Sprouts Farmers Market 2014 Annual Report Download - page 29

pursuant to our supply and delivery contracts in connection with increases in fuel prices. Increases in
energy costs, whether driven by increased demand, decreased or disrupted supply, increased
environmental regulations or an anticipation of any such events will increase the costs of operating our
stores. Although fuel prices declined during the second half of 2014, our shipping costs also may increase
if fuel and freight prices increase. We may not be able to recover these rising costs through increased
prices charged to our customers, and any increased prices may exacerbate the risk of customers choosing
lower-cost alternatives. In addition, if we are unsuccessful in attempts to protect against these increases in
energy costs through long-term energy contracts, improved energy procurement, improved efficiency and
other operational improvements, the overall costs of operating our stores will increase, which would impact
our profitability, financial condition and results of operations.
Higher wage and benefit costs could adversely affect our business.
Changes in federal and state minimum wage laws and other laws relating to employee benefits,
including the Patient Protection and Affordable Care Act, could cause us to incur additional wage and
benefit costs. Increased labor costs would increase our expenses and have an adverse impact on our
profitability.
Increases in certain costs affecting our marketing, advertising and promotions may adversely
impact our ability to advertise effectively and reduce our profitability.
Postal rate increases, and increasing paper and printing costs affect the cost of our promotional
mailings. In response to any future increase in mailing costs, we may consider reducing the number and
size of certain promotional pieces. In addition, we rely on discounts from the basic postal rate structure,
such as discounts for bulk mailings and sorting by zip code and carrier routes. We are not party to any
long-term contracts for the supply of paper. Future increases in costs affecting our marketing, advertising
and promotions could adversely impact our ability to advertise effectively and our profitability.
A widespread health epidemic could materially impact our business.
Our business could be severely impacted by a widespread regional, national or global health epidemic.
A widespread health epidemic may cause customers to avoid public gathering places such as our stores or
otherwise change their shopping behaviors. Additionally, a widespread health epidemic could also
adversely impact our business by disrupting production and delivery of products to our stores and by
impacting our ability to appropriately staff our stores.
We may require additional capital to fund the expansion of our business, and our inability to obtain
such capital could harm our business.
To support our expanding business, we must have sufficient capital to continue to make significant
investments in our new and existing stores and advertising. We cannot assure you that cash generated by
our operations will be sufficient to allow us to fund such expansion. If cash flows from operations are not
sufficient, we may need additional equity or debt financing to provide the funds required to expand our
business. If such financing is not available on satisfactory terms or at all, we may be unable to expand our
business or to develop new business at the rate desired and our operating results may suffer. Debt
financing increases expenses, may contain covenants that restrict the operation of our business, and must
be repaid regardless of operating results. Equity financing, or debt financing that is convertible into equity,
could result in additional dilution to our existing stockholders.
Our inability to obtain adequate capital resources, whether in the form of equity or debt, to fund our
business and growth strategies may require us to delay, scale back or eliminate some or all of our
operations or the expansion of our business, which may have a material adverse effect on our business,
operating results, financial condition or prospects.
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