Sprouts Farmers Market 2013 Annual Report Download - page 27

Table of Contents
In addition, we and our suppliers compete with other food retailers in the procurement of natural and organic products, which
are often less available than conventional products. If our competitors significantly increase their natural and organic product
offerings due to increases in consumer demand or otherwise, we and our suppliers may not be able to obtain a sufficient supply of
such products on favorable terms, or at all, our sales may decrease, which could have a material adverse effect on our business,
financial condition and results of operations. We could also suffer significant inventory losses in the event of disruption of our
distribution network or extended power outages in our distribution centers. If we are unable to maintain inventory levels suitable for
our business needs, it would materially adversely affect our financial condition and results of operations.
If we are unable to successfully identify market trends and react to changing consumer preferences in a timely manner,
our sales may decrease.
We believe our success depends, in substantial part, on our ability to:
Consumer preferences often change rapidly and without warning, moving from one trend to another among many product or
retail concepts. Our performance is impacted by trends regarding healthy lifestyles, dietary preferences, natural and organic
products, and vitamins and supplements. Consumer preferences towards vitamins, supplements or natural and organic food
products might shift as a result of, among other things, economic conditions, food safety perceptions, scientific research or findings
regarding the benefits or efficacy of such products, national media attention and the cost of these products. Our store offerings
currently include natural and organic products and dietary supplements. A change in consumer preferences away from our
offerings would have a material adverse effect on our business. Additionally, negative publicity over the safety or benefits of any
such items may adversely affect demand for our products, and could result in lower customer traffic, sales and results of
operations.
If we are unable to anticipate and satisfy consumer preferences in the regions where we operate, our sales may decrease,
which could have a material adverse effect on our business, financial condition and results of operations.
Real or perceived quality or food safety concerns could have an adverse effect on our sales and reputation.
We could be materially adversely affected if consumers lose confidence in the safety and quality of products we sell. We are a
fresh, natural and organic retailer, and we believe that many customers choose to shop our stores because of their interest in
health, nutrition and food safety. As a result, we believe that our customers hold us to a high food safety standard. Concerns
regarding the safety of our food products or the safety and quality of our food supply chain could cause shoppers to avoid shopping
with us, even if the basis for the concern is outside of our control. In addition, adverse publicity about these concerns, whether or
not ultimately based on fact, and whether or not involving products sold at our stores, could discourage consumers from buying
products we sell and have an adverse effect on our sales. Any lost confidence on the part of our customers would be difficult and
costly to reestablish. Any such adverse effect could be exacerbated by our position in the market as a natural and organic food
retailer, and could significantly reduce our brand value. Issues regarding the
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• anticipate, identify and react to natural and organic grocery and dietary supplement trends and changing consumer
preferences in a timely manner;
• translate market trends into appropriate, saleable product and service offerings in our stores before our competitors; and
•
develop and maintain vendor relationships that provide us access to the newest merchandise on reasonable terms.