Sprouts Farmers Market 2013 Annual Report Download - page 24

Table of Contents
Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should
carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on
Form 10-K, including our consolidated financial statements and related notes. Any of the following risks could materially and
adversely affect our business, operating results, financial condition, or prospects and cause the value of our common stock to
decline, which could cause you to lose all or part of your investment.
Risks Related to Our Business and Industry
Competition in our industry is intense, and our failure to compete successfully may adversely affect our revenues and
profitability.
We operate in the highly competitive retail food industry. Our competitors include supermarkets, natural food stores, mass or
discount retailers, warehouse membership clubs, online retailers, and specialty stores. These retailers compete with us for
products, customers and locations. We compete on a combination of factors, primarily product selection and quality, customer
service, store format, location and price. Our success depends on our ability to offer products that appeal to our customers’
preferences, and our failure to offer such products could lead to a decrease in our sales. To the extent that our competitors lower
prices, our ability to maintain profit margins and sales levels may be negatively impacted. In addition, some competitors are
aggressively expanding their number of stores or their product offerings or increasing the space allocated to perishable and
specialty foods, including natural and organic foods. Some of these competitors may have been in business longer or may have
greater financial or marketing resources than we do and may be able to devote greater resources to sourcing, promoting and
selling their products. As competition in certain areas intensifies or competitors open stores within close proximity to our stores, our
results of operations may be negatively impacted through a loss of sales, decrease in market share, reduction in margin from
competitive price changes or greater operating costs.
Our continued growth depends on new store openings, and our failure to successfully open new stores could negatively
impact our business and stock price.
Our continued growth depends, in large part, on our ability to open new stores and to operate those stores successfully.
Successful implementation of this strategy depends upon a number of factors, including our ability to effectively achieve a level of
cash flow or obtain necessary financing to support our expansion; find suitable sites for new store locations; negotiate and execute
leases on acceptable terms; secure and manage the inventory necessary for the launch and operation of our new stores; hire, train
and retain skilled store personnel; promote and market new stores; and address competitive merchandising, distribution and other
challenges encountered in connection with expansion into new geographic areas and markets. Although we plan to expand our
store base primarily through new store openings, we may grow through strategic acquisitions. Our ability to grow through strategic
acquisitions will depend upon our ability to identify suitable targets and negotiate acceptable terms and conditions for their
acquisition, as well as our ability to obtain financing for such acquisitions, integrate the acquired stores into our existing store base
and retain the customers of such stores. If we are ineffective in performing these activities, then our efforts to open and operate
new stores may be unsuccessful or unprofitable, and we may be unable to execute our growth strategy.
Although we believe, based on research conducted for us by a third-party research firm, that the U.S. market can support
approximately 1,200 Sprouts Farmers Market stores operating under our current format, we anticipate that it will take years to grow
our store count to that number. We cannot assure you that we will grow our store count to approximately 1,200 stores. We opened
19 stores in
19
Item 1A.
Risk Factors