Sprouts Farmers Market (SFM) risk factors, 2025 10-K

Market and Other External Risks

1. 01General economic conditions that impact consumer spending or result in competitive responses could adversely affect our business
2. 02Our failure to compete successfully in our competitive industry may adversely affect our revenues and profitability
3. 03We rely heavily on sales of fresh produce and quality fresh, natural and organic products, and product supply disruptions may have an adverse effect on our profitability and operating results
4. 04The current geographic concentration of our stores creates an exposure to local or regional downturns or catastrophic occurrences and the impact of climate change
5. 05Fluctuations in product and commodity availability and prices, including from the impact of tariffs, may impact profitability
6. 06Supply chain disruptions may delay our store growth plans
7. 07Widespread health epidemics or other incidents beyond our control could materially impact our business
8. 08Increasing energy costs, unless offset by more efficient usage or other operational responses, may impact our profitability
9. 09We may require additional capital to fund the expansion of our business, and our inability to obtain such capital could harm our business

Business and Operating Risks

1. 10Our ability to execute on our long-term growth strategy largely depends on new store openings, and our failure to successfully open new stores could negatively impact our business
2. 11Real or perceived concerns that products we sell could cause unexpected illness, side effects, injury or death could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation
3. 12Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to deliver our produce and other products in a timely manner
4. 13Disruption of significant supplier relationships could negatively affect our business
5. 14Disruptions to, security breaches or non-compliance involving, our information technology systems could harm our ability to run our business and expose us to potential liability and loss of revenues
6. 15If we are unable to successfully identify market trends and react to changing consumer preferences in a timely manner, our sales may decrease
7. 16Our newly opened stores may negatively impact our financial results in the short-term, and may not achieve sales and operating levels consistent with our more mature stores on a timely basis or at all
8. 17We may be unable to maintain or increase comparable store sales, which could negatively impact our business and stock price
9. 18We may be unable to maintain or improve our operating margins, which could adversely affect our financial condition and ability to grow
10. 19If we fail to maintain our reputation and the value of our brand, our sales may decline
11. 20If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected
12. 21The loss of key management could negatively affect our business
13. 22If we are unable to attract, train and retain team members, we may not be able to grow or successfully operate our business
14. 23Union attempts to organize our team members could negatively affect our business
15. 24Higher wage and benefit costs could adversely affect our business
16. 25Our lease obligations could adversely affect our financial performance and may require us to continue paying rent for store locations that we no longer operate
17. 26Claims under our insurance plans may differ from our estimates, which could materially impact our results of operations
18. 27We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could adversely impact our business
19. 28Covenants in our Credit Agreement restrict our operational flexibility

Financial Reporting, Legal and Other Regulatory Risks

1. 29Legal proceedings could materially impact our business, financial condition, results of operations and cash flows
2. 30We may be unable to adequately protect our intellectual property rights, which could harm our business
3. 31resources. If we are unable to prevent our competitors from using names, logos and domain names similar to ours, consumer confusion could result, the perception of our brand and products could be negatively affected, and our sales and profitability could suffer as a result
4. 32Changes in accounting standards may materially impact reporting of our financial condition and results of operations
5. 33If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings
6. 34Our nutrition-oriented educational activities may be impacted by government regulation or our inability to secure adequate liability insurance
7. 35Our business and reputation may be adversely impacted by evolving environmental, social and governance matters

Common Stock Ownership Risks

1. 36Our stock price may be volatile, and you may not be able to resell your shares at or above the price you paid for them or at all
2. 37Anti-takeover provisions could impair a takeover attempt and adversely affect existing stockholders
3. 38If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline
4. 39Since we do not expect to pay any cash dividends in the near future, investors may be forced to sell their stock in order to obtain a return on their investment
5. 40Our business could be impacted as a result of actions by activist stockholders or others