Sprouts Farmers Market 2013 Annual Report Download - page 58

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Table of Contents
Direct store expenses
Direct store expenses increased during 2013 compared to 2012, primarily due to $89.6 million of direct store expenses
associated with additional stores we operated during 2013 related to the Sunflower Transaction and new store openings. Direct
store expenses, as a percentage of net sales, decreased 10 basis points primarily related to a reduction in non-capitalizable store
development costs as a percentage of sales.
Comparing 2013 to pro forma 2012, direct store expenses increased due to $39.6 million of direct store expenses associated
with new store openings in 2013. The remainder of the increase is related to stores that were opened during or prior to 2012. Direct
store expenses, as a percentage of net sales were relatively in-line compared to pro forma 2012, as we utilized the leverage in
payroll to invest in store level compensation programs and to fund higher health care costs.
Selling, general and administrative expenses
The decrease in selling, general and administrative expenses during 2013 includes a $19.5 million decrease in acquisition and
integration costs and $2.7 million related to settlement of a tradename dispute recorded in 2012. These decreases were partially
offset by $4.1 million in expenses related to technology initiatives, $3.2 million of bonuses paid in conjunction with our IPO, a $2.3
million increase in regional personnel and travel expenses related to increased store count, a $2.2 million increase in advertising
expenses, $2.0 million of expenses related to our November 2013 secondary offering, including employer payroll taxes on options
exercised, $1.0 million of IPO related expenses, $1.0 million of increased equity-based compensation and payroll taxes including
expense related to the anti-dilution payments made in April 2013, $0.9 million in corporate payroll and benefits expenses and $0.5
million in legal settlements. Selling, general and administrative expenses decreased as a percentage of net sales during 2013 due
to improved leverage of payroll and store advertising costs and the decrease in acquisition and integration costs described above.
Comparing 2013 to pro forma 2012, selling, general and administrative expenses decreased primarily due a $17.1 million
decrease in acquisition and integration costs, $2.7 million decrease related to settlement of a tradename dispute recorded in 2012
and a $2.5 million decrease in administrative payroll and benefits related to synergies achieved from the integration of Sunflower.
53
Fiscal 2013
Fiscal 2012
Change
% Change
(dollars in thousands)
As reported:
Direct store expenses
$
496,183
$
368,323
$
127,860
35
%
Percentage of net sales
20.4
%
20.5
%
(0.1
)%
Pro forma:
Direct store expenses
$
496,183
$
403,731
$
92,452
23
%
Percentage of net sales
20.4
%
20.3
%
0.1
%
Fiscal 2013
Fiscal 2012
Change
% Change
(dollars in thousands)
As reported:
Selling, general and administrative expenses
$
81,795
$
86,364
$
(4,569
) -
5
%
Percentage of net sales
3.4
%
4.8
%
(1.4
)%
Pro forma:
Selling, general and administrative expenses
$
81,795
$
91,611
$
(9,816
) -
11
%
Percentage of net sales
3.4
%
4.6
%
(1.2
)%