Q1 2025 Sprouts Farmers Market Inc Earnings Call

Operator: That's sprouts.com During this call, management 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 statement.

During this call management 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.

Operator: 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.

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.

Operator: 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.

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.

Jack Sinclair: With that, let me hand it over to Jack. Thanks Susannah and good afternoon, everyone. We're delighted with our strong first quarter results, marking a positive start to the year. Our sales increased 19% supported by comparable store sales of 11.7% and robust new store performance. Our diluted earnings per share reached $1.81, reflecting a 62% increase compared to the same period last year. These results highlight the effectiveness of our differentiated strategy and the excellent execution by our teams across the business. In the past five years, more consumers have embraced a movement towards health and wellness, leading to a significant growth in our target market opportunity, now estimated at approximately $290 billion of the $1.6 trillion spent on food at home.

Jack: Thanks, Suzanne and good afternoon, everyone.

Jack: We are delighted with our strong first quarter results.

Jack: Marketing a positive start to the year or.

Jack: <unk> sales increased 19% supported by comparable store sales of 11, 7% and robust new store performance, our diluted earnings per share reached $1 81.

Jack: Reflecting a 62% increase compared to the same period last year.

Jack: These results highlight the effectiveness of our differentiated strategy and the excellent execution by our teams across the business.

Jack: In the past five years more consumers have embraced a movement towards health and wellness, leading to a significant growth in our target market opportunity.

Jack: Estimated at approximately $290 billion.

Jack: Of the one six trillion.

Jack: Bent on food at home.

Jack Sinclair: Our strategic commitment to our health enthusiast target customer is clearly resonating, driving both traffic and sales. Our specialty attribute driven products are performing well, and our knowledgeable team members are ready to assist customers in making informed choices to achieve their health goals.

Jack: Our strategic commitment to our health enthusiasts target customer is clearly resonating driving both traffic and sales are.

Jack: Our speciality attribute driven products are performing well and our knowledgeable team members are ready to assist customers in making informed choices to achieve their health goals.

Jack Sinclair: Customer engagement remains central to our strategy, which is why we're excited to launch our new loyalty program this year. This initiative, combined with our continued store growth plans, will improve access to fresh, healthy products for our customers across the globe.

Jack: Customer engagement remains central to our strategy, which is why I'm really excited to launch our new loyalty program. This year. This initiative combined with our continued store growth plans will improve access to fresh healthy products for our customers across the country.

Jack Sinclair: In the first quarter, we made a significant move to begin self-distributing fresh meat and seafood through our distribution center.

Jack: In the first quarter, we made a significant move to prevent to begin self distributing fresh meat and seafood through our distribution centers.

Jack Sinclair: This step allows greater control over our products, enhancing freshness and optimizing the capacity we've built in our supply chain the past few years. We're just beginning to unlock our potential, and I look forward to sharing more about our journey in a few moments.

Jack: Allows greater control over our products enhancing freshness and optimizing the capacity we've built in our supply chain the past few years.

Jack: We're just beginning to unlock our potential and I'll look forward to sharing more about our Germany in a few moments for now I'll hand, it to customers to review, our first quarter financial results as well as our updated 2025 outlook conscious.

Curtis Valentine: For now, I'll hand it to Curtis to review our first quarter financial results, as well as our updated 2025 outlook. Curtis? Thanks, Jack, and good afternoon, everyone. In the first quarter, total sales were $2.2 billion, up $353 million, or 19%, compared to the same period last year. This growth was driven by an 11.7% increase in comparable store sales and the strong results from new stores. The comp performance across categories, channels, and geography was once again balanced and broad based, while also being supported by new stores entering into the comp base at a strong rate. traffic grew, particularly in our brick and mortar locations.

Speaker Change: Thanks, Jack and good afternoon, everyone in the first quarter total sales were $2 2 billion up $353 million or 19% compared to the same period last year.

Speaker Change: This growth was driven by an 11, 7% increase in comparable store sales and the strong results from new stores.

Speaker Change: Comp performance across categories channels, and geography was once again balanced and broad based while also being supported by new stores entering into the comp base at a strong rate.

Speaker Change: Traffic grew particularly in our brick and mortar locations. Our E. Commerce sales grew approximately 28% representing 15% of our total sales for the quarter with strong performance from all partners. Additionally, sprouts brand contributed 24% to our total sales for the quarter.

Curtis Valentine: Our e-commerce sales grew approximately 28%, representing 15% of our total sales for the quarter with strong performance from all partners. Additionally, Sprouts brand contributed 24% to our total sales for the quarter. A few notable events in the first quarter also boosted sales. Our stores in Colorado benefited from a strike at a conventional grocer, and our vitamin department saw increased sales due to the harsh cold and flu season this past winter. We estimate these events accounted for approximately 50 basis points of the comp sales growth. Our first quarter gross margin was 39.6%, an increase of 129 basis points compared to the same period last year.

Speaker Change: A few notable events in the first quarter also boosted sales our stores in Colorado benefited from a strike at our conventional grocer in our vitamin Department saw increased sales due to the harsh cold and flu season. This past winter.

Speaker Change: We estimate these events accounted for approximately 50 basis points of the comp sales growth.

Our first quarter gross margin was 39, 6% an increase of 129 basis points compared to the same period last year.

Curtis Valentine: This increase was primarily due to leveraging our improvements in inventory management and category management. Supply constraints and strong sales continue to put pressure on our in stocks, resulting in additional shrink leverage. SG&A for the quarter totaled $623 million, an increase of $83 million and 79 basis points of leverage compared to the same period last year. Our strong comp performance led to leverage mainly in labor and occupation. Store closure and other costs total approximately $2 million for the quarter. These are primarily related to costs associated with exiting leases related to our 2023 store closures, as well as disaster recovery charges from the California wildfire.

Speaker Change: This increase was primarily due to leveraging our improvements in inventory management and category management.

Speaker Change: Supply constraints and strong sales continued to put pressure on our in stocks, resulting in additional shrink leverage.

Speaker Change: SG&A for the quarter totaled $623 million, an increase of $83 million and 79 basis points of leverage compared to the same period last year.

Speaker Change: Our strong comp performance led to leverage mainly in labor and occupancy.

Speaker Change: Store closure and other costs totaled approximately $2 million for the quarter.

Speaker Change: These are primarily related to costs associated with exiting leases related to our 2023 store closures as well as disaster recovery charges from the California wildfires.

Curtis Valentine: appreciation and amortization, excluding depreciation included in the cost of sales was $35 million. For the first quarter, our earnings before interest and taxes were $226 million. Interest income was approximately $1 million. And our effective tax rate was 21%.

Speaker Change: Depreciation and amortization, excluding depreciation included in the cost of sales was $35 million.

Speaker Change: For the first quarter, our earnings before interest and taxes were $226 million interest income was approximately $1 million and our effective tax rate was 21%.

Curtis Valentine: Net income was $180 million in diluted earnings per share or $1.81, an increase of 62% compared to the same period last year.

Speaker Change: Net income was $180 million and diluted earnings per share were $1 81.

Speaker Change: An increase of 62% compared to the same period last year.

Curtis Valentine: During the first quarter, we opened three new stores. Ending the quarter with 443 stores across 24 states. A strong and healthy balance sheet has underpinned our financial performance. During the first quarter of 2025, we generated $299 million in operating cash flow, which allowed us to self fund our investments of $49 million in capital expenditures, net of landlord reimbursement to grow business. We have also returned $219 million to our shareholders by repurchasing 1.6 million shares. We have $232 million remaining under our current share repurchase authorization. We ended the quarter with $286 million in cash and cash equivalents, zero balance on our $700 million revolver, and $22 million of outstanding letters of credit.

During the first quarter, we opened three new stores.

Speaker Change: Ending the quarter with 443 stores across 24 states.

Speaker Change: A strong and healthy balance sheet is underpinned our financial performance.

Speaker Change: During the first quarter of 2025, we generated $299 million in operating cash flow, which allowed us to self fund our investments of $49 million in capital expenditures net of landlord reimbursements to grow a business.

Speaker Change: We have also returned $219 million to our shareholders by repurchasing one 6 million shares.

Speaker Change: We have $232 million remaining under our current share repurchase authorization.

Speaker Change: We ended the quarter with $286 million in cash and cash equivalents.

Speaker Change: <unk> balance on our $700 million revolver and $22 million of outstanding letters of credit.

Jack Sinclair: More customers are prioritizing quality, healthy options, driving growth faster than the overall food at home market. This momentum fuels our ambition to enter new markets.

Speaker Change: More customers are prioritizing quality healthy options driving growth faster than the overall food at home market.

Speaker Change: This momentum fuels, our ambition to enter new markets.

Curtis Valentine: As we look ahead towards the rest of 2025, we're committed to achieving strong earnings growth and seizing these opportunities. For 2025, we expect total sales growth to be 12 to 14% and comp sales in the range of five and a half to seven and a half percent. We anticipate comp sales to start the year stronger and moderate as we cycle the higher comps from late 2024.

Speaker Change: As we look ahead towards the rest of 2025, we are committed to achieving strong earnings growth and seizing these opportunities.

Speaker Change: For 2025, we expect total sales growth to be 12% to 14% and comp sales in the range of five five to seven 5%.

Speaker Change: We anticipate comp sales to start the year stronger and moderate as we cycle the higher comps from late 2024.

Curtis Valentine: We plan to open at least 35 new stores. Earnings before interest and taxes are expected to be between $640 million and $660 million, and earnings per share are expected to be between $4.94 and $5.10. assuming no additional share repurchase. 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 million and $250 million. For the second quarter of the year thus far, we have continued to see solid customer engagement and expect comp sales to be in the range of approximately six and a half to eight and a half percent.

Speaker Change: We plan to open at least 35 new stores.

Speaker Change: Earnings before interest and taxes are expected to be between $640 million and $660 million and earnings per share are expected to be between $4 94 and.

Speaker Change: And $5 10.

Speaker Change: Assuming no additional share repurchases.

Speaker Change: That said, we do expect to continue to repurchase shares opportunistically.

Speaker Change: We also expect our corporate tax rate to be approximately 24%.

Speaker Change: During the year, we expect capital expenditures net of landlord reimbursements to be between $230 million and $250 million.

Speaker Change: For the second quarter of the year. Thus far we have continued to see solid customer engagement and expect comp sales to be in the range of approximately six five to eight 5%.

Curtis Valentine: and earnings per share between $1.19 and $1.23. Year-over-year margin rate in both gross margin and SG&A will start to normalize in the second quarter, and we anticipate continued EBIT margin expansion of approximately 60 basis points year-over-year.

Speaker Change: And earnings per share between $1 19.

Speaker Change: And $1 23.

Speaker Change: Year over year margin rate in both gross margin and SG&A will start to normalize in the second quarter and we anticipate continued EBIT margin expansion of approximately 60 basis points year over year.

Curtis Valentine: To add some perspective for the back half of 2025, we believe our strong financial position and execution of our strategic initiatives gives us flexibility to navigate uncertainties that may arise from the macro environment. We are effectively managing our expenses while continuing to look for investment opportunities that will drive long-term sustainable earnings growth. We believe that our momentum and execution will result in comps towards the high end of our low single-digit comp algorithm and continued expansion of our bottom line margin in the second half, even as we cycle the robust performance from the last year.

Speaker Change: To add some perspective for the back half of 2025, we believe our strong financial position and execution of our strategic initiatives gives us flexibility to navigate the uncertainties that may arise from the macro environment. We are effectively managing our expenses, while continuing to look for investment opportunities that will draw drive long term sustainable earnings growth.

Speaker Change: <unk>.

Speaker Change: We believe that our momentum and execution will result in comps towards the high end of our low single digit comp algorithm and continued expansion of our bottom line margin in the second half even as we cycle the robust performance from last year.

Jack Sinclair: And with that, I'll turn it back to Jack. Thanks, Curtis. In 2025, we will build on the strong foundation we've established over the past few years as we invest and grow our In the midst of uncertainty, this year we will concentrate on continuing our successful initiative. And we are confident that we are well positioned to compete in any environment. We're committed to enhancing our offerings, increasing customer engagement, optimizing our supply chain and building stores that provide pleasant shopping experience. Additionally, we're focused on developing a dedicated team that is committed to serving our valued customers now and into the future.

Jack: And with that I'll turn it back to Jack.

Jack: Thanks Scott.

Jack: In 2025, we will build on the strong foundation, we've established over the past few years, as we invest and grow our business.

Jack: In the midst of uncertainty this year, we will concentrate on continuing our successful initiatives and we are confident that we are well positioned to compete in any environment.

Jack: We are committed to enhancing our offerings, increasing customer engagement optimizing our supply chain and building stores that provide pleasant shopping experiences.

Jack: <unk>, we're focused on developing our dedicated team that is committed to serving our valued customers now and into the future.

Jack Sinclair: We're focused on our greatest strength, our differentiation. As has been the case, attribute driven products continue to lead our sales and are growing faster than the rest of our business. Trends such as high-protein inherited meats, grass-fed options, and products free from seed oils are driving our success with our target customers. The foraging team, in collaboration with our merchants, has developed a robust innovation pipeline for both our Sprouts brand and branded products. Our ability to quickly launch and build brands has attracted entrepreneurial vendors from across the country who are eager to partner with us and offer their products in our stores.

Jack: We are focused on our greatest strength of differentiation.

Jack: As has been the case attribute driven products continue to lead our sales and are growing faster than the rest of our business.

Jack: <unk>, such as high protein and heritage meets grass fed options and products freed from Cdos are driving our success with our target customers with.

Jack: The <unk> team in collaboration with unmatched <unk> has developed a robust innovation pipeline for both our spreads brand and branded products on.

Jack: Our ability to quickly launch and build brands as attracted entrepreneurial banned us from across the country and eagle to partner with US and also the products in our stores.

Jack Sinclair: Additionally, we showcased our differentiation and curated assortment through unique events, such as the lemon event we hosted in the first quarter, as well as discovery days that highlight the attributes of our Sprouts brand product. In the first quarter, our marketing efforts collectively drove traffic, highlighting our unique value proposition through our storytelling and media strategy. We launched our new brand campaign in January, sharing that sprouts feeling and distinguishing ourselves from the typical resolution message. At the same time, we continue to leverage our market-based media investment strategy. Social media remains a strong channel for us, with both reach and engagement increasing.

Jack: Additionally, we showcased our differentiation and curated assortment through unique events such as the laminate event, we hosted in the first quarter as well as discovery days the highlight the attributes of our stripes brand products.

Jack: In the first quarter, our marketing efforts collectively drove traffic highlighting our unique value proposition through our storytelling and media strategy.

Jack: Launched a new brand campaign in January sharing that stealing and distinguishing ourselves from the typical resolution messages.

Jack: At the same time, we continued to leverage our market based media investment strategy.

Social media remains a strong channel for us with both reach and engagement increasing.

Jack Sinclair: Additionally, our e-commerce business and partnerships continue to grow, allowing us to support our omni-channel customers on their preferred shopping platforms with Sprouts. We're also enhancing the in-store customer experience by offering more sampling opportunities, improving in-stocks, continuing to improve customer service, and enhancing freshness. Our personalization and loyalty journey continued in the first quarter. Following our expansion to 35 stores in December, we continue to see positive results and strong customer engagement, including increased scans and sign-ups. We'll continue to be more data driven as we analyze new customer information during our test and learn phase. In the second quarter, we plan to enhance the customer experience and prepare for our planned launch in the third quarter.

Jack: Additionally, our e-commerce business and partnerships continue to grow, allowing us to support our omnichannel customers on their preferred shopping platforms with spreads.

Jack: We're also enhancing the in store customer experience by offering more sampling opportunities improving installed continuing to improve customer service and enhancing freshness.

Jack: Our personalize Asian and loyalty journey continued in the first quarter. Following our expansion to 35 stores in December we continue to see positive results on strong customer engagement.

Jack: <unk> increased scans and sign ups.

Jack: We are continuing to be more data driven as we analyze new customer information during a test and learn phase.

Jack: In the second quarter, we plan to enhance the customer experience and prepare for our planned to launch in the third quarter.

Jack Sinclair: We're increasingly confident that loyalty customers engage more frequently, grow faster and spend more. Over the past few years, we've implemented new systems, expanded existing space, and built new facilities to prepare our supply chain for greater self-distribution in various categories. This proactive approach has unlocked exciting opportunities as we scale sprouts for growth. Our systems and process work has already improved our in-stock shrink and our produce distribution, increasing freshness for our customers. Additionally, we're taking control of our own destiny by laying the groundwork to self-distribute our meat and seafood alongside our project. While every transition presents challenges, particularly with a fresh category, our dedicated team is rising to the occasion and are making progress.

Jack: We're increasingly confident in our loyalty customers engage more frequently grow faster and spend more.

Jack: Over the past few years, we have implemented new systems expanded existing space and built new facilities to prepare our supply chain for greater south distribution in various categories.

Jack: This proactive approach has unlocked exciting opportunities as we scale for growth.

Jack: Our systems and process work has already improved our installed shrink under project distributions, increasing freshness for our customers.

Jack: Additionally, we are taking control of our own destiny by leading the guidance trend walk to self distribute our meat and seafood alongside our projects.

Jack: Let me transition presents challenges, particularly with the fresh category. Our dedicated team is rising to the occasion and are making progress. We're on track to begin and sourcing from our spreads DC in the third quarter.

Jack Sinclair: We're on track to begin insourcing from our first Sprouts DC in the third quarter. Additionally, we have begun the process to expand our Northern California DC capacity in 2026, which will complete the initial meat and seafood insourcing journey, as well as supporting future growth in that region. We plan to open at least 35 stores for the year and continue to expand our strong pipeline with nearly 120 stores approved and more than 85 leases signed. While the openings in 2025 will enhance store density in our existing footprint, we're also looking towards expansion in new regions, as we develop market plans for the Midwest and the Our new stores continue to perform exceptionally well and are experiencing strong comps as they enter into the base.

Jack: Additionally, we have begun the process to expand our northern California, DC capacity in 2026, which will complete the initial meat and seafood and sourcing, Germany as well as supporting future growth in that region.

Jack: We plan to open at least 35 stores for the year and continue to expand our strong pipeline with nearly 120 stores approved in more than 85 leases signed.

Jack: While the openings in 2025 will enhance store density in our existing footprint. We're also looking towards expansion in new regions as we developed market plans for the Midwest and the northeast.

Jack: Our new stores continued to perform exceptionally well and are experiencing strong comps as we enter into the base.

Jack Sinclair: We're seeing this success from sea to shining sea, which gives us confidence that our offering will resonate with our target customer in any market.

Jack: We're seeing the success from sea to Shining Sea, which gives us confidence that Albany will resonate with our target customer in any market.

Jack Sinclair: None of this would be possible without our amazing team. We're committed to our purpose and our values, and our annual team member survey reflect our progress, showing improvements in every major When our values align with those of our customers, community and team members, great things happen. We recently published our 2024 Impact Report, which highlights areas that matter to all these stakeholders, such as our partnership with 400 local food banks, to which we donated almost 30 million fresh meals. Our efforts to reduce plastic have resulted in about 75% of our customers bringing their own reusable bags at the checkout.

Jack: None of this would be possible without our amazing team, we are committed to our purpose and our values and our annual team member survey reflect our progress showing improvements in every metric.

Jack: When our values aligned with those of our customers community and team members great things happen we.

Jack: We recently published our 2024 impact report, which highlights the areas that matter to all these stakeholders such as our partnership with 400 local food banks to which we don't know donated almost 30 million fresh meals.

Jack: With us to reduce plastic have resulted in about 75% of our customers, bringing their own reusable bikes at the checkout.

Jack Sinclair: And the support of our Healthy Communities Foundation provided 500 local non-profit partners and schools in our communities, brought to us by our team members and our customers in the local stores.

Jack: And the support of a healthy community Foundation provided 500 local nonprofit partners in schools and our communities brought to us by team members and our customers and the local stores.

Jack Sinclair: We remain focused on scaling our workforce for our future growth. We continue to recruit, develop and engage Sprouts team members. We've invested in developing our team members through several leadership programs, including Assistant Store Manager University Program, our Fast Track for Internal Assistance Store Managers, in addition to our leadership programs for new hire, seasoned assistant managers and store managers. These programs support our retention efforts while filling our leadership pipeline to support our future.

Jack: We remain focused on scaling our workforce for our future growth, we continue to recruit develop and engage sprouts team members.

Jack: We've invested in developing our team members through several leadership programs, including assistant store manager University program, our fast track brand channel Assistant store managers. In addition to our leadership programs for new hire seasoned assistant managers and store managers.

Jack: These programs support our retention efforts, while filling our leadership pipeline to support our future growth.

Jack Sinclair: In summary, we are excited about the future of sprouts and the growth opportunities ahead as we continue to execute our strategic initiative. Our strong business momentum places us in a position of strength, enabling us to navigate an uncertain macro environment while investing in unlocking Sprout's full potential. Over the past five years, our clear strategy has proven successful, and we are committed to staying on that path. As our target market expands and the demand for healthier option increases, we are witnessing growth that outpaces the overall food at home market. This momentum reinforces our commitment to prioritizing our customer needs and helping people live and eat better across the country.

Jack: In summary, we are excited about the future spreads and the growth opportunities ahead, as we continue to execute our strategic initiatives.

Jack: Strong business momentum places us in a position of strength, enabling us to navigate an uncertain macro environment, while investing in unlocking <unk> full potential.

Jack: Over the past five years, our clear strategy has proven successful and we are committed to staying on that path.

Jack: As our target market expands and the demand for healthy adoption increases we are witnessing growth to outpace the overall food at home market. This.

Jack: This momentum reinforces our commitment to prioritizing our customer needs and helping people live and eat better across the country.

Jack Sinclair: We look forward to sharing our journey with you throughout the year.

Jack: I look forward to sharing our journey with you throughout the year.

Operator: And with that, I'd like to turn it over for questions. Operator. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We ask that participants limit themselves to one question and one follow-up.

Speaker Change: And with that I'd like to tonnage over for questions operator.

Jack: Thank you.

Jack: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and.

Jack: And due to time constraints, we ask that participants limit themselves to one question and one follow up.

Leah Jordan: And our first question comes from the line of Leah Jordan with Goldman Sachs. Thank you. Good afternoon. So you guys had really nice gross margin expansion this quarter.

Lee: And our first question comes from the line of Lee of Jordan <unk> with Goldman Sachs.

Lee: Thank you. Good afternoon can you guys had really nice gross margin expansion. This quarter. So as you look at the decelerating trend in your comp outlook, even on a two year basis, plus some uncertainty in the macro backdrop, just how are you thinking through potential reinvestment at this point it sounded.

Leah Jordan: So as you look at the decelerating trend in your comp outlook, you know, even on a two-year basis, plus some uncertainty in the macro backdrop, just how are you thinking through potential reinvestment at this point?

Curtis Valentine: It sounded like, Curtis, you said that you were looking for some investment this year, maybe more color on what you were referring to there, or just how are you thinking about the tradeoffs between balancing top line and bottom line growth? Hi, Leah. Good afternoon. Yeah, so we are, you know, we are investing in the business similar to a level that we invested in last year. But it's into things like loyalty, the supply chain systems, IT, self-distribution, it's still those same pieces, our talent engine, getting ready for growth. So it's those areas. And if we can, you know, find ways to accelerate that, we'll look for ways to do that for the long term sustainable earnings growth.

Speaker Change: Curtis you said that you were looking for some investment this year, maybe more color on what you were referring to there or just how are you thinking about the tradeoff between balancing topline and bottom line growth at this point.

Speaker Change: Hi, good.

Speaker Change: Good afternoon.

Speaker Change: So we are we are investing in the business similar to a level that we invested in last year, but it's into things like loyalty the supply chain systems.

Speaker Change: The self distribution, it's still those same pieces, our talent engine getting ready for growth.

Speaker Change: So those areas and if we can find ways to accelerate that we will look for ways to do that for the long term sustainable earnings growth as we look ahead on the growth side I think we will start to see that moderate as the year progresses.

Curtis Valentine: As we look ahead, you know, on the growth side, I think we'll start to see that moderate as the year progresses. Had some one timers in there in Q1, it'll, you know, start to normalize. But we see, you know, continued expansion here in the second quarter. And again, it'll just start to moderate as we get through the rest of the year.

Speaker Change: <unk> had some one timers in there in Q1 that will start to normalize.

Speaker Change: But we see continued expansion here in the second quarter and again I will just start to moderate as we get through the rest of the year.

Leah Jordan: Very helpful. Thank you.

Jack: Very helpful. Thank you and then just Jack you called out the ongoing consumer shift to health and wellness, it's something we see too.

Jack Sinclair: And then just Jack, you called out the ongoing, you know, consumer shift to health and wellness. It's something we see, too. But just given continued outsized growth for the category.

Jack: But just given continued outsized growth for the category.

Jack Sinclair: Do you think this broader trend is becoming too hard for maybe other retailers to ignore at this point? Are you seeing any shift from your competitors? Or how confident are you that you can retain your differentiated? Well, we're very focused on sticking to our own agenda, Leah, and making sure that what we do is we maximize the offer for those health-enthusiast customers that we've been so focused on over the last few years, and we'll continue to do that. As we look at other people, other people are clearly bringing some products in across this marketplace, but it doesn't bring them any access to the bit of the market that we've chosen not to approach, and as we've watched this market, it's gone from 200 to 290 billion as we've referenced the total available market in this space.

Jack: Do you think this broader trend is becoming too hard for maybe other retailers to ignore at this point are you seeing any shift from your competitors or how confident are you that you can retain your differentiated position.

Jack: Well, we're very focused on.

Jack: Stick and tell everyone agenda.

Jack: Ensure that what we do is we maximize the offer for those health enthusiast customers that we've been so focused on over the last few years and we will continue to do that as we look at other people are clearly, bringing some products in across this marketplace, but it doesn't bring them it doesn't bring them any access to.

Jack: The market that we have.

Jack: We've chosen not to approach and as we've watched this market has gone from 200 to 290 billion as we referenced.

Jack: The total total available market in this space, we are still only $8 billion of that so there's plenty of room for us to grow and the reality is there's one point.

Jack Sinclair: We're still only eight and a bit billion of that, so there's plenty of room for us to grow, and the reality is there's 1.3 trillion dollars roughly that we're not focusing in on, that the other guys will always be focusing in more than us, and we're doubling down on what we can do in terms of the attributes that are working with this health-enthusiast customer, organic, gluten-free, vegan, vegetarian, dairy-free, those kind of drivers, gluten-free, these drivers are the ones that we can be very good at, and the team are continuing to double down, but we'll be as good as we are at this, and the team are focused very much on it, and I think from a competitive point of view, we're in a good place.

Jack: One three trillion dollars roughly that were not focusing in on that the other guys will always be focusing in on more than us and we are doubling down on what we can do in terms of the attribute the attributes to our Watkins with us.

Jack: <unk> customer organic gluten free vegan vegetarian daily free those kind of drivers gluten free. These drivers are the ones that we can be very good at on the team are continuing linked to double date, but will be as good as we honor those.

Jack: The team are focused very much on that and I think from a competitive point of view we're in a good place.

Leah Jordan: Great, thank you.

Great. Thank you.

Jack: Thank you.

Rupesh Parikh: And our next question comes from the line of Rupesh Parikh with Good afternoon, and thanks for taking my question. So I guess the first one, just on new stores, so at least in my mind, new store productivity seems, again, very strong. So just any surprises, any, I guess, even more incremental positive surprises as you continue to roll out.

Speaker Change: And our next question comes from the line of <unk> Parikh with Oppenheimer.

Good afternoon, and thanks for taking my question.

Speaker Change: I guess the first one was just on new stores. So at least in my about new store productivity seem again very strong so just any surprises.

Speaker Change: Even more incremental positive surprises as you continue to roll out new stores.

Speaker Change: Okay.

Jack Sinclair: No, not incremental. Rupesh, just really good performance. The 24s came out strong, as we talked about on the last call, and they're continuing to perform well. The 22 and 23 vintages have comps really, really well, and they're maintaining strong comps. You know, the overall business is good, and they're outperforming that even. And so we've only opened three here in Q1, so it's not a huge change from where we were 60 days ago, but the new stores are performing really well, and that's driving that number.

Speaker Change: No not incremental repast, just really good performance of 20 fours came out strong as we talked about on the last call.

Speaker Change: They're continuing to perform.

Speaker Change: Perform well into 'twenty, two and 'twenty, three vintages have comps really really well and they're maintaining.

Speaker Change: <unk> strong comps the overall business is good and they're outperforming that even and so we've only opened three here in Q1. So it's not a huge change from where we were 60 days ago, but.

Speaker Change: The new stores are performing really well and thats driving that number.

Nick Konat: Great, and then maybe just on the loyalty program. So the commentary still seems upbeat from your team. So same thing there, like if you continue to roll it out, like any positive surprises you're seeing, and I know it's still early, but I don't know if there's a comp list or anything you could share. with a small battle.

Speaker Change: Great and then maybe just on the loyalty program. So the commentary still seems upbeat from your team. So same thing Theyre always have you continue to rollout roll it out with any positive surprises youre seeing and I know, it's still early but I don't know if theres a comp lift or anything you could share in terms of what you may be you're seeing with that small doctor stores. Thank you.

Nick Konat: And Nick, you can take that one because we're having a lot of confidence in this. Yeah.

Net you can take that one because we have confidence in us hydro pet snack.

Nick Konat: Hi, Rupesh, Nick. Jack mentioned in his comments, we feel very good about where loyalty is. We're really happy with what we're seeing in the 35 stores we're currently in right now across our kind of KPIs in the business. We're meeting and slightly exceeding those. Jack alluded to some really good uptake on scans and our signups and scans. You know, our plan moving forward here is to begin the national launch in the second half of the year, starting with our market here in Arizona. We've got a few. things to tidy up as far as getting the enterprise lined up and technology put together, but there's a lot of energy behind it here at Sprouts.

Speaker Change: Jack mentioned in his.

Speaker Change: In his comments.

Speaker Change: We feel very good about where loyalty is we're really happy with what we're seeing in the 35 stores. We're currently in right now.

Speaker Change: Across our Kpis in the in the business, we're meeting or slightly exceeding those as Jack alluded to some really good uptake on scans in sign ups and scans.

Speaker Change: Our plan moving forward here is to begin the national launch in the second half of the year.

Speaker Change: <unk> with.

Speaker Change: Our market here in Arizona, we have got a few.

Speaker Change: Things to tidy up as far as getting the enterprise lined up new technology put together, but there is a lot of energy behind it here at sprouts.

Nick Konat: Team members can't wait to see it come out and we're excited to share with them and all of you guys in the second half. Great.

Speaker Change: Team members can't wait to see it come out and we're excited to share with them and all of you guys in the second half.

Rupesh Parikh: Thank you, Apostle. Thanks, Rupesh.

Great. Thank you I'll pass it along.

Josh: Thanks, Josh.

Ken Goldman: Thank you and our next question comes from the line of Ken Goldman with Jpmorgan.

Ken Goldman: And our next question comes from the line of Ken Goldman with JPMorgan. Hi, thank you. I wanted to ask about household additions. I know it's only one data source, but in numerator data that we look at, it seems that your rate of additions is huge to over 20% and seems to be accelerating. And I don't want to suggest that that's the necessarily exact accurate number, but it's far bigger than what we're seeing at other grocers. And I'm just curious, you know, A, is it still in line just roughly, or at least directionally with kind of what you're seeing in terms of just adding households at a quicker pace than what you used to?

Ken Goldman: Hi, Thank you.

Ken Goldman: Wanted to ask about household additions.

Speaker Change: I know, it's only one data source, but in numerator data that we look at it seems that the.

Speaker Change: Your your rate of additions is huge.

Speaker Change: Over 20% and it seems to be accelerating and I don't want to suggest that that's the necessarily exact accurate number but it's far bigger than what we're seeing in other grocers and I'm just curious.

Speaker Change: Is it still in line, just roughly or at least directionally with kind of what you're seeing in terms of just adding households at a quicker pace than what you're used to and then how often are these new households, becoming loyal customers in comparison to your legacy customers.

Nick Konat: And then how often are these new households becoming loyal customers in comparison to your legacy? Hey, Ken, it's Nick. Thanks for the question. You're right. We're seeing really healthy customer metrics overall. So I'd start with both our new customers and existing customers. We're seeing strong behavior. We are seeing strong new customer growth. And what what excites me is that we're seeing it both in our new and emerging markets, but also in existing markets where we've been for a while. So we're certainly excited to see that customers like what we're doing in across the country. The other piece of this I would mention is with our existing customers, we're seeing higher engagement, in turn driving a higher share of wallets.

Nick: Hey, Ken it's Nick Thanks for the question.

Nick: Youre right were seeing really healthy customer metrics overall, so I'd start with both our new customers and existing customers. We're seeing strong behavior. We are seeing strong new customer growth and what excites me is that we're seeing it both in our new and emerging markets, but also in existing markets, where we've been for a while.

Nick: So we're certainly excited to see that customers like what we're doing in across the country.

Nick: The other piece of this I would mentioned is with our existing customers were seeing higher engagement.

Nick: In turn driving a higher share of wallet. So there also.

Nick Konat: So they're also, you know, certainly liking what we're doing and voting with their wallet. You know, we will continue to drive both of these, you know, our focus is on continuing to acquire customers across the board. And as Jack mentioned, with the market size and market segment growing, we think there's an opportunity for us to continue to acquire new. And with the customer engagement work we're doing, deepen the engagement we have with our existing customers to drive growth.

Nick: Certainly liking, what we're doing and voting with their wallet.

Speaker Change: We will continue to drive both of these are our focus is on continued acquired customers across the board and as Jack mentioned the Mr market size and market segment growing we think there is an opportunity for us to continue to acquire new and.

Nick: With the customer engagement work, we're doing deepen the engagement, we have with our existing customers to drive growth.

Ken Goldman: Great, thank you. And then quick follow up. You know, some of the other data that we have would suggest that in times when consumers are a little more challenged, they will shop in more stores to buy all their groceries. I don't think that's controversial. But I just wanted to make sure that, you know, going ahead, is there a possibility that if consumers do struggle a little bit more, if we head into a recession, that you could potentially pick off even more households just from consumers who are saying, look, I got to go to three or four stores instead of one just, you know, and my and my fuel costs are really low.

Nick: Great. Thank you and then a quick follow up.

Nick: Some of the other data that we have would suggest that.

Nick: In times when consumers are a little more challenged.

Nick: They will.

Nick: <unk> more stores to buy all their groceries, I don't think thats controversial but.

Nick: I wanted to make sure that going ahead is there a possibility that if consumers do struggle a little bit more if we head into a recession.

Nick: That you could potentially pick off even more households, just from consumers, who are saying look I've got to go to three or four stores instead of one just.

Nick: And my fuel costs are really low so maybe I can do that I'm just I just wanted to both theses we hear on your guys' ahead. Thank you.

Jack Sinclair: So maybe I can do that. I'm just, it's one of the bull theses we hear on you guys ahead is that you can benefit in a recessionary period. And I'm just trying to get a little sense of if you would agree with that. Well, I think the context of my remarks a little while ago, Ken, where we think we can thrive in any circumstances going forward. And if there is consumer pressure, the one thing that's clear is people have got to eat and they'll carry on eating. And people with specialist diets are continuing to, if you're a vegan, you stay being a vegan.

Nick: Can benefit in a recessionary period I'm, just trying to get a little sense of if you would agree with that.

Nick: Well I think the context of my remarks, a little while ago Ken.

Nick: We think we can thrive in any circumstances going forward.

Nick: Consumer so the one thing Thats clear is people who've got a carryon eating and people with specialist diets.

Speaker Change: Continuing to if you Ravi can you stay being a vegan. So we're quite confident that they offer we've got in front of people, it's going to be important even in difficult circumstances. The other thing that tends to happen when consumers are under pressure they eat more at home than eating out of home. So we think that's a benefit potential benefit within the context of the question you've asked.

Jack Sinclair: So we're pretty confident that the offer we've got in front of people is going to be important, even in difficult circumstances. The other thing that tends to happen when consumers are under pressure, they eat more at home than eating out of home. So we think that's a benefit, potential benefit within the context of the question you've asked there. So yeah, I think we kind of feel almost if it's tough, we'll do fine. And if it's not tough, we'll do fine.

Speaker Change: Sure. So yes, I think we kind of feel almost if it's tough will do fine and if it's not tough we'll do fine. So we're pretty feeling as if the proposition. We are put in front of our target customers is allowing us to be successful in the context of people shopping more or less number of grocery stores.

Jack Sinclair: So we're pretty feeling as if the proposition we're putting in front of our target customers is allowing us to be successful in the context of people shopping more or less number of grocery stores.

Ken Goldman: Great, thank you so much.

Speaker Change: Great. Thank you so much.

Ken Goldman: Thanks again.

Ken Goldman: Thanks, Ken.

Operator: Thank you.

Speaker Change: Thank you and our next question comes from the line of John <unk> with Guggenheim.

John Heinbockel: And our next question comes from the line of John Heinbockel with Guggenheim. Hey, Jack or Nick, I you guys clearly building on the last question, right? opportunity with what's for dinner tonight. And I think you think you under index in that trip. So what do you think is the unlock there? You know, does that run through the loyalty program? You think something else?

Speaker Change: Jack or Nick.

Speaker Change: You guys clearly building on the last question right.

Speaker Change: Opportunity with what's for dinner Tonight.

Speaker Change: And I think do you think you're under index in that trip. So what do you think is the unlock there.

Speaker Change: Does that run through the loyalty program, you think something else.

Nick Konat: I'll let you take that, Nick, a little bit. We're certainly confident in the work that we're doing around meals and the investment in space and product and that, but maybe, Nick, you can expand on that.

Speaker Change: Well I'll, let you take that Niccolo, but we certainly confident in the work that we're doing around meals.

Speaker Change: Investment in space and product to not but maybe you can expand on that John.

Nick Konat: Yeah, hey, John. I think a lot of what we're doing is aimed at tackling kind of the thrust of your question. We believe there's a lot of opportunities to gain more share of Wallet from our existing customers, and that's by talking to them, sharing them with them the things that are from an attribute standpoint and getting the shop more of our store. So if you, for instance, if you see our new format, you know, meets at the front of the store intentionally, it's super important to our target customer. They're looking for attribute-driven, grass-fed, organic protein options.

Speaker Change: I think a lot of what we're doing.

Speaker Change: Is aimed at tackling kind of.

Speaker Change: Thrust of your question, we believe there's a lot of opportunity to gain more share of wallet from our existing customers and thats by.

Speaker Change: Talking to them sharing them with the things that are important from an attribute standpoint, and getting them to shop more of our store. So if you for instance, you see are our new format meets at the front of the store intentionally it's super important to our target customer.

Speaker Change: Theyre looking for atrophy, driven grass fed organic protein options, we've been intentional in trying to serve that is a way to take care of the customer, but also to drive more of a center of the plate and in turn are larger shop and as you noted certainly the loyalty work is aimed at.

Nick Konat: We've been intentional in trying to serve that as a way to take care of the customer, but also to drive more of center of the plate and in turn a larger shop. And as you noted, certainly the loyalty work is aimed at customizing and personalizing everything we do around our vegan shoppers, our organic shoppers, our gluten-free shoppers, so that we can gain more of their spend and more of their trips. And I think it's fair to say, John, loyalty will play a role in that as we get further down and understanding the customers and communicating some of the attributes that Nick was talking about.

Speaker Change: Customizing personalizing everything we do around our vegan shoppers are organic shoppers are gluten free shopper. So we can gain more of their spend and more of their trips.

Speaker Change: And I think it's fair to say John loyalty will play a role in that as we get further data and understanding the customers and communicating some of the attributes that next talking about.

John Heinbockel: You may be building on that. I know you want to upgrade, improve, right, the loyalty experience as you start to roll this out.

Speaker Change: Maybe building on that.

Speaker Change: I know you want to.

Speaker Change: Grade improve right the loyalty experiences.

Speaker Change: To roll this out.

Nick Konat: What do you think? What's not in the program today that shoppers want? If anything, right? And how do you how do you enhance the experience? Sure, where we are to the good news is, you know, we've been asking our customers about the loyalty program in those 35 markets, and we're getting really good marks on the program from the standpoint of getting our customers what they are looking for, tailored to their unique needs. I'll maybe answer that question in two pieces. Short term, John, I need to, we're looking to streamline the omnichannel experience for loyalty so that the online experience, the in-store experience, the transfer, the experience across channels is really seamless.

Speaker Change: What do you think what's not in the program today that shoppers want.

Speaker Change: If anything right and how do you how do you enhance the experience.

Speaker Change: Sure where we are at the good news is we've been asking our customers about the loyalty program in those 35 markets and we're getting really good marks on the program from a standpoint of getting getting me, giving our customers. What they are looking for tailored to their unique needs.

Speaker Change: I'll, maybe I'll answer that question in two pieces short term John.

Speaker Change: We're looking to streamline the omnichannel experience for loyalty so that the online experience the in store experience the transfer of the experience across channels is really seamless.

Nick Konat: In the test today, it's not quite to the level I think we can be, so that's one short-term change that will help our customer. Long term, you know, I think we're going to continue to go where the customer takes us as we learn through this process and use the data and use our insight to do so. I will tell you, we will always be committed to making sure we find ways to help customers find and get access to new and unique products because they told us that's what's most important to them. They look to us as the place that can introduce them to the unique items that they're looking for.

Speaker Change: Test today, it's not quite the level I think we can be so thats one short term change that will help our customer.

Long term I think we're going to continue to go where the customer takes us as we learned through this process and use the data and use our insight to do so I will tell you we will always be committed to making sure we find ways to help customers find and get access to new and unique products as opposed to assets.

Speaker Change: Most important to them they look to us for the place that can introduce them to the unique items that they're looking for so whether that be through technology experiences other ways to engage the customer that's something you'll continue to see us investing.

Nick Konat: So, whether that be through technology, experiences, other ways to engage the customer, that's something you'll continue to see us invest in.

Speaker Change: Thank you.

John Heinbockel: Thank you. Thanks, John. Thank you.

Speaker Change: Thanks, Sean.

Edward Kelly: And our next question comes from the line of Edward Kelly with Wells Fargo. Yeah, hi, good morning, everybody, or good afternoon, everybody. I wanted to ask you, probably, I guess, a follow up maybe on to on Ken's question. And it kind of pertains to, you know, one cadence of the comp momentum throughout the quarter. I mean, it seems like it's probably pretty steady. But I'm curious, because, you know, consumer confidence, you know, seems to be changing.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Edward Kelly with Wells Fargo.

Edward Kelly: Yes, hi, good morning, everybody or good afternoon everybody.

Edward Kelly: Wanted to ask you probably I guess, a follow up maybe on to Ken's question and it kind of pertains to one cadence of the comp momentum throughout the quarter I mean, it seems like it's probably pretty steady, but I'm curious because consumer confidence seems to be changing.

Curtis Valentine: And, you know, as part of that, I'm just wondering if you're seeing any behavioral change at all in the store that might pertain to private label or anything else that you potentially would Hey, it's Curtis. The cadence, just a little bit better February than the other two months. But that was really around, you know, the height of the cold and flu season. And a couple things we called out in the script, the strike, that sent some business our way. Outside of that, it was pretty steady throughout. Really, no, you know, no dramatic changes from the fourth quarter, as far as the shape of the comp.

Speaker Change: I am just wondering if youre seeing any behavioral change at all in the store that might pertain to private label or anything else that you potentially would note.

Curtis: Hey, It is Curtis.

Curtis: <unk>, just a little bit better February than the other two months, but that was really around the height of the cold and flu season in the couple of things we called out in the script the strike.

Curtis: Some business our way outside of that it was pretty steady throughout.

Curtis: Really no no dramatic changes from the fourth quarter as far as the shape of the comp. It was broad it was balanced geographies channels etcetera, everything kind of played out as we as we'd hoped it would and it was pretty steady throughout the quarter.

Curtis Valentine: It was broad, it was balanced, you know, geographies, channels, etc. Everything kind of played out as we as we'd hoped it would. And it was pretty steady throughout the quarter. And no note of like behavioral changes at all related to, you know, just, you know, the macro and the way the consumers feel. I think probably somewhat surprisingly, we haven't seen any impact from the consumer confidence, either regionally or category wise or trading down or different dynamics within it. So that's probably the surprise in some ways, who knows where consumer confidence is going to lead to in terms of behavior going forward.

Curtis: And no note of like behavioral changes at all related to.

Curtis: The macro and led the way the consumer is feeling.

Curtis: I think probably somewhat surprisingly, we haven't seen any impact from the consumer confidence either regionally or category wise of trading down or different dynamics within it. So thats, probably the surprise in some ways, who knows where consumer confidence is going to lead to in terms of behavior going forward and we're watching it really carefully but we.

Curtis Valentine: And we're watching it really carefully. But we haven't seen any significant change in behavior.

Curtis: Haven't seen any significant change in behavior.

Jack Sinclair: Okay, and just to follow up on, you know, self-distribution, Jack, you had mentioned something about, you know, just beginning to sort of unlock, you know, the benefits associated with that. And I was curious if you could provide a bit more color on both, like, the margin and the operational benefits, you know, of what you're doing on the meat and seafood side.

Speaker Change: Okay, and just a follow up on self distribution. Jack you had mentioned something about just beginning to sort of unlock the benefits associated with that and I was curious if you could provide a bit more color on both the margin and the operational benefits.

Speaker Change: What youre doing on meat and seafood side, and then I'm curious as to whether there is further opportunity beyond those categories down the road.

Jack Sinclair: And then I'm curious as to whether there is further opportunity beyond those categories down the road. is getting our meat and seafood business under our own auspices so that we can manage it ourselves. And the aspiration behind that will be to have better in stocks, better working dynamic with our vendor base and enabling us to potentially just get more in stock and be better at providing a service to the customer. And we're very hopeful that that's going to help us in both the top line and the bottom line within the meat category. That's not going to flow through until next year when we get this thing fully up and running.

Speaker Change: Paul let Nick go into some detail, but the reality of this we've been investing in space to be able to add more categories to self distribution over the last few years and as we put Dcs that we've built three dcs on the ground and expanded some other ones as we've done that the intention was always to bring more categories to bear on the fresh categories are the most important one.

Speaker Change: Those are so important to our customer base. So that we have been doing and we are building as we talked about in the script is getting our meat and seafood business under our own auspices. So that we can manage ourselves and the aspiration behind that will be better.

Speaker Change: Better in stocks better work and dynamic with our vendor base and enabling us to potentially just get more install can be better at providing a service to the customer and we're very hopeful that's going to help us on both the top line on the bottom line with them.

Speaker Change: Category, that's not going to flow through until next year. When we get this thing fully up and running and we're working our way through that and the teams are doing a great job, but maybe you could build on that yeah, Hey, Ed.

Nick Konat: And we're working our way through that. The teams are doing a great job.

Nick Konat: But maybe, Nick, you could build on that. Yeah. Hey, Ed, the protein focus for us is important strategically because, as I mentioned, I think in John's earlier question, we have a very differentiated meat and protein business in the meat and seafood side. We offer only attribute-driven products in that space. And the importance of freshness, control, quality, and in turn also profitability is really important for us in that business. So we chose that we wanted to invest there and bring that in-house, run that self-distribution. We had the capacity to do so. We're going to be, as we mentioned, we're going to be spending this year making that transition.

Ed: The protein focus for us is important strategically because as I mentioned I think in John's earlier question.

Ed: We have a very differentiated and protein business and the seafood and meat and seafood side, we offer only attribute driven products in that space and the importance of freshness.

Ed: Control quality and in turn also profitability is really important for us in that business.

Ed: So we chose that we wanted to invest there and bring that in house with run that self distribution that we had the capacity to do so.

Ed: We're going to be as we mentioned, we're going to be spending this year, making that transition.

Nick Konat: And we've already started that process and will, as Jack mentioned, continue it towards the end of the year and early in 2026. So we're not going to see a ton of the benefit this year, but we should see some of that next year. And right now, for me and my team, that's what we're really focused on is how do we execute that really well and not create any major issues for the business. And so far, we're doing just that.

And we've already started that process and we will as Jack mentioned continue towards the end of the year and early in 2006, So we're not going to see a ton of the benefit this year, but we should see some of that next year and right now for me and my team. That's what we're really focused on is how do we execute that really well and not create any major issues with the business and so far we're doing just that.

Nick Konat: And with regard to further opportunities, there may be, as we come down the line on this, Ed, further categories. It's something we're looking at. But at the moment, we're really doubling down on getting the meat and seafood thing right.

Ed: And with regard to further opportunities that may be as we come down the line on this Ed further categories.

Ed: It's something we're looking at by the moment, but really doubling down on getting that meat seafood thing right.

Edward Kelly: Great. Thank you.

Ed: Great. Thank you.

Andrew: Thank you Andrew.

Krisztina Katai: And our next question comes from the line of Krisztina Katai with Deutsche Bank. Hi, good afternoon. Thanks for taking the question. So, Jack, I wanted to ask on attribute-based products and the momentum. there.

Speaker Change: Our next question comes from the line of Cristina <unk> with Deutsche Bank.

Speaker Change: Hi, good afternoon. Thanks for taking the question Jack I wanted to ask one attribute based products and the momentum that you continue to see there can you talk about the plant SKU launches that you have for 2025 and just plans to further leverage the momentum of the sprouts brand in particular and then to.

Jack Sinclair: Can you talk about the Plants Q launches that you have for 2025 and just plans to further leverage the momentum of the Sprouts brand in particular?

Jack Sinclair: And then two, some of the reformulation efforts that are out there under the new health secretary. Nisha Thakur, Online Investment Advisor, Inc. © The Real Vision 2013 Transcription by CastingWords That's a good question, and we're spending a lot of time looking. The one great thing about our company is we're well ahead of most of these kind of dynamics about what's in our food and what the dyes and these kind of things. We've got some work to do, which I'll talk about in a second. With regard to our Sprouts brand business, we've been delighted at the progress that we've made on that.

Speaker Change: Some of the reformulation efforts that are out there under the new health Secretary of removing some of the harmful ingredients like dies just one.

Speaker Change: Your general views on potential changes in competitors' offerings, and how that might change your go to market strategy.

Speaker Change: Yes, it's a good question.

Speaker Change: We're spending a lot of time looking the one great thing about our company is we're well ahead of most of these kind of dynamics.

Speaker Change: In our food and what the dyes and these kind of things we've got some work to do which I'll talk about in a second with regard to our price brand business. We've been delighted at the progress that we've made on that our surprise, Brian is very clean relative to the rest of the marketplace. In fact, I don't think we will get any work to do on the price front.

Jack Sinclair: Our Sprouts brand is very clean relative to the rest of the marketplace. In fact, I don't think we've got any work to do on our Sprouts brand. The business there has been very focused on bringing those attributes to bear. Organics has been a big plus for us. Gluten-free has been a big plus for us, and they're doubling down. The team are doubling down on that. As we've said, we're not trying to aspire to a bigger percentage of sales in Sprouts brand, but without doing that, we've gone from 16% to 24% of Sprouts brand because we're bringing products that relate to that attribute-based business that you're alluding to.

Speaker Change: The business there has been very focused on bringing those attributes to payer organic has been a big plus for US gluten free has been a big plus for us and our Dublin day and the team are doubling down on that and as we've said, we're not trying to aspire to a bigger percentage of sales.

Speaker Change: <unk> brand, but without doing that we've gone from 16% to 24% of <unk> brand because we are bringing projects that relate to the attribute based business that youre alluding to with regard to ingredients and where this goes as I said, we are in good place relative to that there's one or two things that we're taking a really close look at.

Jack Sinclair: With regard to ingredients and this goes, as I said, we're in a good place relative to that. There's one or two things that we're taking a really close look at. I think we'll be better placed than most in terms of managing it. I don't think it's going to change our go-to-market strategy because I think we're ahead of this relative to the rest of the market. How it's going to play out with regard to the branded goods and the rest of the market is going to be an interesting one, but less relevant to us than it will be to many others.

Speaker Change: And.

I think we'll be better placed than most in terms of managing it I don't think its going to change our go to market strategy. Because I think we're ahead of this relative to the rest of the market.

Speaker Change: Hi, this is going to play out.

Speaker Change: With regard to the branded goods and the rest of the market I think is going to be an interesting one but less relevant to us and it will be too many others.

Curtis Valentine: Great, and if I can just follow up, I have one for Curtis, just gross margin. Unknown Attendee, Krisztina Katai, Susannah Livingston, Jacob Aiken, Scott Mushkin, Unknown Attendee, Krisztina Katai, Susannah Livingston, Jacob Aiken, Unknown Attendee, Krisztina Katai, to just manage that line item really well. Thank you. Yeah, thanks, Krisztina. Yeah, the teams are doing a great job there. They continue to, you know, to find more opportunities. We talked a lot in the last, you know, four, five, six calls about being a fairly immature business and still having opportunities ahead of us. We're capturing some of those as we go here quarter to quarter to quarter.

Speaker Change: Alright.

Speaker Change: If I can just follow up I have one for Curtis just gross margin continues to surprise to the upside you obviously noted improvement.

Speaker Change: Inventory and category management.

Speaker Change: Maybe if you could talk about the sustainability of these how much is left there to further unlock just trying to understand that overall ceiling of gross margins that we can see because you continue to just manage that line item really well. Thank you.

Speaker Change: Yes, Thanks Kristina.

Speaker Change: The teams are doing a great job there.

Speaker Change: We continue to find more opportunities we talk a lot in the last 456 calls about being a fairly immature business and still have an opportunities ahead of us.

Speaker Change: We're capturing some of those as we go here quarter to quarter to quarter.

Curtis Valentine: But we're, we still believe there's levers to pull there, there's ways to get better, certainly in how we order, how we allocate product, things like that, will continue to get better, how we manage the in and out of 7000 SKUs that we're bringing in and taking out every year can be better. And so there's still room to go and not clearly not as much as is behind us, but we still have opportunities there. And that's great.

Speaker Change: But we still believe there is levers to pull there theres ways to get better certainly in how we order how we allocate product things like that and we will continue to get better how we manage the in and out of 7000, skus that were bringing in and taken out every year.

Speaker Change: Can be better and so there is still room to go and not clearly not as much as it is behind us, but we still have opportunities there and thats great. It gives us the opportunity to invest in things like loyalty and self distribution and the things that we're putting our money into to grow the business in the long term so expecting that to moderate for sure in the second half of the year.

Curtis Valentine: It gives us the opportunity to invest in things like loyalty and self-distribution and the things that we're putting our money into to grow the business in the long term. So expecting it to moderate for sure in the teams will continue to surprise us with upside. But for now, we're expecting that to come back closer to normal. Thank you. Best of luck. Thanks, Krisztina.

We go forward.

Speaker Change: The teams will continue to surprise us with upside, but for now we're expecting that to come back closer to normal.

Speaker Change: Alright, Thank you best of luck.

Kristina: Thanks Kristina.

Mark Carden: Thank you. And our next question comes from the line of Mark Carden with UBS. Afternoon, thanks so much for taking the questions. So to start, in recent quarters, you guys have talked about the opportunity to capture more trade-in from the Food Away From Home channel. Do you think you've seen much of a step up here just given some of the soft restaurant traffic data that's been out there over the past few months? And then do you approach retention any differently with these customers you might be bringing in?

Speaker Change: Thank you Andrew.

Speaker Change: Our next question comes from the line of Mark Carden with UBS.

Speaker Change: Good afternoon. Thanks, so much for taking the questions. So to start in recent quarters, you guys have talked about the opportunity to capture more trade in from the food away from home channel do you think you've seen much of a step up here just given some of the soft restaurant traffic data that's been out there over the past few months and then do you approach retention any differently.

Speaker Change: These customers that you might be bringing in.

Nick Konat: Hey, Mark, it's Nick. We certainly have seen that we believe we're getting some of that food at home purchase, again, especially from our core target customer who's looking for convenient meals that are driven by health and attributes. And we're seeing, as I mentioned, you know, some of our center of the plate and meal driven offerings certainly perform well. And so, you know, we're we are working hard to capture some of that spend and share. As far as the question on, you know, retention of that, this is where I get back to, you know, our opportunity with loyalty.

Nick: Hey, Mark it's Nick.

Mark: We certainly have seen that we believe we are getting some of that food at home purchase again, especially from our core target customer who's looking for convenient meals.

Mark: That are driven by health and attributes and we are seeing.

Mark: As I mentioned some of our center of the plate and meal driven offerings certainly performed well.

Mark: And so we are working hard to capture some of that spend and share.

Mark: As far as the question on retention of that this is where I get back to the <unk>.

Mark: Opportunity with loyalty and.

Nick Konat: And when people come in and engage with us, whether it's their first time or 10th time, and we understand what they're purchasing and why we can start to serve them all sorts of great options. keep them coming back and expand their basket. So we're looking forward to that as the program launches and our capabilities there improve. That's great. Thanks.

Mark: And when people come in and engage with us whether it's the first time return time, and we understand what they're purchasing and why we can start to serve them all sorts of great options to keep them coming back and expand their basket. So we're looking forward to that as the loyalty program launches and our capabilities there improve.

Speaker Change: That's great. Thanks, and then on tariffs and you guys appear to be pretty well positioned on the food side. How do you think about any potential impact it could have on your pace of unit growth going forward relative to your algo just given the potential.

Jack Sinclair: And then on tariffs, you guys appear to be pretty well positioned on the food side. How do you think about any potential impacts it could have on your pace of unit growth going forward relative to your algo just given the potential for higher costs to build? Again, it's something we're paying a lot of attention to, Mark, as you say, with regard to the operating and selling of our food, we're pretty well protected in that most of our stuff comes from the US and the stuff that comes from Mexico is being protected more or less, unless something changes.

Mark: For higher cost to build.

Mark: Again, it's something we're paying a lot of attention to Mark as you say with regard to the operators telling of our February we're pretty well protected in that in that most of our stuff comes in the U S and the stuff that comes from Mexico has been protected more some more or less unless something changes.

Jack Sinclair: But we're in a relatively good place there. The thing we are paying attention to is the cost of building our stores. So far, I don't think it's going to have an impact on us this year, but we're going to have to think pretty hard about what the long term impact might be on that. At this stage, we've got plenty of space within our returns that gives us confidence that whatever happens in terms of steel tariffs and lumber tariffs and other things, that we're well protected in it. But we are paying a lot of attention to it, as you can imagine.

Mark: In a relatively good place there the thing we are paying attention to is the cost of building a store. So far I don't think it's going to have an impact on us this year, but we're going to have to think pretty hard about what the long term impact might be on that.

Mark: Stage, we've got plenty of space within our returns that gives us confidence that whatever happens in terms of steel towers.

Mark: <unk> and other things that we're well protected in it but we are paying a lot of attention to as you can imagine.

Mark Carden: Great. Thanks so much. Good luck, guys. Thanks. Thank you.

Mark: Great. Thanks, so much good luck guys.

Mark: Thanks.

Mark: Hugh.

Mark: Thank you.

Michael Montani: Our next question comes from the line of Mike Montani with Evercore ISI. Hey, good afternoon. Thanks for taking the question. I just wanted to ask if I could follow up on the comp side, can you guys provide some incremental information in terms of transaction size versus transaction count that you experienced within the quarter to drive the comp?

Speaker Change: Our next question comes from the line of Mike, Montana, <unk> with Evercore ISI.

Speaker Change: Hey, good afternoon, thanks for taking the question.

Speaker Change: Just wanted to ask if I could follow up on the comp side can you guys provide some incremental information in terms of transaction size versus transaction count that you experienced within the quarter to drive the comp and then as we look at the start of <unk> results are you comping.

Michael Montani: And then as we look at the start. Submit your results, are you comping within the range, or does the guidance provide a cushion if things were to...

Speaker Change: Within the range or does the guidance provide cushion if things were to moderate from here.

Speaker Change: [laughter].

Curtis Valentine: Hi, Mike, it's Curtis. Yeah, so traffic and basket, about 70% traffic in Q1, so we continue to see strong traffic results and a pretty normal basket. And the business is in good shape here as we start the quarter.

Mike: Hi, Mike.

Mike: So traffic in basket about 70% traffic in Q1, so we continue to see strong traffic results and a pretty normal basket and.

Mike: And the business is in good shape here as we start the quarter.

Curtis Valentine: Excuse me, sorry. Q2 is off to a good start, looking similar to Q1, but we're feeling comfortable with the guidance and we'll see where the world goes here over the next few months. Got it.

Mike: Excuse me sorry.

Mike: Q2 is off to a good start looking similar to Q1, but we're feeling comfortable with the guidance and we'll see where the world goes here over the next few months.

Speaker Change: Got it and then if I could just follow up on the margin side, we were getting to about 60 bps of EBIT margin improvement in <unk>, and then 40 to 50 bps in the back half. So you had mentioned some moderation in the pace of gross margins should we basically look at that and say it could be roughly equal gross margin expansion versus.

Curtis Valentine: If I could just follow up on the margin side, we were getting to about 60 bps of EBIT margin improvement in 2Q and then 40 to 50 bps in the back half. So, you know, you had mentioned some moderation in the pace of gross margins. Should we basically look at that and say, you know, it could be roughly equal gross margin expansion versus SG&A leverage or anything you'd say to keep in mind there? Yeah, I think spot on for Q2 and about the 60 range. I think the majority of that will be gross as we continue to see strong results there.

Mike: SG&A leverage or anything you'd say to keep in mind there.

Speaker Change: Yes, I think so.

Speaker Change: Spot on for Q2 in about the 60 range I think the majority of that will be gross as we continue to see strong results there.

Curtis Valentine: And some of the supply, you know, things we talked about will probably leak into Q2. As we get to the back half, it'll be probably a little bit more more split between the two, we should see leverage in SG&A throughout the year as well. And there'll be a little more balance between the two as we talk about the second half.

Speaker Change: Some of the supply things, we've talked about will probably leak into Q2.

Speaker Change: As we get to the back half.

Speaker Change: It'll be probably a little bit more more split between the two we should see leverage in SG&A.

Speaker Change: Throughout the year as well there'll be little more balanced between the two as we talked about the second half.

Michael Montani: Thanks for taking the question and good luck. Thanks, Mike. Thank you.

Speaker Change: Great. Thanks for taking the question and good luck.

Speaker Change: Thanks, Mike Thanks, Mike.

Bill Kirk: And our next question comes from the line of Bill Kirk with Roth Capital Park. Hey, good afternoon, everybody. So you just posted a quarter with almost 12% EBITDA margins, and I don't think you've ever had a quarter over 10.

Speaker Change: Thank you and our next question comes from the line of Bill Kirk with Roth Capital Partners.

Bill Kirk: Hey, good afternoon everybody.

Speaker Change: So you just posted a quarter with almost 12% EBITDA margins and I don't think you've ever had a quarter over 10. So.

Curtis Valentine: So I guess my question is longer term, can Sprouts be a double digit EBITDA margin business? Hey, Bill, it's Curtis. You know, certainly we're, we're aspiring to continue to improve the business quarter after quarter and year after year. Obviously, you know, we think about it in terms of stable, we were going to continue to invest in the business to drive those long term results. And as we've said before, as we, as we kind of catch new watermarks, new high watermarks, you know, we don't expect to go back to the customer. And, you know, we're going to continue to drive inefficiency out of our model and, you know, look to improve the business.

Speaker Change: Yes, My question is longer term.

Speaker Change: Can sprouts be a double digit EBITDA margin business.

Curtis: Hey, Bill its Curtis.

Bill Kirk: Certainly where we are.

Bill Kirk: Aspiring to continue to improve the business quarter after quarter and year. After year, obviously, we think about it in terms of stable, we're going to continue to invest in the business to drive those long term results.

Bill Kirk: And as we've said before as we as we kind of catch new watermarks, New high Watermarks, we don't expect to go backwards and so.

Bill Kirk: I'm really pleased with how the business is performing and how the teams are performing and taking care of our target customer and we're going to continue to drive inefficiency out of our model and look to improve the business, but we're going to continue to invest in the business as well you can count on us for stable.

Jack Sinclair: But we're going to continue to invest in the business as well, you can count on us for stable. You know, if it gets better than that, we'll, we'll maintain it. I think the exciting thing for us at the moment, Bill, is that we're in the place where, as I've always said, we're a relatively immature business. So there's opportunities for us to improve our business. And as we continue to do that, to reinvest this for the future is so exciting in terms of the work we can do in IT and supply chain and making our business better and really investing in our team members as we create this differentiated experience in store.

Bill Kirk: And if it gets better than that we'll maintain it.

Bill Kirk: The exciting thing for us at the moment Bill is that we're in a place where as I've always said, we're a relatively immature business. So there is opportunities for us to improve our business and as we continue to do that to reinvest for the future.

Bill Kirk: So exciting in terms of what we can do in it and supply chain and making our business better and really investing in our team members as we create this differentiated experience in store I'm really excited about where we're at and giving us the fuel to do that is something that captisol navigated our way through how do we think this one through.

Curtis Valentine: I'm really excited about where we're at. And giving us the fuel to do that is something that Curtis will navigate our way through how we think this one through.

Bill Kirk: But it's an exciting place to be at the moment. Thank you.

Bill Kirk: It's an exciting place to be at the moment.

Speaker Change: Thank you and as a follow up Curtis I think you mentioned that tie in stock levels.

Curtis Valentine: And as a follow up, Curtis, I think you mentioned that tight in stock levels had helped shrink leverage. Have they reached a point or has it reached a point where those tighter inventory levels are impacting sales in any way? Are there any missed sales out there as those inventory levels that helped shrink leverage have gotten a little tighter? Yeah, good question, Bill, I think, you know, we feel good about we're getting the product we need to keep the sales going. Obviously, it was a good quarter in Q1 and pretty similar to Q2. I think we do want to get back in stock as best we can just to take care of the target customer.

Bill Kirk: Shrink leverage.

Speaker Change: They reached a point or has it reached a point where those tighter inventory levels are impacting sales in any way or are there any missed sales out there as those inventory levels that help shrink leverage had gotten a little tighter.

Speaker Change: Yes. Good question Bill I think we feel good about where getting the product we need to keep the sales going obviously it was a good quarter in Q1 and pretty similar to Q2, I think we do want to get back in stock as best we can just to take care of the target customer.

Curtis Valentine: You know, are we leaving a little bit on the table there, perhaps? But we just really need to be in stock to take care of the customer. And, and that's what we're focused on is getting back to break there. I think there's a few categories we've looked at that probably as the transition in self distributions probably helped us a little bit in that space. way you want to describe it. Thank you.

Speaker Change: Are we leaving a little bit on the table, there, perhaps but we just really need to be in stock to take care of the customer and.

Speaker Change: And that's what we're focused on is getting back to break there.

Speaker Change: Thank you. Thank you. Thank you execute Cathy sorry, I'll list a few categories, we've looked at that probably as it transition and south distributions, probably helped us a little bit in that space.

Speaker Change: Whichever way you want to describe it.

Speaker Change: Thank you.

Kendall Toscano: And our next question comes from the line of Robbie Ohmes with Bank of America.

Speaker Change: And our next question comes from the line of Ravi owns with Bank of America.

Kendall Toscano: Hi, this is Kendall Toscano on for Robbie. Thanks for taking my question. I'm curious, although grocers probably don't have as much exposure to tariffs we have in place right now, curious if there's anything you're seeing from peers in terms of pricing actions, maybe trying to get ahead of future tariffs or manage rising costs in other areas?

Speaker Change: Hi, This is Tim I'll just follow on for Robbie Thanks for taking my question.

Speaker Change: Im curious.

Speaker Change: Grocers, probably don't have as much exposure to tariff.

Speaker Change: Tariffs do you have in place right now curious if theres anything youre seeing from peers in terms of pricing actions, maybe trying to get ahead of future tariffs or manage.

Speaker Change: Rising costs in other areas.

Nick Konat: Hi Kendall, it's Nick. No, we're not we're not seeing anything on the product side right now in any any preemptive response to tariffs. Things have been pretty stable for us on the cost side. Same on SG&A. It's early and I think people are trying to figure out exactly where it's going to be when it's all said and done. So we haven't seen much yet.

Nick: I Kendall, it's Nick no we're not we're not seeing anything.

Nick: On the product side, right now and any any preemptive response to tariffs things have been pretty stable for us on the cost side same on SG&A.

Nick: Early and I think people are trying to figure out exactly where it's going to be when it's all said and done so we haven't seen much up.

Kendall Toscano: Got it, thanks.

Nick: Got it thanks.

Curtis Valentine: And then, apologies if I missed it, but can you give us any more color in terms of the supply constraints you brought up before? Exactly what categories are driving that? And I know you also had, that was a driver of some gross margin expansion. So is that something you expect to continue into the second quarter?

Speaker Change: And then apologies if I missed it but can you give us any more color in terms of the supply constraints you brought up before exactly what categories are driving that and also had that was a driver of gross margin expansion. So is that something you expect to continue into the second quarter.

Curtis Valentine: Yeah, there's a few things going on there. One, well, clearly, the meat transition and self-distribution, that's just a challenge with fresh product. And so as we made that transition to kind of our bridge solution before we're ready to do it in RDCs, you know, we had some empty shells and spots that contributed to shrink. And we pulled back a little bit on promo in the second half of the quarter, as well as we were just managing supply and working through the transition. That piece is largely behind us. We're in good shape on the meat front.

Speaker Change: Yes, Theres, a few things going on there well clearly the meat transition and self distribution. That's just the challenge with fresh product and so as we made that transition to kind of bridge solution before we're ready to do it in our Dcs, we had some empty shelves in spots.

Speaker Change: <unk> contributed to shrink and we pulled back a little bit on promo in the second half of the quarter as well as we were just managing supply in and working through the transition.

Speaker Change: That piece is largely behind us we're in good shape on the meat front, we've got a bridge solution in place our partners doing great.

Curtis Valentine: We've got our bridge solution in place. Our partner's doing great. And we're working through supply with them.

Speaker Change: And we're working through working through supply with them.

Curtis Valentine: And then the other piece is eggs, which just continues to be a challenge with avian flu. That continues on here. And then the third part is just generally the business is in great shape, and we're running strong comps. And so we're chasing inventory in a variety of areas across the business. And that's led to a little bit less shrink. So, you know, we'll see how that plays out in the second quarter. A little bit of that, as I said earlier, could leak into Q2. But we're working hard to try and get back to bright and shore those up.

Speaker Change: And then the other pieces eggs, which just continues to be a challenge with avian flu.

Speaker Change: That continues on here and then the third part is just generally the business is in great shape, and we're running strong comps and so we're adjacent inventory in a variety of areas across the business.

Speaker Change: And that's led to a little bit less shrink so.

Speaker Change: We'll see how that plays out in the second quarter, a little bit of that as I said earlier could leak into Q2.

Speaker Change: But we're working hard to try and get back to bright ensure those up.

Speaker Change: Okay.

Kendall Toscano: Great. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: Hello.

Speaker Change: Okay.

Speaker Change: Thank you.

Kelly Bania: Our next question comes from the line of Kelly Bania with BMO Capital Markets. Hi, good evening, thanks for fitting me in. Wanted to follow up on e-commerce. I think you said that your growth was consistent across your three kind of primary partners. And just wanted to dig in a little bit more on Instacart and how that's going because I thought it was interesting that they lowered their minimum delivery threshold, I believe to $10 recently. And so just curious if that contributed to any growth there or if there's any way, change in the way that consumers can use sprouts with that lower threshold there, thinking of kind of prepared foods and convenient meal solutions in particular.

Kelly Bania: Question comes from the line of Kelly Bania with BMO capital markets.

Kelly Bania: Hi, good evening, Thanks for fitting me in wanted.

Kelly Bania: I wanted to follow up on E. Commerce, I think you said that you are correct.

Speaker Change: Assistant across your three kind of primary partners.

Speaker Change: And just wanted to dig in a little bit more on in CCAR and how that's going because I thought it was interesting that they lowered their minimum delivery thresholds I believed to $10 recently and so I was just curious if that contributed to any growth there or if theres any way a change in the way that consumers can use sprouts with.

Speaker Change: That lower threshold, there thinking of kind of prepared food and convenient meal solutions in particular.

Speaker Change: Yes.

Nick Konat: Hey, Kelly, it's Nick. Yeah, as you mentioned, I mean, we did see really strong e-commerce growth of 28% overall. And I think we've talked about our e-commerce growth is driven first and foremost by the fact that we've got a really unique and differentiated offering that's hard to find other places. And so people will certainly continue and we continue to see strong transactions and people looking for what we have on e-commerce. And I think as we've noted strategically for us, we're here to serve the customer wherever they want us to. And the good news is those e-commerce customers are omni-channel customers and also high value.

Nick: Hey, Kelly it's Nick.

Nick: We did see really strong e-commerce growth of 28% overall and I think as we've talked about our E. Commerce growth is driven first and foremost by the fact that we've got a really unique and differentiated offering thats our defined other places and so people will.

Nick: Certainly continue and we continue to see strong transactions and people.

Nick: Looking for what we have on E Commerce, and I think as we've noted strategically for US we're here to serve the customer wherever they want us to.

Nick: Good news is those ecommerce customers, our omnichannel customers and also high value. So that growth is a nice tailwind for us.

Nick Konat: So that growth has a nice tailwind for us. Regarding Instacart, the good news is we're seeing strong growth across all three of our partners, Instacart, DoorDash, and Uber Eats. We're certainly comping over some of the new launches with Uber Eats last year and DoorDash, but they continue to grow. And Instacart is still the large majority of our e-commerce business. We're seeing strong growth. Some of the things you mentioned, we're seeing a little bit of help, but again, I think our customer is more focused on the unique products and attributes more so than maybe the deal that others on that platform may be looking for.

Nick: Regarding <unk>. The good news is we're seeing strong growth across all three of our partners since Descartes door dash Uber eats or <unk>.

Nick: Comping over some of the new launches with Uber eats last year and door dash, but they continue to grow and instant card is still the large majority of our ecommerce business, we're seeing strong growth.

Nick: Some of the things you mentioned seeing a little bit of help but again I think our customer is more focused on the unique products and attributes more so than maybe the deal that others on that platform maybe looking for.

Nick Konat: But so far, we're continuing to see strong growth of that partner in all three. Thank you. Thanks, Kelly. Thank you.

Nick: But so far we continue to see strong growth of that partner in all three.

Nick: Thank you.

Speaker Change: Thanks, Kevin Thanks, Thanks Kelly.

Jack Sinclair: And our next question comes from the line of Scott Marks with Jeff. Yeah, I think the reality for us is that continuing to what we've seen over the course of the last few years, those categories that are differentiated, those categories that have got different attributes in them, we're seeing a stronger growth in those categories than in categories that are more traditional. So our dairy business is really strong, our frozen business is really strong, our grocery business is really strong. While at the same time, I think one of the step ups we've had, Nick, has been what's happened in our vitamin business, which Curtis alluded to part of the reason being cold and blue.

Speaker Change: And our next question comes from the line of Scott marks with Jefferies.

Scott Marks: Hey, good afternoon, guys. Thanks for taking my questions.

Scott Marks: First one asked about and you mentioned earlier that you've kind of seen.

Scott Marks: Broad based growth across all categories, which I think is a little bit different from what we hear from maybe more traditional retailers and some of the suppliers. So I'm. Just wondering if you can talk maybe on a relative basis, maybe some areas that are doing a bit better than maybe some that are a little bit weaker.

Yes, I think the reality for US is continuing to what we've seen over the course of the last few years those categories differentiated those categories that have good different attributes and then we're seeing a stronger growth in those categories than in categories that are more traditional so our daily business is really strong.

Scott Marks: Frozen business is really strong our grocery business has really strong while at the same time I think one of the staff up to five <unk> has been what's happened in our vitamin business, which.

Speaker Change: Carlos alluded to part of the reason being cold and flu, but part of it is just the way that world is changing in terms of products are very.

Curtis Valentine: But part of it is just the way that world is changing in terms of products that are very, those supplements that are coming in to help people with different issues and different things they're thinking about. I've been astonished at the new products that are coming through there and how well they're doing. So as well as our base business, which is bulk and produce, and our meat business, which we're feeling comfortable with, those are probably the areas that are doing a little bit better. Yeah. No, I think you're right on, Jack. The only color I would add is, you know, where it's innovative and attribute forward for us, Scott, it's winning, and our customers voting for that.

Speaker Change: Those supplements coming in to help with people with different chosen different things or thinking about Afghanistan, instead of new products coming through there on how well they are doing so as well as our base business, which is bulk in projects in our meat business, which we're feeling comfortable with those would probably be the areas are doing well, but better yes, I think youre right on Jack the only color I would add.

Speaker Change: It is.

Speaker Change: Where it's innovative and attribute forward for us.

Speaker Change: It's winning in a customer's voting for that Thats, maybe aware the outsized growth is coming in those when it's innovative and new and differentiated with an attribute that certainly winning for us.

Curtis Valentine: That's maybe where the outsized growth is coming in those, and when it's innovative and new and differentiated with an attribute, that's certainly winning for us overall. Jack covered some of the categories. I think one of the things I'm really happy with, with the work with the team is, you know, pockets of the country or parts of our categories that maybe were a little softer last year, we put a lot of work in and helped improve, and so we're seeing all the businesses continue to grow, so there isn't a lag where we look at it and go, this is not working for us.

Jack: Overall, Jack covered some of the categories I think one of the thing I'm really happy with the work with the team is.

Jack: Part pockets of the country or parts of our calories that maybe were a little softer last year, we put a lot of work in and helped improve and so we're seeing all of the businesses continue to grow so there isn't a laggard when we look at and go. This is not working for US has been a lot of work on execution and the team has done a good job of growing all of our businesses right now.

Scott Mushkin: There's been a lot of work on execution, and the team's done a good job of growing all of our businesses right now. Understood. Thanks for that.

Jack: Understood. Thanks for that and then just as a follow up.

Scott Mushkin: And then just as a follow up, in your investor deck, there was a comment in there about having kind of a same store growth tailwind from some of the new stores, but that being partially offset by some cannibalization, which is something I don't believe I've seen alluded to before. So just wondering if you can kind of share some insights into that in terms of maybe magnitude and which markets. Thanks. Yeah, I think the cannibalization, you know, it's probably about 100 to 150 basis points. And it just depends on kind of where we're opening stores and how close they are to other stores.

Jack: In your.

Jack: Investor deck, there was a comment in there about.

Jack: Having kind of a.

Jack: Same store growth tailwind from some of the new stores, but that being partially offset by some cannibalization, which is something I don't believe I've seen alluded to before so I'm. Just wondering if you can kind of share some some insight to that in terms of maybe magnitude and which markets.

Jack: Thanks.

Jack: Yes.

Jack: Yes, I think the cannibalization.

Jack: About 100 to 150.

Jack: Basis points and it just depends on kind of where we're opening stores and how close they are to other stores that tends to obviously lean a little bit more towards our more established markets in the west and southwest as we opened stores in the east we've got a little bit more space and a little bit less cannibalization, but blended together.

Curtis Valentine: That tends to obviously lean a little bit more towards our more established markets in the West and Southwest. As we open stores in the East, we've got a little bit more space and a little bit less cannibalization. But blended together, you know, you're in that 125 basis points range. And on the new store side, they're coming in and they're folding into the comp really, really well. We're really pleased with the new store performance. We just don't have the number of vintages behind us, you know, was 8% last year, 8% the year before that. Prior to that, you know, we only opened 12 and 16 stores in a couple of years.

Jack: We're in that 125 basis points range and on the new store side, they're coming in and they are folded into the comp really really well, we're really pleased with the new store performance. We just don't have.

Jack: The number of vintages behind US was 8% last year, 8% the year before that prior to that we only opened 12 and 16 stores in a couple of years and so once we get the full kind of 10% growth over multiple years that that number will continue to grow I think the cannibalization will stay in that same range right now.

Curtis Valentine: And so once we get to full, you know, kind of 10% growth over multiple years, that number will continue to grow. I think the cannibalization will stay in that same range. Right now, they're, you know, a slight benefit if you net them together with the new store comps, you know, partially offset by the cannibalization. Expect the new store comp impact to continue to grow as we get more stores in the base. And again, the cannibalization should stay pretty steady in that 100 to 150 range, you know, as we open in that mix of new markets versus existing more established markets.

Jack: A slight benefit if you net them together with the new store comps.

Jack: Partially offset by the cannibalization I expect the new store comp impact to continue to grow as we get more stores in the base and again, the cannibalization should stay pretty steady in that 100 150 range as we opened in that mix of new markets versus existing more established markets.

Scott Mushkin: Understood. Thanks so much. I'll pass it on. Thanks, Scott. Thanks. Thank you.

Speaker Change: Understood. Thanks, so much I'll pass it on.

Scott Marks: Thanks Scott.

Speaker Change: Thank you.

Jack Sinclair: And our next question comes from the line of Scott Mushkin with R5 Capital. Hey, guys. Thanks. So I wanted to go back to a question that kind of came up a little bit, which was just the idea of competition. You know, if we're going to go back in time, I get this question from investors a lot with you guys. It reminds people of whole. And people ended up copying Whole Foods to a degree to push their margins back down quite a bit. So, the question is... You know, what else can you do to expand the moat from competitors?

Speaker Change: Next question comes from the line of Scott Myshkin with <unk> capital.

Scott Myshkin: Hey, guys. Thanks for fitting me in.

Speaker Change: I wanted to go back to a question that came up a little bit which was just the idea of competition. If we're going to go back in time.

Speaker Change: I get this question from investors a lot with you guys. It reminds people of whole foods.

Speaker Change: And people ended up copying whole foods to a degree to push their margins back down quite a bit.

Speaker Change: So the question is.

Speaker Change: What else can you do to expand the moat from competitors, because they're going to come right.

Jack Sinclair: Because they're going to come, right? product differentiation is key, which you're doing, but what else in your mind can really drive an increasingly unique customer experience? Is it much better customer service, for example, you know, which would actually require some investment and maybe, you know, keep the margins more not growing as much, but just want to get your thoughts on that. Well, we're very focused on, as I've used the expression, plowing our own canoe. We're going to do our own, I think everyone laughs at it because I don't quite understand it myself, but it certainly means we're trying to do our own thing and pushing that agenda down the road.

Speaker Change: Differentiation is key which youre doing but what else in your mind can really drive an increasingly unique customer experience is a much better customer service for example.

Speaker Change: Which would actually require some investment and maybe keep the margins more.

Speaker Change: Not growing as much but just wanted to get your thoughts on that.

Speaker Change: Well, we're very focused on as Ive used the.

Speaker Change: The expression plowing our own canoe, we're going to do I think everyone laughs, because I don't quite understand it myself, but it certainly means we're trying to do our own thing and pushing that agenda down the road I don't see the agenda changing significantly Scott we've got to double down on our produce business, which has always been an important part of our organic projects.

Jack Sinclair: I don't see the agenda changing significantly, Scott. We've got to double down on our produce business, which has always been the important part of it. Organic produce is on fire for us. If your organic business is growing as fast as it is for us relative to conventional, it's very hard for the other guys to chase after that. They're going to chase after the basic of that business rather than the organic side of it. We're excited about the opportunity in that space and doubling down on it. I think we can do more and more in our launching of products.

Speaker Change: Is on fire for us and I don't see it.

Speaker Change: If your organic business is growing as fast as it is for us relative to conventional it's very hard for the other guys to chase after that Theyre going to chase after the basic of the elder.

Speaker Change: Business, rather than the organic side of it. So we're excited about the opportunity in that space and doubling down on it I think we can do more and more and are.

Jack Sinclair: We talked to the last call, we launched 7,500 products last year. That's an extraordinary number and always refreshing our business. I spent yesterday with an innovation group in the beverage forum out in California and the number of products that are coming our way. It literally is very difficult for the other guys to launch as many products as that. We feel pretty confident in that space. With regard to pricing, we've always looked at pricing and having a price differential with everybody on our fresh produce business. We continue to have that. With regard to the products we're selling, we're pretty well priced on the products outside of the fresh food space.

Speaker Change: Launching a product we launched seven five that we talked to the last call. We launched seven 5000 products last year, that's an extraordinary number and keeping goal always refreshing our business I spent yesterday with the innovation with an innovation group and in the beverage Forum in California in the number of products coming our way.

Speaker Change: And it literally is very difficult for the other guys to launch as many products as that so we feel pretty confident in that space with regard to pricing, we have always looked at pricing and having a price differential with everybody on our fresh project business and we continue to have that.

Speaker Change: With regard to the products, we are selling we are pretty well priced on the product side of the fresh foods space. So from a pricing point of view, we think we've got a moat from a product point of view, we think we've got it and then probably as important is how do we create the atmosphere inside our stores have been absolutely delighted at the way the operations team have taken onboard.

Jack Sinclair: From a pricing point of view, we think we've got a moat. From a product point of view, we think we've got a moat. Then probably as important is how we create the atmosphere inside our stores. I've been absolutely delighted at the way the operations team have taken on board the mantle of trying to be the best service you can possibly be and the best service in the grocery industry in the United States. That involves sampling and saying hello to people and greeting people. We've got some pretty tough measures to make sure our teams are doing that.

Speaker Change: The module of trying to be the best service, you can possibly be and the best service in the grocery understand and the United States and not involve sampling and saying Hello to people greeting people and we've got some pretty tough measures to make sure. Our teams are doing that and.

Jack Sinclair: That, I think, is a really important part. That isn't a thing that a lot of grocers try to aspire to. That's part of the reason that we feel confident that the work that we're doing to take Drive some efficiency in our business that we can then convert back into service and convert back into product is something that will give us that differentiation going forward. So we've been working so far. And as I look at what's happening in the marketplace, Scott, I feel pretty confident that we're on the right track. That was perfect, Jack.

Speaker Change: I think so a really important part there isn't a thing that a lot of our.

Speaker Change: A lot of grocers try to aspire to.

Speaker Change: That's part of the reason that we feel confident the work that we're doing to take.

Speaker Change: Drive some efficiency in our business that we can then convert back into service and convert back into product.

Speaker Change: Something that will give us that differentiation going forward.

Speaker Change: No.

Speaker Change: Well, it's been working so far and as I look at what's happening in the marketplace, Scott I feel pretty confident that we're on the right track.

That's perfect Jack that was actually a fantastic answer so I appreciate it. Thank you.

Jack Sinclair: That was actually a fantastic answer, so I appreciate it. Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you and I'm showing no further questions at this time, so with that I'll hand, the call back over to CEO, Jack Sinclair for any closing remarks.

Operator: And I'm showing no further questions at this time. So with that, I'll hand the call back over to CEO Jack Sinclair for any closing remarks. Well, thanks, everybody, for your attention. We appreciate your support and appreciate your interest in our business. And we look forward to updating it through the year. Thanks, everybody. Copyright © 2021 Mooji Media Ltd. All Rights Reserved.

Speaker Change: Well thanks, everybody for your attention. We appreciate your support and appreciate your interest in our business and we look forward to updating it through the thanks everybody.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Sure.