Sprouts Farmers Market 2014 Annual Report Download - page 21

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We may be unable to maintain or increase comparable store sales, which could negatively impact
our business and stock price.
We may not be able to maintain or improve the levels of comparable store sales that we have
experienced in the past. Our comparable store sales growth could be lower than our historical average for
many reasons, including:
• general economic conditions;
• slowing in the fresh, natural and organic retail sector;
• the impact of new and acquired stores entering into the comparable store base;
• the opening of new stores that cannibalize store sales in existing areas;
• increased competitive activity;
• price changes in response to competitive factors;
• possible supply shortages;
• cycling against any year of above-average sales results;
• consumer preferences, buying trends and spending levels;
• product price inflation and deflation;
• the number and dollar amount of customer transactions in our stores;
• our ability to provide product offerings that generate new and repeat visits to our stores; and
• the level of customer service that we provide in our stores.
These factors may cause our comparable store sales results to be materially lower than in recent
periods, which could harm our business and result in a decline in the price of our common stock.
Disruption of significant supplier relationships could negatively affect our business.
NB is our primary supplier of dry grocery and frozen food products, accounting for approximately 23%
of our total purchases in each of fiscal 2014 and 2013. We also have commitments in place with NB to
order certain amounts of our distribution-sourced organic and natural produce, and to maintain certain
minimum average annual store purchase volumes, including for any new stores we open. Our current
contractual relationship with NB continues through April 2018. Due to this concentration of purchases from
a single third-party supplier, the cancellation of our distribution arrangement or the disruption, delay or
inability of NB to deliver product to our stores may materially and adversely affect our operating results
while we establish alternative distribution channels. Another 4% of our total purchases in each of fiscal
2014 and 2013 were made through our secondary supplier, UNFI. Our current contractual relationship with
UNFI continues through December 31, 2018. There is no assurance UNFI or other distributors will be able
to fulfill our needs on favorable terms or at all. In addition, if NB, UNFI or any of our other suppliers fail to
comply with food safety, labeling or other laws and regulations, or face allegations of non-compliance, their
operations may be disrupted. We cannot assure you that we would be able to find replacement suppliers
on commercially reasonable terms, which would have a material adverse effect on our financial condition
and results of operations.
Any 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.
We self-distribute our produce through our two distribution centers located in Arizona and Texas and a
third-party distribution center in California. Any significant interruption in the operation of our distribution
center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, power
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