When you shop at Sprouts Farmers Market, you’ll feel inspired, curious, and maybe a little adventurous. After all, our diverse offering of fresh, natural and organic food reflects an authentic farmers market—complete with field bins, wooden barrels and natural light. Sprouts attracts both the devout organic shopper and the traditional supermarket consumer with best-in-class service and everyday low prices. By making healthy foods affordable, we empower customers to eat better and make informed food choices. The nationwide trend toward healthy living continues to accelerate, and that motivates us. We are completely, utterly passionate about driving down the price of healthy eating. It’s what we call “healthy living for less!” 1 SPROUTS FARMERS MARKET From farm to farmers market. QuaLitY, VALue AND taste At the crack of dawn, the Sprouts distribution This is a side of the food industry consumers centers are buzzing. Our quality control team rarely see. They shop at Sprouts with the expec- members move from cooler to cooler inspecting tation of “farm-fresh” produce. But they gen- each produce shipment for traceability, freshness, erally know little about how food gets from field quality and taste. Our seafood merchants scour to plate, and the complex logistics on which the the freshest catch on both coasts and negotiate system depends. for great prices while our grocery buyers taste By self-distributing our produce, we go to great test new products and decide which ones make lengths to guarantee that quality is there every the cut. step of the way. Whether we’re sourcing our prod- The morning frenzy assures Sprouts customers ucts from around the corner or around the globe, are getting the freshest merchandise available. our goal is always to offer fresh, quality products at great value. 5 2013 ANNuaL report A step beyond the traditional grocery store. THE SPROUTS EXPERIENCE You often hear dietitians telling people to “shop With a diverse offering of fresh, natural and the perimeter” of their grocery store as a strategy organic food, Sprouts stores are reminiscent for eating well. But you don’t have to worry about of an open-air farmers market—complete with that at Sprouts. We put produce at the heart of wooden bins, barrels and natural light. Our our store because fruits and vegetables are the low shelves and spacious aisles allow custom ers to heart of healthy eating. maneuver comfortably and view the entire store. Mountains of fresh produce priced significantly Our team members are knowledgeable and below the competition draw new customers through approachable. With a passion for people and a our doors. They soon discover our fresh bakery, flair for food, they engage our customers through full-service deli and butcher shop, thousands of helpful service and education. That’s the Sprouts vitamins and supplements, natural and organic difference, and that’s why our customers often groceries, and scoop-your-own bulk department. become our biggest advocates. Customers love our products, but it’s the in-store experience that keeps them coming back for more. 6 A step beyond the traditional grocery store. THE SPROUTS EXPERIENCE SPROUTS FARMERS MARKET 167 stores in eight states. THE broaD appeaL of our coNcept ExistiNG Markets tarGet Near term markets 2 3 24 73 26 6 4 29 From health-conscious California to down-home While adding 19 new stores in fiscal 2013 (new Oklahoma—and everywhere in between—the store growth of 13%) we achieved economies of Sprouts model is working. That’s because our scale in sourcing and distribution. We also made unique combination of high quality food, com- significant investments in management, merchan- petitive pricing and personal service enables us dising, information technology systems, team to attract a broad customer demographic. member training, marketing and compliance to enable us to pursue our growth plans. Sprouts ended the year with 167 stores and annual sales of $2.4 billion, making us a strong competi- Research shows that the U.S. can support approxi- tor to the supermarkets and health food stores mately 1,200 Sprouts locations, allowing us to throughout the country. And while Sprouts may grow more than seven times our current footprint not be a typical grocery store, we are a one-stop- over the next 15-plus years. We’ve set ambitious shop with a full assortment of specialty, natural but achievable growth targets, and look forward and organic products at affordable prices. to new opportunities on the horizon. 9 2013 ANNuaL report Improving the health of the communities we serve. RespoNsibLE RetaiLING The concept of food in America has changed to local pantries. We donated more than 3 million dramatically in recent years. More than ever, pounds of food in 2013, equal to nearly 2.5 mil- consumers are passionate about “eco-friendly” lion healthy meals for people in need. Additionally, food that has been harvested in a sustainable Sprouts has donated more than $1.1 million to way. In turn, we’re sourcing our food responsibly Autism Speaks, the nation’s largest autism research and putting more certified organic, cruelty-free and advocacy organization, through the generosity and non-GMO items on our shelves. of customers and business partners. We also understand that successful companies We also reduce our environmental footprint by thrive in healthy communities. That’s why we’re installing energy-efficient lighting and equip- committed to improving the health of the com- ment and using fewer refrigerants. munities we serve. With the support of our customers, team mem- As a responsible neighbor, we support organiza- bers and suppliers, responsible retailing is at the tions that share our healthy living goals. Through forefront of everything we do. our Food Rescue Program, each store donates food 10 Improving the health of the communities we serve. RespoNsibLE RetaiLING SPROUTS FARMERS MARKET 2013 by the numbers. the power of INteGratioN Pro forma comparabLE STORE saLes Growth2 (Two-Year stack) 20.4% curreNT perioD prior PerioD 14.8% 10.7% 14,500 11.6% team members AND CouNtiNG 2.6% 9.7% 7.4% 10,000 % RecYCLING 4.9% cars visit EACH Sprouts 5.1% proGram 2.3% parkiNG Lot weekLY 13 UNIT GROWTH for plastic, aluminum, ‘09 ‘10 ‘11 ‘12 ‘13 paper, e-waste 675 and compost Sprouts DONateD more thaN TruckLoaDS O F for Sprouts WatermeLONS SOLD support office 3,000,000 lbs of fooD to LocaL huNGer PAGE Views ON reLief AGENcies 19 27. 8 mm Sprouts.com 715 ope N E D stores TRUCKLOADS 27,50 0 IN 2013 O F A P P L E S Average square feet per store 2,500,000 SOLD Estimated number of meals pr o v i d e d t o those in need supplied by donations from $ 1,400 Sprouts shoppers and vendors mm SpROUTS 1.1 braND private DONATION LabeL items pro forma Net saLes MADE to Autism ($ IN mm)1 mm S peaks A N D 2,438 100 $ SAARC BANANas so L D 1,991 $ 1,723 $ Nearly 1,490 mm $ 1,239 17 $ 3,000 POUNDS of 325,000 1,059 T E A M M E M B E R $ Facebook fans ora NG es PROMOTIONS so L D ‘08 ’09 ’10 ’11 ’12 ’13 ¹Pro forma net sales reflect the net sales of our predecessor entity and Sunflower as if the Henry’s Transaction and Sunflower Transaction had been consummated on the first day of fiscal 2008. 2“Comparable store sales growth” refers to the percentage change in our comparable store sales as compared to the prior comparable period. Pro forma comparable store sales growth reflects comparable store sales growth calculated as if the Henry’s Transaction and the Sunflower Transaction had been consummated on the first day of fiscal 2007. Comparable store sales growth on a “two-year stacked basis” is computed by adding the pro forma comparable store sales growth of the period referenced and that of the same fiscal period ended twelve months prior. 13 2013 ANNuaL report Message from the President and CEO M arch 17, 2014 Dear Fellow Stockholders: It’s difficult to put into words how amazing 2013 When I joined Sprouts in 2002, we had one store was for Sprouts Farmers Market. The success of in Arizona and fewer than 50 team members. 19 new stores, the excitement of our initial public Our headquarters was in converted storage space offering, and the celebration of nearly 3,000 where we worked on folding tables with power team member promotions are just a few of the strips hanging from the ceiling. But as the milestones that made 2013 such a special year in Sprouts story illustrates, growth is in our DNA our company’s history. and we’ve stayed true to our core values through- out our history. Our company was built on hard Our business model is resonating across the work and dedication—to the brand, to each country; we are growing at a very healthy pace; other, and most importantly, to our customers. and every day we are helping Americans embrace healthy living for less. We set ambitious goals and met them despite unprecedented challenges. For example, Sprouts People often ask me, “What fuels Sprouts’ per- was one of the only retailers to post positive formance, and how can you continue the comps and open new stores even during the momentum?” There isn’t a magic formula. No deepest part of the recession. We set an aggres- secret sauce or classified algorithm. We simply sive target of growing organically to 50 stores by remain authentic, and will continue to do so in 2010, and exceeded it by 12 percent.