Sprouts Farmers Market, Inc. 10-Q

Item 1. Financial Statements SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) March 29, 2026 December 28, 2025 ASSETS Current assets: Cash and cash equivalents $ 252,161 $ 257,282 Accounts receivable, net 63,313 65,221 Inventories 419,178 427,095 Prepaid expenses and other current assets 37,642 60,306 Total current assets 772,294 809,904 Property and equipment, net of accumulated depreciation 1,128,928 1,085,356 Operating lease assets, net 1,756,367 1,652,732 Intangible assets 208,215 208,215 Goodwill 381,750 381,750 Other assets 21,820 20,692 Total assets $ 4,269,374 $ 4,158,649 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 260,737 $ 291,033 Accrued liabilities 311,281 304,419 Accrued salaries and benefits 61,461 96,017 Accrued income tax 16,396 — Current portion of operating lease liabilities 185,374 177,263 Current portion of finance lease and other finance obligations 2,549 2,071 Total current liabilities 837,798 870,803 Long-term operating lease liabilities 1,775,890 1,682,425 Long-term debt and other finance obligations 97,044 81,585 Other long-term liabilities 40,853 40,283 Deferred income tax liability 83,549 80,479 Total liabilities 2,835,134 2,755,575 Commitments and contingencies (Note 6) Stockholders’ equity: Undesignated preferred stock; $ 0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding — — Common stock, $ 0.001 par value; 200,000,000 shares authorized, 94,556,903 shares issued and outstanding, March 29, 2026; 95,926,024 shares issued and outstanding, December 28, 2025 95 96 Additional paid-in capital 850,411 841,848 Retained earnings 583,734 561,130 Total stockholders’ equity 1,434,240 1,403,074 Total liabilities and stockholders’ equity $ 4,269,374 $ 4,158,649 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Thirteen weeks ended March 29, 2026 March 30, 2025 Net sales $ 2,329,179 $ 2,236,436 Cost of sales 1,411,903 1,350,073 Gross profit 917,276 886,363 Selling, general and administrative expenses 658,781 623,226 Depreciation and amortization (exclusive of depreciation included in cost of sales) 42,027 35,099 Store closure and other costs, net 1,161 1,706 Income from operations 215,307 226,332 Interest income, net ( 129 ) ( 924 ) Income before income taxes 215,436 227,256 Income tax provision 51,712 47,230 Net income $ 163,724 $ 180,026 Net income per share: Basic $ 1.73 $ 1.83 Diluted $ 1.71 $ 1.81 Weighted average shares outstanding: Basic 94,813 98,537 Diluted 95,585 99,719 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) For the thirteen weeks ended March 29, 2026 Shares Common Stock Additional Paid In Capital Retained Earnings Total Stockholders’ Equity Balances at December 28, 2025 95,926,024 $ 96 $ 841,848 $ 561,130 $ 1,403,074 Net income — — — 163,724 163,724 Issuance of shares under stock plans 519,153 1 — — 1 Repurchase and retirement of common stock, including excise tax ( 1,888,274 ) ( 2 ) — ( 141,120 ) ( 141,122 ) Share-based compensation — — 8,563 — 8,563 Balances at March 29, 2026 94,556,903 $ 95 $ 850,411 $ 583,734 $ 1,434,240 For the thirteen weeks ended March 30, 2025 Shares Common Stock Additional Paid In Capital Retained Earnings Total Stockholders’ Equity Balances at December 29, 2024 99,255,036 $ 99 $ 808,140 $ 513,654 $ 1,321,893 Net income — — — 180,026 180,026 Issuance of shares under stock plans 500,863 1 — — 1 Repurchase and retirement of common stock, including excise tax ( 1,568,017 ) ( 2 ) — ( 220,592 ) ( 220,594 ) Share-based compensation — — 6,656 — 6,656 Balances at March 30, 2025 98,187,882 $ 98 $ 814,796 $ 473,088 $ 1,287,982 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) Thirteen weeks ended March 29, 2026 March 30, 2025 Operating activities Net income $ 163,724 $ 180,026 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 44,276 36,820 Operating lease asset amortization 38,598 34,689 Share-based compensation 8,563 6,656 Deferred income taxes 3,070 4,595 Other non-cash items 1,785 1,532 Changes in operating assets and liabilities: Accounts receivable 2,894 10,763 Inventories 7,917 3,049 Prepaid expenses and other current assets 21,293 ( 236 ) Other assets ( 412 ) ( 357 ) Accounts payable 3,147 54,084 Accrued liabilities 190 6,102 Accrued salaries and benefits ( 34,556 ) ( 29,777 ) Accrued income tax 16,396 33,922 Operating lease liabilities ( 41,570 ) ( 41,249 ) Other long-term liabilities ( 28 ) ( 1,530 ) Cash flows from operating activities 235,287 299,089 Investing activities Purchases of property and equipment ( 101,151 ) ( 59,479 ) Cash flows used in investing activities ( 101,151 ) ( 59,479 ) Financing activities Payments on finance lease liabilities ( 225 ) ( 326 ) Repurchase of common stock ( 140,000 ) ( 218,762 ) Cash flows used in financing activities ( 140,225 ) ( 219,088 ) (Decrease)/Increase in cash, cash equivalents, and restricted cash ( 6,089 ) 20,522 Cash, cash equivalents, and restricted cash at beginning of the period 260,894 267,213 Cash, cash equivalents, and restricted cash at the end of the period $ 254,805 $ 287,735 Supplemental disclosure of cash flow information Cash paid for interest $ 463 $ 807 Cash paid/(refunded) for income taxes 1,025 ( 102 ) Supplemental disclosure of non-cash activities Property and equipment in accounts payable and accrued liabilities $ 35,658 $ 19,224 Excise tax accrued on repurchase of common stock 5,294 3,823 Leased assets obtained in exchange for new operating lease liabilities, net of lease terminations 142,232 69,736 Property acquired through finance obligations 16,162 — The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation 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 March 29, 2026, the Company operated 483 stores in 25 states. For convenience, the “Company” is used to refer collectively to Sprouts Farmers Market, Inc. and unless the context otherwise requires, its subsidiaries. The Company’s store operations are conducted by its subsidiaries. The accompanying unaudited consolidated financial statements include the accounts of the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. All intercompany accounts and transactions have been eliminated in consolidation. The Company has no items included in other comprehensive income for the periods presented. Interim results are not necessarily indicative of results for any other interim period or for a full fiscal year. The information included in these consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the fiscal year ended December 28, 2025 (“fiscal year 2025”) included in the Company’s Annual Report on Form 10-K, filed on February 19, 2026. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The Company reports its results of operations on a 52- or 53-week fiscal calendar ending on the Sunday closest to December 31. The fiscal year ending January 3, 2027 (“fiscal year 2026”) is a 53-week year and fiscal year 2025 is a 52-week year. The Company reports its results of operations on a 13-week quarter, except for 53-week fiscal years (in which the fourth quarter has 14 weeks). All dollar amounts are in thousands, unless otherwise noted. 8 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Summary of Significant Accounting Policies 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 on the Company's 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 on the Company's consolidated balance sheets. A summary of the activity and balances in the gift card and loyalty program liabilities is as follows: Thirteen weeks ended March 29, 2026 March 30, 2025 Beginning Balance $ 21,099 $ 11,071 Gift cards issued during the period but not redeemed (1) 1,140 1,129 Loyalty value deferred during the period, net of amount redeemed or expired (1) ( 696 ) — Revenue recognized from beginning liability ( 2,871 ) ( 2,703 ) Ending Balance $ 18,672 $ 9,497 (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 March 29, 2026. Restricted Cash Restricted cash primarily relates to the Company's healthcare, general liability and workers’ compensation plan benefits of $ 2.6 million and $ 3.6 million as of March 29, 2026 and December 28, 2025, respectively. These balances are included in prepaid expenses and other current assets in the consolidated balance sheets. 9 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. 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 the thirteen weeks ended March 29, 2026 had, or are expected to have, a material impact on the Company’s consolidated financial statements. 3. Fair Value Measurements The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of goodwill, intangible assets and long-lived assets. 10 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company did no t have any financial liabilities measured at fair value on a recurring basis as of March 29, 2026 and December 28, 2025. The determination of fair values of certain tangible and intangible assets for purposes of the Company’s goodwill or long-lived asset impairment evaluation is based upon Level 3 inputs. When necessary, the Company uses third party market data and market participant assumptions to derive the fair value of its asset groupings, which primarily include right-of-use lease assets and property and equipment. Cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued salaries and benefits approximate fair value because of the short maturity of those instruments. 4. Long-Term Debt and Other Finance Obligations A summary of long-term debt and other finance obligations is as follows: As of Facility Maturity Interest Rate March 29, 2026 December 28, 2025 Senior secured debt $ 600.0 million Credit Agreement July 25, 2030 Variable — — Former Credit Facility March 25, 2027 Variable $ — $ — Finance Obligations September 30, 2036 n/a 85,264 69,420 Finance lease liabilities Various n/a 11,780 12,165 Long-term debt and other finance obligations $ 97,044 $ 81,585 (1) The Former Credit Facility was replaced by the $ 600.0 million Credit Agreement as discussed below. Credit Agreement The Company’s subsidiary, Sprouts Farmers Markets Holdings, LLC (“Intermediate Holdings”), is the borrower under a credit agreement entered into on July 25, 2025 (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility (the "Revolving Credit Facility") with an initial aggregate commitment of $ 600.0 million. Amounts outstanding under the Credit Agreement may be increased from time to time in accordance with an expansion feature set forth in the Credit Agreement. The Company capitalized debt issuance costs of $ 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 Bank of America, 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 $ 22.0 million have been issued as of March 29, 2026 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 11 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 March 29, 2026, 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 March 29, 2026. As of March 29, 2026, 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 the thirteen weeks ended March 29, 2026, the Company made no additional borrowings and had no outstanding debt under the Credit Agreement as of March 29, 2026. During 2025, the Company made no additional borrowings and had no outstanding debt under the Credit Agreement or the Former Credit Facility as of December 28, 2025. Covenants The Credit Agreement contains financial, affirmative and negative covenants. The negative covenants include, among other things, limitations on the Company’s ability to: • incur additional indebtedness; • grant additional liens; • enter into sale-leaseback transactions; • make loans or investments; • merge, consolidate or enter into acquisitions; • pay dividends or distributions; • enter into transactions with affiliates; • enter into new lines of business; 12 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) • modify the terms of certain debt or other material agreements; and • change its fiscal year. Each of these covenants is subject to customary and other agreed-upon exceptions. In addition, the Credit Agreement requires that the Company and its subsidiaries maintain a maximum total net leverage ratio not to exceed 3.75 to 1.00, which ratio may be increased from time to time in connection with certain permitted acquisitions pursuant to conditions as set forth in the Credit Agreement, and a minimum interest coverage ratio not to be less than 3.00 to 1.00. Each of these covenants is tested as of the last day of each fiscal quarter. The Company was in compliance with all applicable covenants under the Credit Agreement as of March 29, 2026. 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 March 29, 2026, the Company has recorded $ 85.3 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 amount of the guarantee is to be determined based upon final construction costs. As of March 29, 2026, no amounts related to this residual value guarantee have been deemed probable. 5. Income Taxes The Company’s effective tax rate increased to 24.0 % for the thirteen weeks ended March 29, 2026, compared to 20.8 % for the thirteen weeks ended March 30, 2025. The increase in the effective tax rate was primarily driven by a reduction in the benefit for stock-based compensation in the current year partially offset by a decrease in non-deductible executive compensation. The income tax effect resulting from excess tax benefits of share-based payment awards was $ 4.2 million and $ 12.8 million for the thirteen weeks ended March 29, 2026 and March 30, 2025, respectively. The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three years, with some exceptions, following the tax year to which those filings relate. 6. Commitments and Contingencies The Company is exposed to claims and litigation matters arising in the ordinary course of business and uses various methods to resolve these matters that are believed to best serve the interests of the Company’s stakeholders. The Company’s primary contingencies are associated with self-insurance obligations and litigation matters. Self-insurance liabilities require significant judgment and actual claim settlements and associated expenses may differ from the Company’s current provisions for loss. 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 13 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 concluded, dispositive motions have been ruled on, and a trial date has been set for June 2026. Stockholder Actions On November 24, 2025, a complaint was filed in the United States District Court for the District of Arizona against the Company and certain of its officers by Singh Family Revocable Trust u/a dtd 02/18/2019 on behalf of a purported class of the Company's stockholders. The complaint purports to state claims under Sections 10 and 20 of the Securities Exchange Act of 1934, as amended, based on allegedly false and misleading statements made by certain of the Company's officers regarding the resilience of its customers against macroeconomic pressures. The complaint seeks damages on behalf of the purported class in an unspecified amount and an award of reasonable costs and attorneys’ fees. On December 16, 2025, stockholder Fraser MacDonald filed a separate complaint in the United States District Court for the District of Arizona, purporting to assert derivatively on behalf of the Company claims under federal and state law against nine of the Company’s directors and officers. This complaint echoes many of the substantive allegations in the securities class action and, in addition to unspecified damages and attorneys’ fees, seeks corporate governance reforms by the Company. On January 9, 2026, stockholder Richard Kaiser filed another complaint in the same District Court, asserting similar claims against the same nine directors and officers on similar grounds. On February 6, 2026, the District Court issued an order consolidating the two derivative actions under the caption MacDonald v. Sinclair, et al., No. CV-25-04723-PHX-DWL (D. Ariz.). On April 21, 2026, the Court granted the defendants’ unopposed motion to stay the consolidated case pending resolution of the Singh Family Revocable Trust securities class action. The case is presently stayed accordingly. 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. 7. Stockholders’ Equity 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 new repurchase authorization does not have an expiration date; however, the Board expects to periodically review the authorization to assess its continued appropriateness in light of the Company's capital allocation priorities, market conditions, alternative investment opportunities, and other factors. The following table outlines the 14 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) common stock share repurchase programs authorized by the Company’s board of directors and the related repurchase activity and available authorization as of March 29, 2026: Effective date Expiration date Amount authorized Cost of repurchases Authorization available May 22, 2024 May 22, 2027 $ 600,000 $ 457,408 $ — August 13, 2025 N/A $ 1,000,000 $ 303,995 $ 696,005 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): Thirteen weeks ended March 29, 2026 March 30, 2025 Number of common shares acquired 1,888,274 1,568,017 Average price per common share acquired $ 74.74 $ 140.68 Total cost of common shares acquired $ 141,122 $ 220,594 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 March 29, 2026 and through April 27, 2026, the Company repurchased an additional 0.5 million shares of common stock for $ 40.0 million, excluding excise tax. 8. Net Income Per Share The computation of basic net income per share is based on the number of weighted average shares outstanding during the period. The computation of diluted net income per share includes the dilutive effect of share equivalents consisting of incremental shares deemed outstanding from the assumed exercise of options and unvested restricted stock units ("RSUs"). Performance share awards ("PSAs") are included in the computation of diluted net income per share only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be satisfied if the end of the reporting period were the end of the related performance period, and if the effect would be dilutive. 15 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands, except per share amounts): Thirteen weeks ended March 29, 2026 March 30, 2025 Basic net income per share: Net income $ 163,724 $ 180,026 Weighted average shares outstanding - basic 94,813 98,537 Basic net income per share $ 1.73 $ 1.83 Diluted net income per share: Net income $ 163,724 $ 180,026 Weighted average shares outstanding - basic 94,813 98,537 Dilutive effect of share-based awards: Assumed exercise of options to purchase shares 349 575 RSUs 190 462 PSAs 233 145 Weighted average shares and equivalent shares outstanding - diluted 95,585 99,719 Diluted net income per share $ 1.71 $ 1.81 For the thirteen weeks ended March 29, 2026, the Company had 0.1 million options, 0.2 million RSUs and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. For the thirteen weeks ended March 30, 2025, the Company had 0.1 million options and 0.3 million PSAs outstanding which were excluded from the computation of diluted net income per share as those awards would have been antidilutive or were performance awards with performance conditions not yet deemed met. 9. Segments The Company has one operating segment and, therefore, one reportable segment: healthy grocery stores. The Company derives all its revenues from the sale of products at its various store locations across the United States. The accounting policies of the segment are the same as described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance and allocates resources based on consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The following table represents the significant expense and key metrics reviewed by the CODM: Thirteen weeks ended March 29, 2026 March 30, 2025 Net Sales $ 2,329,179 $ 2,236,436 Less: Cost of sales 1,411,903 1,350,073 Direct store expenses 570,594 534,797 Other segment items (1) 131,375 125,234 Interest income, net ( 129 ) ( 924 ) Income tax provision 51,712 47,230 Net income $ 163,724 $ 180,026 16 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Other segment items include non-store selling, general, and administrative expenses, depreciation and amortization, store closure costs, and other overhead expenses. The Company categorizes the varieties of products it sells as perishable and non-perishable. Perishable product categories include produce, meat and meat alternatives, seafood, deli, bakery, floral and dairy and dairy alternatives. Non-perishable product categories include grocery, vitamins and supplements, bulk items, frozen foods, beer and wine, and natural health and body care. In accordance with ASC 606, the following table represents a disaggregation of revenue for the thirteen weeks ended March 29, 2026 and March 30, 2025: Thirteen weeks ended March 29, 2026 March 30, 2025 Perishables $ 1,316,584 56.5 % $ 1,269,732 56.8 % Non-Perishables 1,012,595 43.5 % 966,704 43.2 % Net Sales $ 2,329,179 100.0 % $ 2,236,436 100.0 % 10. Share-Based Compensation 2022 Incentive Plan In March 2022, the Company’s board of directors adopted the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Incentive Plan”), which became effective May 25, 2022, upon approval by the Company’s stockholders. The 2022 Incentive Plan provides team members of the Company, certain consultants and advisors who perform services for the Company, and non-employee members of the Company's board of directors with the opportunity to receive grants of equity awards, including stock options, RSUs, PSAs, and other stock-based awards. The 2022 Incentive Plan replaced the 2013 Incentive Plan (as described below). Awards Granted under the 2022 Incentive Plan During the thirteen weeks ended March 29, 2026, the Company granted the following share-based compensation awards under the 2022 Incentive Plan: Grant Date RSUs PSAs Options March 12, 2026 335,408 119,012 112,765 Total 335,408 119,012 112,765 Weighted-average grant date fair value $ 78.84 $ 78.84 $ 30.37 Weighted-average exercise price $ — $ — $ 78.84 The aggregate number of shares of common stock that may be issued to team members and directors under the 2022 Incentive Plan may not exceed 6,600,000 , subject to the following adjustments. If any awards granted under the 2022 Incentive Plan, terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid in shares, the shares will again be available for purposes of the 2022 Incentive Plan. The number of shares subject to outstanding awards under the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “2013 Incentive Plan”) that terminate, expire, are paid in cash, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Incentive Plan after the effective date of the 2022 Incentive Plan will be available for issuance under the 2022 Incentive Plan. As of March 29, 2026, there were 1,141,294 stock awards outstanding and 4,734,038 shares remaining available for issuance under the 2022 Incentive Plan. 17 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2013 Incentive Plan Prior to the adoption of the 2022 Incentive Plan, the 2013 Incentive Plan served as the umbrella plan for the Company’s share-based and cash-based incentive compensation programs for its directors, officers and other team members. Upon stockholder approval of the 2022 Incentive Plan on May 25, 2022, no further awards will be granted under the 2013 Incentive Plan, but awards outstanding under the 2013 Incentive Plan will remain outstanding in accordance with their terms and the terms of the 2013 Incentive Plan. Stock Options The Company uses the Black-Scholes option pricing model to estimate the fair value of options at grant date. Options vest in accordance with the terms set forth in the grant letter. Time-based options vest annually over a period of three years . RSUs The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date. RSUs generally vest annually over a period of two or three years from the grant date. PSAs PSAs granted in 2023 are subject to the Company achieving certain EBIT performance targets for the 2025 fiscal year. The criteria was based on a range of performance targets in which grantees may earn 0 % to 200 % of the base number of awards granted. The performance conditions with respect to fiscal year 2025 EBIT were deemed to have been met, and the PSAs vested at the maximum payout level on the third anniversary of the grant date (March 2026). During the thirteen weeks ended March 29, 2026, 286,680 of the PSAs vested. There were no outstanding 2023 PSAs as of March 29, 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). PSAs granted in 2026 are subject to the Company achieving certain EBIT performance targets for the 2028 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 2029). Share-based Compensation Expense The Company presents share-based compensation expense in selling, general and administrative expenses on the Company’s consolidated statements of income. The amount recognized was as follows: Thirteen weeks ended March 29, 2026 March 30, 2025 Share-based compensation expense $ 8,563 $ 6,656 18 Table of Contents SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following share-based awards were outstanding under the 2022 and 2013 Incentive Plans as of March 29, 2026 and March 30, 2025: As of March 29, 2026 March 30, 2025 (in thousands) Options Vested 642 612 Unvested 199 213 RSUs 535 476 PSAs 281 306 As of March 29, 2026, 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 $ 6,453 2.4 RSUs 46,320 2.4 PSAs 22,634 2.2 Total unrecognized compensation expense at March 29, 2026 $ 75,407 During the thirteen weeks ended March 29, 2026 and March 30, 2025, no options were exercised. 11. Goodwill The Company’s goodwill balance was $ 381.8 million as of March 29, 2026 and December 28, 2025. As of March 29, 2026 and December 28, 2025, the Company had no accumulated goodwill impairment losses. The goodwill is related to the acquisitions of Henry’s Farmers Market and Sunflower Farmers Market in 2011 and 2012, respectively, and the acquisition of Ronald Cohn, Inc. in 2023. 12. Store Closures No stores were closed during the thirteen weeks ended March 29, 2026 and all lease costs associated with the Company's closed store locations for which a lease remains in effect are included within Store closure and other cost, net. 19 Table of Contents