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F500-2021-437-Sprouts Farmers Market

The supermarket chain offers a wide selection of natural and organic foods, and operates more than 340 stores in 23 states. It makes its <em>Fortune</em> 500 debut this year.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

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This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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<p>Founded in 1943, Sprouts Farmers Market is a retailer of natural and organic food products sold under the Sprouts brand. Perishable products include produce, dairy, meat, and bakery goods. The company also offers nonperishables such as frozen foods, beer and wine, vitamins, body care products, and more.</p>

Q2 2025

Q1 2025

Sprouts Farmers Market (SFM): Company Profile, Stock Price, News, Rankings

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Sprouts Farmers Market

sprouts farmers market

Good day, and thank you for standing by. Welcome to the Sprouts Farmers Market Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session.

I would now like to hand the conference over to your speaker today, Susanna Livingston, Vice President of Investor Relations and Treasury.

Thank you, and good afternoon, everyone. We are pleased you are joining Sprouts on our second quarter twenty twenty five earnings call. Jack Sinclair, Chief Executive Officer and Curtis Valentine, Chief Financial Officer are with me today. Nick Conant, our President and Chief Operating Officer had a family commitment and not be joining us for this quarter. The earnings release announcing our second quarter twenty twenty five results, the webcast of this call and financial slides can be accessed through the Investor Relations section of our website at investors.sprouts.com.

During this call, may make certain forward looking statements, including statements regarding our expectations for 2025 and beyond. These statements involve several risks and uncertainties that could cause results to differ materially from those described in the forward looking statements. For more information, please refer to the risk factors discussed in our SEC filings and the commentary on forward looking statements at the end of our earnings release. Our remarks today include references to non GAAP financial measures. Please see the tables in our earnings release to reconcile our non GAAP financial measures to the comparable GAAP figures. With that, let me hand it over to Jack.

Thanks, Susanna, and good afternoon, everyone. At Sprouts, we remain committed to our purpose, to help people live and eat better. In an environment where consumers are becoming more mindful about what they eat and where it comes from, Sprouts stands apart. Our focus on fresh, local and innovative natural and organic products, along with our knowledgeable team members and approachable stores, continues to resonate with our target customer. In the second quarter, we delivered strong results, driven by our strategy to market to our target customers with a differentiated assortment, disciplined operations, an advantaged supply chain and ongoing store growth.

Our sales increased 17% supported by comparable store sales of 10.2% and robust new store performance. Our diluted earnings per share reached $1.35 reflecting a 44% increase compared to the same period last year. We are proud of how our team continues to execute, focusing on our customers, which in turn continues to deliver strong results. Today, we'll walk you through our performance highlights, update you on our strategic initiatives, and share how we're positioning Sprouts for continued success in the second half of the year and beyond. We're excited about our progress and remain focused on delivering innovative, fresh and healthy foods that meets the evolving needs of our health conscious consumers.

I want to thank the team for their ongoing commitment to supporting our customers on their health journey. For now, I'll hand it to Curtis to review our second quarter financial results, as well as our updated 2025 outlook. Curtis?

Thanks, Jack, and good afternoon, everyone. In the second quarter, total sales were $2,200,000,000 up $327,000,000 or 17% compared to the same period last year. This growth was driven by a 10.2% increase in comparable store sales and the strong results from our new stores. The performance of our comps across categories, channels and geography remains balanced, supported by new stores entering the comp base. Traffic was strong and accounted for the majority of our comp.

As anticipated, it slightly moderated from the first quarter, which is not surprising given traffic was the main driver of last year's acceleration. Our e commerce sales grew 27%, representing approximately 15% of our total sales for the quarter, with good performance from all partners. Additionally, Sprouts brand contributed 24% to our total sales for the quarter. Our second quarter gross margin was 38.8, an increase of 91 basis points compared to the same period last year. This increase was primarily due to leveraging our inventory and category management improvements as well as leverage from our sales performance.

SG and A for the quarter totaled $645,000,000 an increase of $89,000,000 and 33 basis points of leverage compared to the same period last year. Our strong comp performance led to leverage mainly in labor and occupancy. Store closure and other costs totaled approximately $2,000,000 for the quarter. These are primarily due to costs associated with exiting leases related to our twenty twenty three store closures. Depreciation and amortization, excluding depreciation included in the cost of sales was $37,000,000 For the second quarter, our earnings before interest and taxes were $179,000,000 Interest income was approximately $431,000 and our effective tax rate was 26%.

Net income was $134,000,000 and diluted earnings per share were $1.35 an increase of 44% compared to the same period last year. During the second quarter, we opened 12 new stores ending the quarter with four fifty five stores across 24 states. A strong and healthy balance sheet has underpinned our financial performance. Year to date, we generated $410,000,000 in operating cash flow, which allowed us to self fund our investments of $138,000,000 in capital expenditures, net of landlord reimbursement to grow our business. We have also returned $292,000,000 to our shareholders by repurchasing 2,000,000 shares.

We have $158,000,000 remaining under our current share repurchase authorization. We ended the second quarter with $261,000,000 in cash and cash equivalents and $23,000,000 of outstanding letters of credit. As you probably saw on July 25, we closed a $600,000,000 revolving credit facility, which replaced our previously existing $700,000,000 revolver. The terms and conditions are substantially similar to our previous agreement with a new expiration date of July 2030. While we plan to fund our operations and unit growth through our robust cash flow generation, this facility provides Sprouts with financial flexibility as we grow.

An increasing number of customers are emphasizing the importance of quality, healthy food options and this positive trend, along with continued new store performance, is inspiring our plans to expand into new markets. Looking ahead to the remainder of 2025, we are dedicated to achieving significant earnings growth while capitalizing on these emerging opportunities. For 2025, we expect total sales growth to be 14.5% to 16% and comp sales in the range of 7.5% to 9%. We still anticipate comp sales to moderate as we cycle the higher comps from late twenty twenty four. We plan to open at least 35 new stores.

Earnings before interest and taxes are expected to be between $675,000,000 and $690,000,000 and earnings per share are expected to be between $5.2 and $5.32 assuming no additional share repurchases. That said, we do expect to continue to repurchase shares opportunistically. We also expect our corporate tax rate to be approximately 24%. During the year, we expect capital expenditures net of landlord reimbursements to be between $230,000,000 and $250,000,000 For the third quarter, we expect comp sales to be in the range of 6% to 8% and earnings per share to be between $1.12 and $1.16 As we have begun to lap last year's comp step changes, we continue to see consistent two year stack performance of approximately 15%. In the second quarter, we also benefited from some external tailwinds that pushed the two year stack above our run rate in May and June.

While those tailwinds come and go, the approximately fifteen percent two year stack remains consistent and gives us confidence in our increased comp guidance. Year over year margin rate in both gross margin and SG and A are expected to start normalizing in the third quarter as we compare to last year's improved shrink performance and we work to derisk our supply chain, providing more flexibility and capacity. We anticipate continued EBIT margin expansion of approximately 40 to 50 basis points year over year. For the rest of 2025, we are confident in our strong financial foundation and successful execution of our strategic initiatives, which position us to deliver strong earnings growth in the second half. And with that, I'll turn it back to Jack.

Thanks, Curtis. We leveraged our strategic initiatives in the second quarter, which delivered excellent results and set us up for an exciting future. We keep reinvesting in our business by developing innovative products and enhancing our operations both in stores and across the supply chain. Additionally, we're driving engagement with our customers through targeted service strategies and carefully chosen store locations. We also continue to prioritize investing in our team members who play a vital role in driving these results.

Customers are increasingly drawn to Sprouts due to our strength in identifying trendy offerings, providing fresh and quality food and launching innovative products rich in health driven attributes. Innovation is a cornerstone of our strategy and our consistent launch of new products keeps our selection fresh and exciting. Our innovation center continues to grow in sales with baskets that contain innovation items being more than double the size of our overall company basket. We remain focused on the categories that matter to our target customers. The Sprouts brand continues to excel with plans to release over three fifty new products this year alone.

Our success is driven by our strong emphasis on attributes, high quality items and the discovery of products through seasonally themed events. Growth in organic products is on the rise, now accounting for nearly a third of our total sales and over 50% of our produce sales, thanks to our organic first merchandising initiatives. Additionally, we continue to expand our SKU count in trending categories, such as no seed oils and high protein items. We now offer more than 3,700 high protein products with four fifty new items set to be released this year. Our focus on attribute driven products is resulting in increased sales that surpass the rest of the business and outpace overall grocery industry growth.

These efforts reinforce and strengthen Sprout's leadership in the Better For You segment, allowing us to capitalize quickly on key market trends. As you know, we've been building an advantaged supply chain that is a strategic priority, enabling scalable growth for the future. Fresh is the most important category for us. We've been building capacity over the years to take on more self distribution. This includes expanding capacity in existing markets, such as our Northern California DC in early twenty twenty six, and building new capacity in our expansion markets.

By taking control of key product categories, such as meat and seafood, we are taking critical steps towards self sufficiency. This approach allows us more control over our supply chain while minimizing operational and supply chain risk. Although there's significant work to do, we will begin in sourcing fresh meat and seafood this quarter in Orlando and continue the work through the 2026. We will continue to focus on new DC expansion in the next three to five years to support our continued growth. The Sprouts Rewards loyalty program launched in Arizona this month, marking an important step in our Sprouts customer engagement and personalization journey.

The results of our test and pilot programs have boosted our confidence in the program's potential, showing that loyalty members are shopping more frequently, growing at a faster rate and spending more. Our teams are excited and prepared to support the full rollout, which remains on track for the end of this year. This initiative presents a significant opportunity for us to better understand and serve our target customers, ultimately using these insights across our business to enhance the customer experience and create long term value. Currently, are seeing strong customer acquisition and an increase in share of wallet. Our customer experience is improving across all channels.

In store performance has strengthened due to better in stocks, fresher products and superior service. Additionally, our e commerce platform continues to grow with shop.sprouts.com experiencing the fastest increase in penetration. It has been exciting to witness the evolution of our marketing approach, which has transitioned from paper to digital to targeted marketing and now to genuinely personalised outreach, leveraging customer data to foster more meaningful and engaging customer experiences. Building great stores remains the foundation of our growth strategy and we're on track to open 35 locations this year. New stores this year are opening with solid top and bottom line results and last year's vintage is entering the comp base strong, reinforcing the effectiveness of our model.

We continue to expand our footprint to enhance accessibility for more customers across the country. With a robust pipeline of over 130 approved locations, including recent approvals in the Midwest and the Northeast, we are poised for continued momentum. From sea to shining sea, new stores are delivering strong performance, underscoring the strength of our brand and the scalability of our format. The great results and strong execution of our initiatives are possible because of our team members across the business. At the heart of our culture, our team believes in our purpose and values, which serves as the basis for long term success.

To support our future growth, we have developed a robust talent engine that focuses on our team members recruitment, development and engagement. Key initiatives include the Fast Track program to develop future store managers, the Assistant Store Manager University and our robust onboarding process. We have also implemented monthly talent planning reviews for our field to ensure we remain ahead of our needs and opportunities. As a result of these intentional culture building and training efforts, we have significantly reduced turnover, creating a more stable, engaged and high performing team. I want to express my gratitude to our 35,000 team members for their hard work, which continues to deliver outstanding results.

As we look ahead, we remain confident in our strategic direction and Sprouts unique position within the specialty food retail landscape. Our journey is not just about growing stores or improving margins, it's about deepening our connection with customers who seek real food, fresh quality ingredients and innovative products that meet their unique needs. We've been making progress, but we know there's much more to do, whether it's expanding our footprint, strengthening our supply chain or continuing to innovate. We're committed to building a resilient, purpose driven company that delivers long term value to our shareholders and positively impacts the communities we serve. Thank you for joining us today.

We look forward to sharing more of this journey in the quarters to come. With that, I'd like to turn it over to the operator for questions.

Thank you. Our first question comes from Leah Jordan with Goldman Sachs. You may proceed.

Thank you. Hi, Jack and Curtis. Great job to you and the team on the quarter. Just if wanted to you could provide some more detail on the loyalty program. I know it's been rolling out across the country, still more to go.

But I guess, what has surprised you so far as you've rolled it out to more regions? And then maybe what have you adapted now in your approach and any learnings over the past few months as it's been in some of your initial locations for longer?

Yes. Well, Leah, the first iteration of this is it was in 35 stores. Last week, we rolled out all of our stores in Arizona, so we're now up to close to 70 stores or 75 stores in terms of across. So we're still on the rollout across the nation. We've been learning the encouraging thing is the number of people who are signing up and the way the consumers are scanning is ahead of what our expectations were.

So we're encouraged by that. We're encouraged by the way it's working for we spent a lot of time and money making sure the execution and the experience for the customer was good and worked well and we're comfortable that we've learned a lot about how to make sure there isn't any clunkiness in the signing off and the making it work. We're very confident in where we're at. This will all be rolled out by the October, so we're feeling like the programme's ready to roll out and we think it will bring us some big benefits next year. So I think the learning's been about execution and making it work effectively.

And with the data that we're getting and the information, we're going to be in a very good position to evolve all aspects of our communication, aspects of our merchandising, aspects of where we should put stores. So we're going to learn a lot from it going forward. I'm very excited by the journey we're in the middle of, Leah.

That's very helpful. Thank you. And we'll look forward to hear more on that. I guess for a follow-up, I just wanted to switch over to digital. It continues to be very strong for you guys.

Just more color on the trends there. And also curious how engagement maybe is different for each of your partners? And is there any divergence as they mature at different rates? And then on your comments in the prepared remarks, you talked about sprouts.com being the fastest increase in penetration. So curious what you're doing differently there that's driving that? Thank you.

Sure. I think it's been pretty hi, Lee. This is Curtis. It's been pretty kind of consistent and balanced. The same story continues to play out as we go from quarter to quarter.

Three really good partners, all growing well. I think our team on the shop. Sprouts.com front just continues to learn about how to engage the customer there and work with our partners to do that well. And so they continue to make good solid progress. And that was probably the channel that was coming from the lowest base.

And so they continue to see really strong growth. And I think the only real difference is I think we've talked about it before, but Instacart, the Instacart basket tends to be about two x, The brick and mortar basket's a little bit bigger and the Uber Eats and DoorDash baskets are a little bit more convenience based, kind of what's for dinner tonight, milk, eggs, bread, staples. But outside of that, mix is pretty consistent up and down the different categories. And again, they're all growing really well and providing good service to the customer and good partners for us.

We're encouraged by the shop sprouts.com evolution and development because it gives us some confidence that the customers are navigating directly to the Sprouts brand as part of that context. And that's something that the team have been working on for a number of years now and it's really beginning to come together. And we think that'll build more loyalty going forward.

Thank you. Our next question comes from Edward Kelly with Wells Fargo. You may proceed.

Hi. Good afternoon, everyone. Nice quarter. I wanted to ask you about the comp and the cadence of momentum. So you talked about a stable sort of 15 percentage two year before May and June acceleration.

So I was hoping you could speak to that acceleration, curious if it was related to the disruption across the industry with UNFI. And then I'm curious what you've seen so far in July, and that kind of dovetails into guidance because the guidance for six to 8% in Q3, 6% is 15, right? So you've got it, the midpoint, a little bit better than that. I'm just kind of curious about sustainability of current trend and how you were thinking about it all with guidance.

Sure. Thanks, Ed. This is Curtis. Yeah, two things really in May and June. Really the biggest driver was we had a really strong produce season.

So we've seen some really good organic crops and availability. And so the team, again, has done a great job. We're well positioned. They work really closely with the growers. We're focused on local.

They're focused on organic first. And so when we have a good season, particularly in organic, they're able to capitalize on it. And that's what we really saw through May and June. As the seasons evolve, that's kind of normalized a bit. But in May and June, we saw a nice pop in the produce business.

And then the second piece, sure, there was quite a significant disruption in the natural organic space. We had a limited impact there just because we have a smaller portion of our business there. And so that was a help or two. We had some people come our way when they couldn't find things elsewhere. And that also boosted them.

That's a little bit more of the June. But the May story in total was a little bit better than that 15%. And then as far as how it's evolved quarter to date, both of those things have kind of settled and normalized a bit. And so we're kind of back into that fifteen percent two year stack run rate and really quarter to date through July, it's right at the midpoint from a two year stack perspective. And so that's what gives us the confidence in the guide.

Since we jumped up last September, it's been seven of the 11 periods have been in that 15% range, with just a few periods where we've seen some external factors that we've capitalized and seen stronger numbers. And so just the consistency of what we've seen, I think, gives us the confidence to guide where we guided.

Great. Thank you. That's good color. And then just a quick follow-up on the gross margin, another strong quarter. You talked about trends normalizing kind of from here into the back half.

But self distribution in meat and seafood is rolling in, and I'm curious as to how that impacts gross margin. And then loyalty is also ramping. And I'm not sure if there is some investment that takes place as that rolls out, too. So if you could just maybe speak to the outlook for the gross margin and how those things might impact it.

With regard to self distribution, Ed, we're going through a transition period. So we will get long term benefit on the margin, but that's not going to come through this year to the extent that it will in the future. So that's something that as we manage the transition, we've got some issues that we're trying to deal with and dealing with effectively in terms of how we're managing the margin. And loyalty will take we're given points in the loyalty, so there will be some element of cost around the loyalty that we've taken into account in all the margin forecasts going forward. But ultimately loyalty will about driving the top line.

And we think the margin in due course as we get support for the initiatives will enable us to neutralize any margin impact from loyalty going forward. Curtis, you maybe talk about the

Yeah, just the kind of cadence. I mean, it's kind of playing out as we expected, Ed. I mean, the first half was a little bit better. Certainly the supply disruptions that we've seen in both quarters helps on the shrink line a little bit, as we talked about last quarter. We're expecting that to stabilize and normalize here in the second half.

And then the comps for us normalize, so a little less supply chain leverage. We've got the distribution investments, and then we're up against the tougher compares and shrink. And so those are the kind of key factors, but really it's playing out as we'd expected.

Thank you. Our next question comes from Mike Montani with Evercore ISI. You may proceed.

Yes. Hey, thanks for taking the questions. Just wanted to ask if I could on the margin front first. Could you discuss if there was any kind of impact either on the COGS front or even in SG and A due to some of the UNFI issues that they had in the supply chain and then similarly from the loyalty program?

So no loyalty is just rolling out here in the third quarter, so no impact there. We had the same 30, low 30 stores that were on the pilot that they were on as of Q1. So no change in the loyalty story for Q2. On the disruption front, first off, it was great partnership with UNFI was really great. It was a difficult challenging period, but they worked really closely with the teams.

We were able to flow product through the entirety of it, albeit manually. And so it was helpful to be able to do that. And so it was pretty minimally disruptive to us. It's a small portion of our business. Again, just the product flow little bit challenging.

We didn't promote as much in the second quarter as a result. So some of those types of issues arose, but largely we're able to mitigate through it and we're kind of on the other side of it.

Okay. And then just a follow-up was on the new stores. If you could talk about what you're seeing in terms of new store performance and obviously how to think about the opening cadence for the rest of the year?

Well, we're committed to the 35 stores for the rest of the year. And we opened 12 very successful stores. We're absolutely delighted with the way the new store format is working. I think we're up to 100 of our V six format now in terms of we've opened all the stores have been opened in the new format and that's given us some consistency in terms of execution and rollout. We're feeling confident in the number of stores for the rest of the year.

I think the encouraging thing, Mike, for us is we're seeing a strong performance in what has traditionally been markets that were not that well known. We've been very encouraged by the progress we're making in the Mid Atlantic. The Florida stores really coming alive now in terms of the new stores that are opening. And by and large, we're we're heading, what's the baseball expression, we're heading close to 100 on our new stores at the moment.

Yeah. And cadence wise, Mike, it's we had 12 in the second quarter, nine in the third quarter, 11 in the fourth quarter is kind of where we are. And then as always, this time of year, just the weather and any kind of impacts from that will be the only thing that would change that.

Thank you. Our next question comes from Rupesh Parikh with Oppenheimer. You may proceed.

Good afternoon. Thanks for taking my question. Also, congrats on a nice quarter. I guess, I'll start with maybe just I'll just kick it off to a macro question. So just on inflation, just curious what you guys are seeing the business and expectations going forward.

And on the consumer front, your business continues to perform quite well. Just curious if you're seeing any changes in dynamics around the consumer.

On the inflation front, it's been pretty consistent from quarter to quarter. So we're seeing a similar we're tracking CPI in line with the way we typically do. Obviously, our fresh business is a little more volatile, but it's tracking in line with that. And then we've got some kind of mix helpers as we move to organic and we work some of the value pack type things. So similar story to Q1 on the inflation and AUR front.

In terms of the customer side of things, what we're seeing our customer seems to be pretty resilient. There's still a lot of uncertainty going forward that we're not quite sure about. But if we look at the numbers and we look at how our customers are reacting, I think we've always said that our customer base is pretty focused on what they eat and how they eat and how they so I think we've got some resilience almost irrespective of what happens in the macro economy. I think there's some uncertainty going forward. We're not seeing a lot of dynamics in the other grocery retailers in terms of changing things too much.

And our business has proven pretty resilient as you can see from the numbers.

Thank you. Our next question comes from John Heinbockel with Guggenheim. You may proceed. John, your line is now open. One moment for our next question.

Our next question comes from Robbie Holmes with Bank of America. You may proceed.

Thanks for taking my question. Jack, I was hoping you could talk about the new product flow outlook. It sounds like it continues to go great. But I mean, how do you keep that same percent of newness? And I was curious if are you seeing any competitors kind of moving faster to get in stock in some of the newer items you bring in?

And also related to that, on organic pricing, have you seen any increased competition or anybody trying to do anything there, like Whole Foods to make it tougher to keep the spread on the organic produce pricing?

Well, Robbie, as you can imagine, we watch our competitors all the time in terms of what they're doing in terms of product launches and pricing and things like that. The context we're for our energy is all about how do we bring new innovative entrepreneur driven products into the marketplace. And the foraging team that we've talked a lot about are doing a fantastic job attending conferences, travelling around the world. As I think I've said in the past, they've got the best job in the world as far as I can see. It's the one I would like sometimes.

They're getting out there and really understanding where the opportunities are. I think we're creating a reputation with the young entrepreneurial people that are bringing new products to the marketplace and we're hoping that they're coming to us first. We certainly see from we have a portal where people put new ideas into it. We get tens of thousands of applications into the portal every year and we're looking almost our challenge is how do we bring more of them in, but there's plenty of opportunity for us to do it. And I think we're seen as a place that committed to it because we've got an innovation centre and we create space and give young entrepreneurs the opportunity to get started.

So we're pushing very hard on that agenda. At the same time we're pushing very hard on our Sprouts brand. And Sprouts brand is innovative and different and based on attributes, no seed oils and vegetarian and vegan and the process that we're going through in terms of bringing differentiation from our Sprouts brand, we think gives us a little bit even more of a moat in terms of linking to what the competition might or might not do. We watch them and clearly our sector health focused innovative attribute based products are going to be more important in the future than they are less important. But we think we're at the leading edge of that and we're watching it pretty hard.

Organic pricing, we've been pretty assertive as you know about our organic pricing and force and differentiation. We're working very hard at long term contracts with our produce suppliers to give us the opportunity to create this tripartite pricing position where the customer gets a good deal, we get a good deal and the farmer gets a good deal. And those long term plans are something that I think give us a point of difference in terms of the context of the marketplace. And we haven't seen too much from our competitors either ups or downs in terms of what's happening on organic projects or anything else for that matter. But a good question, Robbie. Thanks.

No, thank you. And just a quick follow-up. I apologize if I missed this, but the CAHE agreement in delays there and everything, can you talk about the status of that and what issues might or might not be there?

Yeah, Kate has been a good partner for us. We'll continue to be a good partner for us. We're just working through the details. As you can imagine, with the long term deal, there's a lot to cover. So we're working through the details, and we're planning for a long term extension here soon.

Thank you. Our next question comes from Mark Carden with UBS. You may proceed.

Afternoon. Thanks so much for taking the questions. So, to start, we've seen a few strikes at two of your largest conventional competitors over the past few months. Obviously, some differences in structure, but have you seen these events, leak any pressure just in a broader underlying wage environment or has it been pretty steady in your view? Thanks.

We work very hard to look after our team members. I think we're the only retailer that gives the opportunity for every team member in the store to earn a bonus. We play pretty good. We look very hard about our wages and benefits relative to the other people and we pay above the average in every market in which we're operating in. So we're feeling and the HR team do a terrific job managing this regionally and locally to make sure we're in the right place and we're taking care of our people.

We haven't seen any major change in terms of how people are thinking about that kind of initiative around our space And I think it's incumbent on us to look after our people appropriately and we're working very hard at that.

That's great. And then we've seen restaurant traffic continue to decline over the past three months, a bit more moderate pace versus earlier in the year. I know in the past, you guys have talked about some potential trade in from food away from home. Do you believe you're seeing any more of a tailwind there? And are you seeing any lifts in your prepared food sales?

We're working very hard on prepared foods. We've got a new salad program out there, a new meals program out there. So we're working hard at it and the team are putting some really the deli team are doing some really good work in that space. I'm encouraged by that and it may be helping us a little bit as you go through that going forward. It's something that we'll continue to invest in.

Great. Thanks so much and good luck guys.

Thank you. Our next question comes from Kelly Bania with BMO Capital Markets. You may proceed.

Founded in 1943, Sprouts Farmers Market is a retailer of natural and organic food products sold under the Sprouts brand. Perishable products include produce, dairy, meat, and bakery goods. The company also offers nonperishables such as frozen foods, beer and wine, vitamins, body care products, and more.

Sprouts Farmers Market Q2 2025 Earnings Call Transcript | Fortune

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Sprouts Farmers Market (SFM) Q2 2025 Earnings Call Transcript

Company Participants