables including sales growth rate, gross margin, payroll and other controllable expenses. If impairment is indicated, a loss is recognized for any excess of the carrying value over the estimated fair value of the asset group. 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. 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. These charges are recorded as a component of Store closure and other costs, net in the accompanying consolidated statements of income. Deferred Financing Costs The Company capitalizes certain fees and costs incurred in connection with the issuance of debt. 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 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. The current and noncurrent portions of deferred financing costs are included in prepaid expenses and other current assets and other assets, respectively, in the accompanying consolidated balance sheets. Leases The Company leases its stores, distribution centers, and administrative offices. The Company determines if an arrangement is a lease at inception. 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 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. 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. Lease assets and liabilities and the related rent expense are recognized at the lease commencement date (date on which the Company gains access to the property) based on the estimated present value of lease payments over the lease term, net of landlord allowances expected to be received. The Company accounts for the lease and non-lease components as a single lease component for all current classes of leases. Most of the Company’s lease agreements include variable payments related to pass-through costs for common area maintenance ("CAM"), property taxes, and insurance. Additionally, some of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels. These variable payments are not included in the measurement of the lease liability or asset and are expensed as incurred. As most of the Company’s lease agreements do not provide an implicit rate, the Company uses an estimated incremental borrowing rate, which is derived from third-party information available at the lease 62 Table of Contents commencement date, in determining the present value of lease payments. The rate used is for a secured borrowing of a similar term as the lease. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to twenty years or more. The exercise of lease renewal options is at the Company’s sole discretion. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less (“short-term leases”) are not recorded on the balance sheet. The Company does not currently have any material short-term leases. Additionally, the Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants. The Company subleases certain real estate to third parties, which have all been classified as operating leases. 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 The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with ASC 820. This framework establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of goodwill, intangible assets, and long-lived assets. Impairment losses related to store-level assets are calculated using significant unobservable inputs including the present value of future cash flows expected to be generated using a risk-adjusted market based weighted-average cost of capital, comparable store sales growth assumptions, and third party property appraisal data. Therefore, these inputs are classified as a level 3 measurement in the fair value hierarchy. 63 Table of Contents Derivative Financial Instruments The Company records derivatives at fair value. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how the Company reflects the change in fair value of the derivative instrument in its financial statements. A derivative qualifies for hedge accounting if, at inception, the derivative is expected to be highly effective in offsetting the underlying hedged cash flows, and the Company fulfills the hedge documentation standards at the time it enters into the derivative contract. The Company designates its hedge based on the exposure it is hedging. For qualifying cash flow hedges, the Company records changes in fair value in other comprehensive income (“OCI”). The Company releases the derivative’s gain or loss from OCI to match the timing of the underlying hedged item’s effect on earnings. The Company reviews the effectiveness of its hedging instruments quarterly. The Company recognizes changes in the fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings. The Company discontinues hedge accounting for any hedge that is no longer evaluated to be highly effective. The Company does not enter into derivative financial instruments for trading or speculative purposes, and it monitors the financial stability and credit standing of its counterparties in these transactions. The Company had no active derivative financial instruments as of December 28, 2025 or December 29, 2024. Share-Based Compensation 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. The Company uses the Black-Scholes option-pricing model to determine the grant date fair value for each option grant. See Note 22, “Share-Based Compensation” for a discussion of assumptions used in the calculation of fair values. Application of alternative assumptions could produce different estimates of the fair value of share-based compensation and, consequently, the related amounts recognized in the accompanying consolidated statements of income. The grant date fair value of restricted stock units (“RSUs”) and performance share awards (“PSAs”) is based on the closing price per share of the Company’s common stock on the grant date. The Company recognizes compensation expense for time-based awards on a straight-line basis and for performance-based awards on the graded-vesting method over the vesting period of the awards. Revenue Recognition The Company’s performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and payment from customers is also due at the time of sale. Proceeds from the sale of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer and the performance obligation is satisfied by the Company. The Company’s gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented. The outstanding gift card liability balance is included within accrued liabilities 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. 64 Table of Contents A summary of the activity and balances in the gift card and loyalty program liabilities is as follows: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Beginning Balance $ 11,071 $ 10,566 $ 10,906 Gift cards issued during the period but not redeemed (1) 5,296 4,727 4,271 Loyalty value deferred during the period, net of amount redeemed or expired (1) 9,093 — — Revenue recognized from beginning liability ( 4,361 ) ( 4,222 ) ( 4,611 ) Ending Balance $ 21,099 $ 11,071 $ 10,566 (1) net of estimated breakage The nature of goods the Company transfers to customers at the point of sale are inventories, consisting of merchandise purchased for resale. The Company does not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current period from performance obligations satisfied in previous periods, any contract performance obligations, or any material costs to obtain or fulfill a contract as of December 28, 2025. Cost of Sales Cost of sales includes the cost of inventory sold during the period, including the direct costs of purchased merchandise (net of discounts and allowances), distribution and supply chain costs, and depreciation and amortization for distribution centers and supply chain related assets. The Company recognizes vendor allowances and merchandise volume related rebate allowances as a reduction of inventories during the period when earned and reflects the allowances as a component of cost of sales as the inventory is sold. The Company’s largest supplier accounted for approximately 52 %, 50 % and 47 % of total purchases during 2025, 2024 and 2023, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses primarily consist of salaries, wages and benefits costs, share-based compensation, occupancy costs (including rent, property taxes, utilities, CAM and insurance), advertising costs, buying costs, pre-opening and other administrative costs. 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. Advertising costs are expensed as incurred. Advertising expense, net of rebates, was $ 52.5 million, $ 46.8 million and $ 45.8 million for 2025, 2024 and 2023, respectively. Depreciation and amortization Depreciation and amortization expense (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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 65 Table of Contents assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. Realization of the deferred tax assets is principally dependent upon achievement of projected future taxable income offset by deferred tax liabilities. Changes in recognition or measurement are reflected in the period in which the judgment occurs. The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three years, following the tax year to which those filings relate. The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as part of income tax expense. Share Repurchases The Company has elected to retire shares repurchased to date. Shares retired become part of the pool of authorized but unissued shares. The Company has elected to record the purchase price of the retired shares in excess of par value directly as a reduction of retained earnings. The cost of common shares repurchased includes a 1% excise tax imposed as part of the Inflation Reduction Act of 2022. Net Income per Share Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the fiscal period. Diluted net income per share is based on the weighted average number of shares outstanding, plus, where applicable, shares that would have been outstanding related to dilutive options, PSAs and RSUs. 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. The Company had no other comprehensive income for the past three fiscal years. Recently Adopted Accounting Pronouncements 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 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 issued ASU no. 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The standard requires public entities to disclose additional disaggregation of expense in the notes to the financial statements for interim and annual reporting periods. The guidance is effective for the Company for its fiscal year 2027. Early adoption is permitted, and the guidance should be applied prospectively, with an option to apply it retrospectively. The Company is currently evaluating the potential impact of this ASU on its consolidated financial statements and disclosures. 66 Table of Contents 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. 4. Accounts Receivable A summary of accounts receivable is as follows: As Of December 28, 2025 December 29, 2024 Landlords $ 3,332 $ 5,577 Vendors 36,708 3,814 Insurance 3,651 2,913 Ecommerce 11,027 9,993 Other 10,503 8,604 Total $ 65,221 $ 30,901 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. 5. Prepaid Expenses and Other Current Assets A summary of prepaid expenses and other current assets is as follows: As Of December 28, 2025 December 29, 2024 Prepaid expenses $ 24,938 $ 24,469 Restricted cash 3,612 2,054 Income tax receivable 31,221 8,839 Other current assets 535 769 Total $ 60,306 $ 36,131 67 Table of Contents 6. Property and Equipment A summary of property and equipment, net is as follows: As Of December 28, 2025 December 29, 2024 Land and finance lease assets $ 23,146 $ 16,859 Furniture, fixtures and equipment 1,303,376 1,129,303 Leasehold improvements 889,893 831,020 Construction in progress 174,467 79,994 Total property and equipment 2,390,882 2,057,176 Accumulated depreciation and amortization ( 1,305,526 ) ( 1,161,987 ) Property and equipment, net $ 1,085,356 $ 895,189 Depreciation expense was $ 156.7 million, $ 139.2 million and $ 136.6 million for 2025, 2024 and 2023, respectively. Depreciation expense is primarily reflected in Depreciation and amortization on the consolidated statements of income. 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. 7. Leases Lease cost includes both the fixed and variable expenses recorded for leases. The components of lease cost are as follows: Year Ended Classification December 28, 2025 December 29, 2024 December 31, 2023 Operating lease cost: Open locations Selling, general and administrative expenses (1) $ 270,171 $ 247,312 $ 232,745 Closed locations Store closure and other costs, net 1,111 7,122 4,029 Finance lease cost: Amortization of Property and Equipment Depreciation and amortization 1,499 1,128 1,062 Interest on lease liabilities Interest expense 943 747 816 Variable lease cost: Open locations Selling, general and administrative expenses (1) 81,898 75,646 70,197 Closed locations Store closure and other costs, net 775 2,138 2,302 Sublease income: Open locations Selling, general and administrative expenses ( 586 ) ( 831 ) ( 832 ) Closed locations Store closure and other costs, net ( 241 ) ( 71 ) — Total net lease cost $ 355,570 $ 333,191 $ 310,319 68 Table of Contents (1) Supply chain-related amounts of $ 20.8 million, $ 20.3 million and $ 18.2 million were included in cost of sales for 2025, 2024 and 2023, respectively. Supplemental balance sheet information related to leases is as follows: As Of Classification December 28, 2025 December 29, 2024 Assets Operating Operating lease assets $ 1,652,732 $ 1,466,903 Finance Property and equipment, net 10,680 6,161 Total lease assets $ 1,663,412 $ 1,473,064 Liabilities Current: Operating Current portion of operating lease liabilities $ 177,263 $ 150,400 Finance Current portion of finance lease liabilities 1,653 1,321 Noncurrent: Operating Long-term operating lease liabilities 1,682,425 1,520,272 Finance L ong-term debt and other finance obligations 12,165 7,248 Total lease liabilities $ 1,873,506 $ 1,679,241 2025 2024 2023 Weighted average remaining lease term (years): Operating leases 10.3 10.1 10.0 Finance leases 7.6 5.8 6.7 Weighted average discount rate: Operating leases 7.0 % 7.0 % 7.2 % Finance leases 7.6 % 8.4 % 8.3 % Supplemental cash flow and other information related to leases is as follows: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows for operating leases $ 259,976 $ 249,862 $ 228,411 Operating cash flows for finance leases 943 747 816 Lease assets obtained in exchange for lease liabilities: Finance leases $ 6,266 $ — $ 809 Operating leases 332,427 278,230 364,997 69 Table of Contents A summary of maturities of lease liabilities is as follows: Operating Leases (1), (2) Finance Leases Total 2026 $ 286,062 $ 2,253 $ 288,315 2027 285,295 2,875 288,170 2028 251,238 2,634 253,872 2029 261,792 2,175 263,967 2030 263,586 1,832 265,418 Thereafter 1,302,788 6,817 1,309,605 Total lease payments 2,650,761 18,586 2,669,347 Less: Imputed interest ( 791,073 ) ( 4,768 ) ( 795,841 ) Total lease liabilities 1,859,688 13,818 1,873,506 Less: Current portion ( 177,263 ) ( 1,653 ) ( 178,916 ) Long-term lease liabilities $ 1,682,425 $ 12,165 $ 1,694,590 (1) Operating lease payments include $ 94.6 million related to periods covered by options to extend lease terms that are reasonably certain of being exercised and exclude $ 1,175.9 million of legally binding minimum lease payments for leases executed but not yet commenced. (2) These amounts include rental income related to subtenant agreements under which we will receive $ 1.1 million in 2026, $ 1.2 million in 2027, $ 0.9 million in 2028, $ 0.8 million in 2029, $ 0.6 million in 2030 and $ 0.2 million thereafter. 8. Intangible Assets A summary of the activity and balances in intangible assets is as follows: Balance at December 31, 2023 Additions/Adjustments Balance at December 29, 2024 Indefinite-lived trade names $ 182,937 $ — $ 182,937 Indefinite-lived reacquired rights 23,100 — 23,100 Indefinite-lived liquor licenses 2,023 34 2,057 Total intangible assets $ 208,060 $ 34 $ 208,094 Balance at December 29, 2024 Additions/Adjustments Balance at December 28, 2025 Indefinite-lived trade names $ 182,937 $ — $ 182,937 Indefinite-lived reacquired rights 23,100 — 23,100 Indefinite-lived liquor licenses 2,057 121 2,178 Total intangible assets $ 208,094 $ 121 $ 208,215 There was no amortization expense in 2025, 2024 and 2023. 9. Goodwill 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. The goodwill was related to the acquisitions of Henry’s Farmers Market and Sunflower Farmers Market in 2011 and 2012, respectively, and the acquisition of Ronald Cohn, Inc. in 2023. For further details, see Note 24, "Business Combination." 70 Table of Contents 10. Accrued Liabilities A summary of accrued liabilities is as follows: As Of 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 card and loyalty program liabilities, net of breakage 21,099 11,071 Accrued sales, use and excise tax 19,508 16,550 Other accrued liabilities 145,457 134,323 Total $ 304,419 $ 216,842 11. Accrued Salaries and Benefits A summary of accrued salaries and benefits is as follows: As Of December 28, 2025 December 29, 2024 Bonuses $ 46,467 $ 52,454 Payroll 25,686 23,205 Vacation 22,082 20,061 Severance and other 1,782 2,271 Total $ 96,017 $ 97,991 12. Long-Term Debt and Other Finance Obligations A summary of long-term debt and other finance obligations is as follows: As Of Facility Maturity Interest Rate December 28, 2025 December 29, 2024 Senior secured debt $ 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 (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. 71 Table of Contents 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. Letters of credit issued under the Credit Agreement reduce the capacity of Intermediate Holdings to borrow under the Revolving Credit Facility. Letters of credit totaling $ 23.1 million have been issued as of December 28, 2025 under the Letter of Credit Sub-Facility, primarily to support the Company’s insurance programs. Guarantees Obligations under the Credit Agreement are guaranteed by the Company and substantially all of its existing and future wholly-owned material domestic subsidiaries, and are secured by first-priority security interests in substantially all of the assets of the Company, Intermediate Holdings, and the subsidiary guarantors, including, without limitation, a pledge by the Company of its equity interest in Intermediate Holdings. Interest and Fees Loans under the Credit Agreement will initially bear interest, at the Company's option, either at the Term SOFR (with a floor of 0.00 %) plus a 1.00 % per annum or alternate base rate (with a floor of 0.00 %) plus 0.00 % per annum. The interest rate margins are subject to upward adjustments pursuant to a pricing grid based on the Company’s total net leverage ratio as set forth in the Credit Agreement and to upward or downward adjustments of up to 0.05 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement. Under the terms of the Credit Agreement, the Company is obligated to pay a commitment fee on the available unused amount of the commitments, which commitment fee ranges between 0.09 % to 0.225 % per annum, pursuant to a pricing grid based on the Company’s total net leverage ratio. The commitment fees are subject to upward or downward adjustments of up to 0.01 % based upon the achievement of certain sustainability-linked metric thresholds, as set forth in the Credit Agreement. As of 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 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). 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. Covenants The Credit Agreement contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to: • incur additional indebtedness; 72 Table of Contents • grant additional liens; • enter into sale-leaseback transactions; • make loans or investments; • merge, consolidate or enter into acquisitions; • pay dividends or distributions; • enter into transactions with affiliates; • enter into new lines of business; • modify the terms of debt or other material agreements; and • change its fiscal year. Each of these covenants is subject to customary and other agreed-upon exceptions. In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00. Each of these covenants is tested 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. The final 73 Table of Contents 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 2026 $ 2,930 2027 8,878 2028 9,144 2029 9,419 2030 9,701 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. 13. Other Long-Term Liabilities A summary of other long-term liabilities is as follows: As Of December 28, 2025 December 29, 2024 Long-term portion of self-insurance reserves $ 25,457 $ 24,301 Other 14,826 13,958 Total $ 40,283 $ 38,259 14. Self-Insurance Programs The Company is self-insured for costs related to workers’ compensation, general liability and employee health benefits up to certain self-insured retentions and stop-loss limits. The Company establishes reserves for the ultimate obligation of reported and incurred but not reported (“IBNR”) claims. IBNR claims are estimated using various techniques, including analysis of historical trends and actuarial valuation methods. The Company purchases coverage from third-party insurers for exposures in excess of certain stop-loss limits and recorded receivables of $ 3.1 million and $ 2.1 million from its insurance carriers for payments expected to be made in excess of self-insured retentions at December 28, 2025 and December 29, 2024, respectively. The Company recorded amounts for general liability, workers' compensation and team member health benefit liabilities of $ 57.0 million and $ 53.2 million at December 28, 2025 and December 29, 2024, respectively. 74 Table of Contents The following table summarizes the changes in the Company's self-insurance reserves through December 28, 2025: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Beginning Balance $ 53,228 $ 47,838 $ 47,612 Expenses, net of actuarial adjustments 127,771 106,093 85,148 Claim Payments ( 123,987 ) ( 100,703 ) ( 84,922 ) Ending Balance 57,012 53,228 47,838 Less: Current portion ( 31,555 ) ( 28,927 ) ( 25,012 ) Long-term portion $ 25,457 $ 24,301 $ 22,826 The current portion of the self-insurance reserves is included in "Accrued Liabilities" and the long-term portion is included in "Other Long-Term Liabilities" in the accompanying consolidated balance sheets. 15. Defined Contribution Plan The Company maintains the Sprouts Farmers Market, Inc. 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. 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: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 $ 10,742 $ 9,570 $ 8,496 16. Income Taxes Income Tax Provision The income tax provision consists of the following: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 U.S. Federal—current $ 118,558 $ 87,601 $ 67,898 U.S. Federal—deferred 6,062 8,501 ( 5,927 ) U.S. Federal—total 124,620 96,102 61,971 State—current 39,136 27,805 21,902 State—deferred 1,358 2,190 1,011 State—total 40,494 29,995 22,913 Total provision $ 165,114 $ 126,097 $ 84,884 75 Table of Contents Tax Rate Reconciliation Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pre-tax income as a result of the following: The table below provides the updated requirements of ASU no. 2023-09 for 2025. See Note 3. Significant Accounting Policies—Recently adopted accounting pronouncements for additional details on the adoption of ASU no. 2023-09. Year Ended December 28, 2025 Federal statutory rate $ 144,645 21.0 % Increase (decrease) in income taxes resulting from: 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 — % Tax Credits: Benefit of federal tax credit $ ( 1,649 ) ( 0.2 ) % Transferable Tax Credit Benefit $ ( 3,506 ) ( 0.5 ) % Other, net (2) $ 680 0.1 % 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. Year Ended 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 ) Other, net — ( 0.2 ) 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. 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 total income tax benefit resulting from 76 Table of Contents 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 Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows: As Of December 28, 2025 December 29, 2024 Deferred tax assets Employee benefits $ 23,233 $ 22,163 Operating leases 477,940 429,362 Other lease related 25,486 5,946 Other accrued liabilities 7,943 5,411 Charitable contribution carryforward 4,463 4,522 Inventories and other 4,961 2,881 Total gross deferred tax assets 544,026 470,285 Less: Valuation Allowance ( 4,463 ) ( 4,522 ) Total deferred tax assets, net of valuation allowance 539,563 465,763 Deferred tax liabilities Depreciation and amortization ( 116,992 ) ( 89,974 ) Intangible assets ( 77,491 ) ( 70,978 ) Operating leases ( 424,752 ) ( 376,994 ) Asset retirement obligations ( 807 ) ( 876 ) Total gross deferred tax liabilities ( 620,042 ) ( 538,822 ) Net deferred tax liability $ ( 80,479 ) $ ( 73,059 ) A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that the realization of future deductions is uncertain. Management performs an assessment over future taxable income to analyze whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. 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 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. The Company applies the authoritative accounting guidance under ASC 740 for the recognition, measurement, classification and disclosure of uncertain tax positions taken or expected to be taken in a tax return. 77 Table of Contents A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: As Of 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 Reduction due to lapse of applicable statute of limitations ( 232 ) ( 245 ) ( 700 ) Ending balance $ — $ 232 $ 477 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 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): Year Ended December 28, 2025 Federal $ 82,000 State 38,076 Total $ 120,076 Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdiction: Year Ended December 28, 2025 State 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. 78 Table of Contents 17. Commitments and Contingencies Commitments Real estate obligations, which include legally binding minimum lease payments for leases executed but not yet commenced, were $ 1,175.9 million as of December 28, 2025. In addition to its lease obligations, the Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled. As of December 28, 2025, total future purchase commitments under noncancelable service and supply contracts were $ 41.0 million. Commitments related to the Company’s business operations cover varying periods of time and are not individually significant. These commitments are expected to be fulfilled with no adverse consequences to the Company’s operations or financial conditions. Contingencies The Company is exposed to claims and litigation matters arising in the ordinary course of business and uses various methods to resolve these matters that are believed to best serve the interests of the Company’s stakeholders. The Company’s primary contingencies are associated with self-insurance obligations and litigation matters. Self-insurance liabilities require significant judgments, and actual claim settlements and associated expenses may differ from the Company’s current provisions for loss. 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. Litigation 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 79 Table of Contents 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. 18. Capital Stock Common stock As of December 28, 2025, 95,926,024 shares of the Company’s common stock were issued and outstanding after the repurchase and retirement of 3,955,324 shares during 2025, as described below. As of December 28, 2025, 5,300,371 shares of common stock are reserved for issuance under the 2022 Incentive Plan (see Note 22, “Share-Based Compensation”). The following table outlines the options exercised in exchange for the issuance of shares of common stock during 2025, 2024 and 2023: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Options exercised 96,939 210,312 637,387 Other share issuances under stock plans 529,373 488,798 811,729 Share Repurchases 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: Effective date Expiration date Amount authorized Cost of repurchases Authorization available March 2, 2022 December 31, 2024 $ 600,000 $ 480,715 $ — May 22, 2024 May 22, 2027 $ 600,000 $ 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. The board’s authorization of the share repurchase programs does not obligate the Company to acquire any particular amount of common stock, and the repurchase programs may be commenced, suspended, or discontinued at any time. Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands): Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Number of common shares acquired 3,955,324 2,656,058 5,864,246 Average price per common share acquired $ 120.39 $ 90.57 $ 35.00 Total cost of common shares acquired $ 476,198 $ 240,562 $ 205,262 80 Table of Contents Shares purchased under the Company’s repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings. The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022. Subsequent to December 28, 2025 and through February 17, 2026, the Company repurchased an additional 1.3 million shares of common stock for $ 100.0 million, excluding excise tax. Preferred Stock The Company’s board of directors is authorized, subject to limitations prescribed by Delaware law, to issue up to 10,000,000 shares of the Company’s preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further action by the Company’s stockholders. The Company’s board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding. The Company’s board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of the Company and might adversely affect the market price of the Company’s common stock and the voting and other rights of the holders of the Company’s common stock. The Company has no current plan to issue any shares of preferred stock. 19. Net Income per Share The computation of basic net income per share is based on the number of weighted average shares outstanding during the period. The computation of diluted net income per share includes the dilutive effect of share equivalents consisting of incremental shares deemed outstanding from the assumed exercise of options and unvested RSUs. PSAs are included in the computation of diluted net income per share only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be satisfied if the end of the reporting period were the end of the related performance period, and if the effect would be dilutive . A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands, except per share amounts): Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Basic net income per share: Net income $ 523,670 $ 380,601 $ 258,856 Weighted average shares outstanding - basic 97,687 100,363 102,479 Basic net income per share $ 5.36 $ 3.79 $ 2.53 Diluted net income per share: Net income $ 523,670 $ 380,601 $ 258,856 Weighted average shares outstanding - basic 97,687 100,363 102,479 Dilutive effect of share-based awards: Assumed exercise of options to purchase shares 534 497 343 RSUs 285 474 524 PSAs 198 45 44 Weighted average shares and equivalent shares outstanding - diluted 98,704 101,379 103,390 Diluted net income per share $ 5.31 $ 3.75 $ 2.50 81 Table of Contents 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. 20. Fair Value Measurements The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of goodwill, intangible assets, and long-lived assets. The Company did not have any financial liabilities measured at fair value on a recurring basis as of 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. When necessary, the Company uses third party market data and market participant assumptions to derive the fair value of its asset groupings, which primarily include right-of-use lease assets and property and equipment. For further details, see Note 3, “Significant Accounting Policies – Impairment of Long-lived Assets”. 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. 21. Segments The Company has one operating segment, and therefore, one reportable segment: healthy grocery stores. The Company derives all its revenues from the sale of products at its various store locations across the United States. The accounting policies of the segment are the same as described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance and allocates resources based on consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. In accordance with ASC 280, the following table represents the significant expense and key metrics reviewed by the CODM: 82 Table of Contents Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Net Sales $ 8,806,159 $ 7,719,290 $ 6,837,384 Less: Cost of sales 5,389,770 4,777,799 4,315,543 Direct store expenses 2,210,092 1,958,392 1,723,726 Other segment items (1) 520,139 478,602 447,884 Interest (income) expense, net ( 2,626 ) ( 2,201 ) 6,491 Income tax provision 165,114 126,097 84,884 Net income $ 523,670 $ 380,601 $ 258,856 (1) Other segment items include non-store selling, general, and administrative expenses, depreciation and amortization, store closure costs, and other overhead expenses. The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. In accordance with ASC 606, the following table represents a disaggregation of revenue for 2025, 2024 and 2023: Year Ended 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 % Non-Perishables 3,786,019 43.0 % 3,294,528 42.7 % 2,921,413 42.7 % Net sales $ 8,806,159 100.0 % $ 7,719,290 100.0 % $ 6,837,384 100.0 % 22. Share-Based Compensation 2022 Incentive Plan In March 2022, the Company’s board of directors adopted the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Incentive Plan”), which became effective May 25, 2022, upon approval by the Company’s stockholders. The 2022 Incentive Plan provides team members of the Company, certain consultants and advisors who perform services for the Company, and non-employee members of the Company's board of directors with the opportunity to receive grants of equity awards, including stock options, RSUs, PSAs, and other stock-based awards. The 2022 Incentive Plan replaced the 2013 Incentive Plan (as described below). Awards Granted under the 2022 Incentive Plan The Company granted the following awards during 2025 and 2024 under the 2022 Incentive Plan: Grant Date RSUs PSAs Options March 18, 2025 185,228 58,805 61,079 June 3, 2025 333 — — November 10, 2025 8,087 — — Total 193,648 58,805 61,079 Weighted-average grant date fair value $ 135.42 $ 137.81 $ 51.46 Weighted-average exercise price — — $ 137.81 83 Table of Contents Grant Date RSUs PSAs Options March 19, 2024 272,855 103,584 135,783 June 4, 2024 1,538 — — September 4, 2024 15,024 — — Total 289,417 103,584 135,783 Weighted-average grant date fair value $ 63.14 $ 61.15 $ 23.50 Weighted-average exercise price — — $ 61.15 The aggregate number of shares of common stock that may be issued to team members and directors under the 2022 Incentive Plan may not exceed 6,600,000 , subject to the following adjustments. If any awards granted under the 2022 Incentive Plan, terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid in shares, the shares will again be available for purposes of the 2022 Incentive Plan. 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. 2013 Incentive Plan Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members. Upon stockholder approval of the 2022 Incentive Plan on May 25, 2022, no further awards 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. RSUs granted to independent members of the Company’s board of directors cliff vest in one year . The options expire seven years from grant date. The PSAs are described below. Stock Options Outstanding options only become immediately vested in the event of a change in control (as defined in the applicable team member award agreement) if the grants are not continued or assumed by the acquirer on a substantially equivalent basis. If the options and 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 options or awards will become immediately vested upon such termination. Under all other scenarios, the awards continue to vest per the schedule outlined in the applicable award agreement. Shares issued for option exercises are newly issued shares. The estimated weighted average fair values of options granted during 2025, 2024 and 2023 were $ 51.46 , $ 23.50 and $ 12.63 , respectively, and were calculated using the following assumptions in the table below: 2025 2024 2023 Dividend yield 0.00 % 0.00 % 0.00 % Expected volatility 37.60 % 38.41 % 39.48 % Risk free interest rate 4.07 % 4.31 % 3.78 % Expected term, in years 4.50 4.50 4.50 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 84 Table of Contents 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 following table summarizes grant date weighted average fair value of options granted and options forfeited: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Grant date weighted average fair value of options granted $ 51.46 $ 23.50 $ 12.63 Grant date weighted average fair value of options forfeited $ — $ 11.87 $ 10.98 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 risk-free rate is based on the U.S. Treasury yield curve rates in effect at the time of the grant using the term most consistent with the expected life of the award. 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 $ 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: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding at December 29, 2024 763,786 $ 32.54 Granted 61,079 137.81 Forfeited — — Exercised ( 96,939 ) 26.88 $ 10,869 Outstanding at December 28, 2025 727,926 42.12 3.51 $ 30,835 Exercisable—December 28, 2025 514,941 28.52 2.81 $ 26,301 Vested/Expected to vest—December 28, 2025 727,926 $ 42.12 3.51 $ 30,835 RSUs Outstanding RSUs 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. Under all other scenarios, the awards continue to vest per the schedule outlined in the applicable award agreement. Shares issued for RSU vesting are newly issued shares. The fair value for restricted stock units is calculated based on the closing stock price on the date of grant. The total grant date fair value of RSUs vested during 2025, 2024 and 2023 was $ 14.6 million, $ 15.2 million and $ 13.3 million, respectively. 85 Table of Contents The following table summarizes the weighted average grant date fair value of RSUs awarded during 2025, 2024 and 2023: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 RSUs awarded $ 135.42 $ 63.14 $ 33.21 The following table summarizes RSU activity during 2025: Number of RSUs Weighted Average Grant Date Fair Value Outstanding at December 29, 2024 610,415 $ 46.33 Awarded 193,648 135.42 Vested ( 346,813 ) 42.06 Forfeited ( 24,125 ) 72.74 Outstanding at December 28, 2025 433,125 $ 88.11 PSAs 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 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). There were no outstanding 2021 PSAs as of December 28, 2025. PSAs granted in 2022 are subject to the Company achieving certain EBIT performance targets for the 2024 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted. The performance conditions with respect to fiscal year 2024 EBIT were deemed to have been met, and PSAs vested at 148 % 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). PSAs granted in 2025 are subject to the Company achieving certain EBIT performance targets for the 2027 fiscal year. The criteria is based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted. If performance conditions are met, the applicable number of performance shares will vest on the third anniversary of the grant date (March 2028). 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 86 Table of Contents 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. Shares issued for PSA vesting are newly issued shares. The fair value for PSAs is calculated based on the closing stock price on the date of grant. 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. The total grant date fair value of performance shares forfeited and not earned during 2024 was $ 4.2 million. The total grant date fair value of the 0.4 million PSAs issued but not released as of December 29, 2024 was $ 14.9 million. The total grant date fair value of PSAs granted during 2023 was $ 5.7 million. The total grant date fair value of PSAs vested during 2023 was $ 4.5 million. The total grant date fair value of performance shares forfeited or not earned during 2023 was $ 1.1 million. 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 following table summarizes PSA activity during 2025: Number of PSAs Weighted Average Grant Date Fair Value Outstanding at December 29, 2024 370,278 $ 40.37 Awarded 58,805 137.81 Vested ( 182,560 ) 31.54 Forfeited — — PSAs earned 59,206 31.49 Outstanding at December 28, 2025 305,729 $ 62.67 Share-Based Compensation Expense The Company presents share-based compensation expense in Selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows: Year Ended December 28, 2025 December 29, 2024 December 31, 2023 Share-based compensation expense $ 31,103 $ 28,417 $ 18,898 Income tax benefit ( 3,581 ) ( 3,647 ) ( 3,007 ) Net share-based compensation expense $ 27,522 $ 24,770 $ 15,891 87 Table of Contents As of December 28, 2025, total unrecognized compensation expense and remaining weighted average recognition period related to outstanding share-based awards were as follows: Unrecognized compensation expense Remaining weighted average recognition period Options $ 3,786 1.8 RSUs 24,761 2.0 PSAs 16,289 1.9 Total unrecognized compensation expense at December 28, 2025 $ 44,836 During 2025, 2024 and 2023, the Company received $ 2.6 million, $ 4.9 million and $ 11.5 million in cash proceeds from the exercise of options, respectively. The Company recorded tax benefits of $ 16.1 million, $ 7.0 million and $ 5.0 million during 2025, 2024 and 2023, respectively, resulting from share-based awards. 23. Store Closures In February 2023, the Company's board of directors approved the closing of 11 stores, all of which were closed during 2023. These stores, on average, were approximately 30 % larger than the Company's current prototype format and were underperforming financially. The closure of these stores resulted in a charge of $ 27.8 million in 2023 related to the impairment of leasehold improvements and right-of-use assets and was reflected in Store closure and other costs, net on the consolidated statements of income. The impairment charge represented the excess of the carrying value over the estimated fair value of each store's asset group. Accelerated depreciation on the closed stores' assets during 2023 was $ 5.9 million, and was reflected in Depreciation and amortization on the consolidated statements of income. Severance expense during 2023 was immaterial. 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. 24. Business Combination On March 20, 2023, the Company completed its acquisition of Ronald Cohn, Inc., a corporation that owned two stores located in California operating under the ‘Sprouts Farmers Market’ name pursuant to a legacy trademark license arrangement. The aggregate consideration paid in the transaction consisted of 0.6 million of the Company’s common shares valued at $ 18.1 million using the closing price of the Company's common stock on March 20, 2023 and cash consideration of $ 13.0 million. The Company accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires that the purchase price be allocated to the assets and liabilities acquired based on their estimated fair values as of the acquisition date. Acquisition-related costs were immaterial and were expensed as incurred. The financial results of the acquired stores have been included in the Company’s consolidated financial statements from the date of acquisition. The acquired stores' results of operations were not material to the Company's consolidated results. The net purchase price was allocated to the net tangible assets of ($ 4.9 ) million and a reacquired right intangible asset of $ 23.1 million based on their fair values on the acquisition date. The remaining unallocated net purchase price of $ 12.9 million was recorded as goodwill. Goodwill represents the future economic benefits to the Company from the acquisition, which include the Company's ability to fully control the Sprouts Farmers Market brand by termination of the legacy trademark license agreement and allowing further expansion opportunities in Southern California. The goodwill is not expected to be deductible for tax purposes. 88 Table of Contents Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None.