Investor Deck Ma rc h 17 Ce rta in sta te me nts in this pre se - PowerPoint PPT Presentation

Investor Deck Ma rc h ‘ 17

Ce rta in sta te me nts in this pre se nta tio n a re fo rwa rd-lo o king a s de fine d in the Priva te Se c uritie s L itig a tio n Re fo rm Ac t o f 1995. Any sta te me nts c o nta ine d he re in (inc luding , b ut no t limite d to , sta te me nts to the e ffe c t tha t Spro uts F a rme rs Ma rke t, I nc . (the “Co mpa ny”) o r its ma na g e me nt "a ntic ipa te s," "pla ns," "e stima te s," "e xpe c ts," "b e lie ve s," o r the ne g a tive o f the se te rms a nd o the r simila r e xpre ssio ns) tha t a re no t sta te me nts o f histo ric a l fa c t sho uld b e c o nside re d fo rwa rd-lo o king sta te me nts, inc luding , witho ut limita tio n, sta te me nts re g a rding the Co mpa ny’ s e stima te d g ro wth, e xpe c te d re sults a nd fina nc ia l ta rg e ts. T he se sta te me nts invo lve c e rta in risks a nd unc e rta intie s tha t ma y c a use a c tua l re sults to diffe r ma te ria lly fro m e xpe c ta tio ns a s o f the da te o f this pre se nta tio n. T he se risks a nd unc e rta intie s inc lude , witho ut limita tio n, risks a sso c ia te d with the Co mpa ny’ s a b ility to suc c e ssfully c o mpe te in its inte nse ly c o mpe titive industry; the Co mpa ny’ s a b ility to suc c e ssfully o pe n ne w sto re s; the Co mpa ny’ s a b ility to ma na g e its ra pid g ro wth; the Co mpa ny’ s a b ility to ma inta in o r impro ve its c o mpa ra b le sto re sa le s a nd o pe ra ting ma rg ins; the Co mpa ny’ s a b ility to ide ntify a nd re a c t to tre nds in c o nsume r pre fe re nc e s; pro duc t supply disruptio ns; g e ne ra l e c o no mic c o nditio ns; a nd o the r fa c to rs a s se t fo rth fro m time to time in the Co mpa ny’ s Se c uritie s a nd E xc ha ng e Co mmissio n filing s. T he Co mpa ny inte nds the se fo rwa rd-lo o king sta te me nts to spe a k o nly a s o f the da te o f this pre se nta tio n a nd do e s no t unde rta ke to upda te o r re vise the m a s mo re info rma tio n b e c o me s a va ila b le , e xc e pt a s re q uire d b y la w. I n a dditio n to re po rting fina nc ia l re sults in a c c o rda nc e with GAAP, the Co mpa ny ha s pre se nte d E BI T DA fo r 2016 a nd fo r 2013-2015, a djuste d ne t inc o me a nd a djuste d E BI T DA. T he se me a sure s a re no t in a c c o rda nc e with, a nd a re no t inte nde d a s a n a lte rna tive to , GAAP. T he Co mpa ny's ma na g e me nt b e lie ve s tha t the se pre se nta tio ns pro vide use ful info rma tio n to ma na g e me nt, a na lysts a nd inve sto rs re g a rding c e rta in a dditio na l fina nc ia l a nd b usine ss tre nds re la ting to the Co mpa ny’ s re sults o f o pe ra tio ns a nd fina nc ia l c o nditio n. I n a dditio n, ma na g e me nt use s the se me a sure s fo r re vie wing the fina nc ia l re sults o f the Co mpa ny, a nd ma y b e a c o mpo ne nt o f inc e ntive c o mpe nsa tio n. T he Co mpa ny de fine s E BI T DA a s ne t inc o me b e fo re inte re st e xpe nse , pro visio n fo r inc o me ta x, a nd de pre c ia tio n a nd a mo rtiza tio n, a nd de fine s a djuste d E BI T DA a s E BI T DA a s furthe r a djuste d to e xc lude sto re c lo sure a nd e xit c o sts, c o sts a sso c ia te d with a c q uisitio ns a nd inte g ra tio ns, g a ins a nd lo sse s fro m dispo sa l o f a sse ts, b o nuse s pa id to c e rta in e mplo ye e s in c o nne c tio n with the Co mpa ny’ s initia l pub lic o ffe ring (“I PO Bo nus”), e xpe nse s inc urre d b y the Co mpa ny in its se c o nda ry pub lic o ffe ring s a nd e mplo yme nt ta xe s pa id b y the Co mpa ny in c o nne c tio n with o ptio ns e xe rc ise d in tho se o ffe ring s (“Pub lic Offe ring E xpe nse s”) a nd the lo ss o n e xting uishme nt o f de b t. T he Co mpa ny de fine s a djuste d ne t inc o me a s ne t inc o me e xc luding sto re c lo sure s a nd e xit c o sts, c o sts a sso c ia te d with a c q uisitio ns a nd inte g ra tio ns, g a in a nd lo sse s fro m dispo sa l o f a sse ts, I PO Bo nus, Pub lic Offe ring E xpe nse s, the lo ss o n e xting uishme nt o f de b t a nd the re la te d ta x impa c t o f tho se a djustme nts. F o r fisc a l ye a r 2016, suc h furthe r a djustme nts to ne t inc o me a nd E BI T DA we re imma te ria l; thus o nly E BI T DA is pre se nte d. I n a dditio n to re po rting fina nc ia l re sults in a c c o rda nc e with g e ne ra lly a c c e pte d a c c o unting princ iple s, o r GAAP, we pro vide info rma tio n re g a rding Re turn o n I nve ste d Ca pita l (re fe rre d to a s “ROI C”) a s a dditio na l info rma tio n a b o ut o ur o pe ra ting re sults fo r 2014-2016. ROI C is a no n-GAAP fina nc ia l me a sure use d b y ma na g e me nt to e va lua te o ur inve stme nt re turns o n c a pita l a nd pro vide s a me a ning ful me a sure o f the e ffe c tive ne ss o f o ur c a pita l a llo c a tio n o ve r time . We de fine ROI C a s ne t o pe ra ting pro fit a fte r ta x (re fe rre d to a s “NOPAT ”), inc luding the e ffe c t o f c a pita lize d o pe ra ting le a se s, divide d b y a ve ra g e inve ste d c a pita l. T he se no n-GAAP me a sure s a re inte nde d to pro vide a dditio na l info rma tio n o nly a nd do no t ha ve a ny sta nda rd me a ning s pre sc rib e d b y GAAP. Use o f the se te rms ma y diffe r fro m simila r me a sure s re po rte d b y o the r c o mpa nie s. Be c a use o f the ir limita tio ns, no ne o f the se no n- GAAP me a sure s sho uld b e c o nside re d a s a me a sure o f disc re tio na ry c a sh a va ila b le to use to re inve st in g ro wth o f the Co mpa ny’ s b usine ss, o r a s a me a sure o f c a sh tha t will b e a va ila b le to me e t the c o mpa ny’ s o b lig a tio ns. E a c h o f the se no n-GAAP me a sure s ha s its limita tio ns a s a n a na lytic a l to o l, a nd yo u sho uld no t c o nside r the m in iso la tio n o r a s a sub stitute fo r a na lysis o f the Co mpa ny’ s re sults a s re po rte d unde r GAAP. Ple a se se e the Appe ndix to this pre se nta tio n fo r a re c o nc ilia tio n o f the se no n-GAAP me a sure s to the c o mpa ra b le GAAP me a sure . 2

Overview of Sprouts

Sprouts is Well Positioned to Meet the Needs of Today’s Consumer • F ull g ro c e ry sto re ro o te d in S 1 PRO F ORMA NE T SAL E fr e sh, natur al and or ganic ($ in mm) foods a t va lue pric e s $4,046 • Br oad c o nsume r a ppe a l $3,593 • One o f the la rg e st a nd $2,967 owing na tura l a nd faste st gr $2,438 o rg a nic re ta ile rs with $1,991 sig nific a nt white spa c e $1,723 • I ndustry le a ding re sults a nd str ong ne w stor e e c onomic s 2011 2012 2013 2014 2015 2016 ¹ Pro forma net sales reflect the net sales of our predecessor entity, Henry’s Holdings, LLC (“Henry’s”) and Sunflower Farmers Market, Inc. (“Sunflower”) as if our business 4 combinations with these entities (the “Transactions”) had been consummated on the first day of fiscal 2011.

A Grocery Shopping Experience that Makes Healthy Living Easy & Affordable KNOWL E DGE ABL E HE AL T H VAL UE SE L E CT ION SE RVICE & Engagement Health Value Selection E NGAGE ME NT 5

Sprouts – A Healthy Grocery Store that Flips the Conventional Model • oduc e surro unde d b y a c omple te Pr g r oc e r y offe r ing • Pro mo te va lue e ve r yda y • tme nt o f hig h- Diffe r e ntia te d a ssor q ua lity, he a lthy fo o ds: • Do no t c a rry mo st na tio na l- b ra nde d CPG ite ms • F re sh, na tura l a nd o rg a nic o ffe ring • High standar d Pr ivate L abe l r oote d in quality and taste • F a rme rs ma rke t-inspire d ope n stor e la yout with lo w pro file displa ys • Conve nie nt , sma ll-b o x: 30k sq . ft. • vic e , F r ie ndly, e ng a g e d c ustome r se r e a sy to sho p e nviro nme nt 6

Years of New Store Growth • Spro uts’ fo o tprint a nd ne a r-te rm e xpa nsio n c o ve rs hig h g ro wth a re a s NV • De mo g ra phic s UT 6 CO MO 5 KS 96 a llo ws fo r de e p 30 5 3 NC CA pe ne tra tio n in ma rke ts 4 NM AZ OK TN AR 32 10 AL SC GA 7 13 • Mo de l wo rks we ll in de nse ly MS 4 TX LA 40 po pula te d, urb a n a re a s a s we ll 1 FL a s sma lle r me tro po lita n ma rke ts • Suc c e ssful in “na tura l / life style ” ma rke ts Existing Market a nd mo re “tra ditio na l” ma rke ts Near-Term Expansion Market • Ba la nc e d unit g ro wth with 60% - 70% c o ming fro m Mid-Term Expansion Market e xisting ma rke ts • Will o pe n a ppro xima te ly 30 sto re s pe r ye a r 7

Reaching A Broad Base of Consumers Through Traditional & Digital Mediums • Middle inc ome a nd hig he r • Me dium to a bove a ve ra g e e duc a tion BROAD • Bo o me rs, Ge n-X a nd rising Mille nnia l de mo g ra phic CUST OME R DE MOGRAPHICS • Dive rse e thnic b a c kg ro und • Va lue c onsc ious • Distrib ute mo re tha t 16 million c irc ula rs e a c h we e k • Re a c hing 1.5M unique dig ita l sub sc rib e rs • L a unc he d dig ita l c oupons in 2016 BRAND • Gro wing home de live ry with Ama zo n Prime No w AWARE NE SS pa rtne rship & RE ACH • I nc re a sing g ra ss-ro o t e ffo rts a nd c o mmunity e ng a g e me nt to drive tra ffic 8