Sprouts Farmers Market 2015 Annual Report Download - page 22

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Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition and results
of operations. You should carefully consider the risks and uncertainties described below, together with all
of the other information in this Annual Report on Form 10-K, including our consolidated financial
statements and related notes. Any of the following risks could materially and adversely affect our
business, results of operations, financial condition, or prospects and cause the value of our common
stock to decline, which could cause you to lose all or part of your investment.
Business and Operating Risks
Our continued growth depends on new store openings, and our failure to successfully open new
stores could negatively impact our business and stock price.
Our continued growth depends, in large part, on our ability to open new stores and to operate those
stores successfully. Successful implementation of this strategy depends upon a number of factors,
including our ability to effectively achieve a level of cash flow or obtain necessary financing to support our
expansion; find suitable sites for new store locations; negotiate and execute leases on acceptable terms;
secure and manage the inventory necessary for the launch and operation of our new stores; hire, train
and retain skilled store personnel; promote and market new stores; and address competitive
merchandising, distribution and other challenges encountered in connection with expansion into new
geographic areas and markets. Although we plan to expand our store base primarily through new store
openings, we may grow through strategic acquisitions. Our ability to grow through strategic acquisitions
will depend upon our ability to identify suitable targets and negotiate acceptable terms and conditions for
their acquisition, as well as our ability to obtain financing for such acquisitions, integrate the acquired
stores into our existing store base and retain the customers of such stores. If we are ineffective in
performing these activities, then our efforts to open and operate new stores may be unsuccessful or
unprofitable, and we may be unable to execute our growth strategy.
Although we believe that the U.S. market can support approximately 1,200 Sprouts Farmers Market
stores operating under our current format, we anticipate that it will take years to grow our store count to
that number. We cannot assure you that we will grow our store count to approximately 1,200 stores. We
opened 27 and 24 stores in fiscal 2015 and 2014, respectively, and we intend to achieve 14% annual new
store growth over at least the next five years. However, we cannot assure you that we will achieve this
expected level of new store growth. We may not have the level of cash flow or financing necessary to
support our growth strategy. Additionally, our proposed expansion will place increased demands on our
operational, managerial and administrative resources. These increased demands could cause us to
operate our existing business less effectively, which in turn could cause deterioration in the financial
performance of our existing stores. Further, new store openings in markets where we have existing stores
may result in reduced sales volumes at our existing stores in those markets. If we experience a decline in
performance, we may slow or discontinue store openings, or we may decide to close stores that we are
unable to operate in a profitable manner. If we fail to successfully implement our growth strategy,
including by opening new stores, our financial condition and results of operations may be adversely
affected.
On many of our projects, including build-to-suit and existing repurposed locations, we have received
landlord contributions for leasehold improvements and other build-out costs. We cannot guarantee that
we will be able to continue to receive landlord contributions at the same levels or at all. Any reductions of
landlord contributions could have an adverse impact on our new store cash-on-cash returns and our
operating results.