Sprouts Farmers Market 2013 Annual Report Download - page 66

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Table of Contents
Direct store expenses
Direct store expenses increased during fiscal 2012 primarily due to the additional stores we operated during 2012 following
the Transactions (net of closures) and new store openings. Direct store expenses increased $70.5 million during fiscal 2012 as a
result of the additional stores we operated during fiscal 2012 related to the Sunflower Transaction and new store openings in 2012.
The remainder of the change relates to stores opened during or prior to 2011 and the effect of a full year of expenses for the stores
acquired in the Henry’
s Transaction. This increase was partially offset by a 100 basis point improvement in direct store expenses as
a percentage of net sales, primarily due to (i) the alignment of store payroll and benefit policies following the Transactions,
(ii) economies of scale with respect to certain benefit costs and (iii) improved leverage of store payroll expenses resulting from
comparable store sales growth. These factors were partially offset by a $2.7 million loss on asset disposals during fiscal 2012.
On a pro forma basis, direct store expenses increased during fiscal 2012 primarily due to new store openings. Pro forma direct
store expenses increased $18.5 million during fiscal 2012 as a result of new store openings. This increase was partially offset by a
60 basis point improvement in pro forma direct store expenses as a percentage of pro forma net sales primarily as a result of the
effects of the alignment of store payroll and benefit policies and economies of scale with respect to certain benefit costs following
the Transactions and improved leverage of store payroll expenses resulting from pro forma comparable store sales growth.
Selling, general and administrative expenses
The increase in selling, general and administrative expenses during fiscal 2012 includes (i) a $10.1 million increase in
transaction and acquisition integration costs to $20.4 million, (ii) a $2.7 million legal settlement related to a trade name dispute,
(iii) a $0.6 million loss on disposal of assets related to the disposal of equipment purchased in the Sunflower Transaction and
(iv) incremental operating expenses following the Transactions. These factors were partially offset by synergies achieved from
integration of the Transactions.
Selling, general and administrative expenses decreased as a percentage of net sales during fiscal 2012 primarily due to
improved leverage of fixed selling, general and administrative expenses,
61
Fiscal 2012
Fiscal 2011
Change
% Change
(dollars in thousands)
As reported:
Direct store expenses
$
368,323
$
238,245
$
130,078
55
%
Percentage of net sales
20.5
%
21.5
%
(1.0
)%
Pro forma:
Direct store expenses
$
403,731
$
360,437
$
43,294
12
%
Percentage of net sales
20.3
%
20.9
%
(0.6
)%
Fiscal 2012
Fiscal 2011
Change
% Change
(dollars in thousands)
As reported:
Selling, general and administrative
expenses
$
86,364
$
58,528
$
27,836
48
%
Percentage of net sales
4.8
%
5.3
%
(0.5
)%
Pro forma:
Selling, general and administrative
expenses
$
91,611
$
83,077
$
8,534
10
%
Percentage of net sales
4.6
%
4.8
%
(0.2
)%