Sprouts Farmers Market 2015 Annual Report Download - page 26

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Real or perceived concerns that products we sell could cause unexpected side effects, illness,
injury or death could result in their discontinuance or expose us to lawsuits, either of which could
result in unexpected costs and damage to our reputation.
There is increasing governmental scrutiny of and public awareness regarding food safety.
Unexpected side effects, illness, injury, or death caused by products we prepare and/or sell or involving
vendors that supply us with products could result in the discontinuance of sales of these products or our
relationship with such vendors or prevent us from achieving market acceptance of the affected products.
Such side effects, illnesses, injuries and death could also expose us to product liability or negligence
lawsuits. Any claims brought against us may exceed our existing or future insurance policy coverage or
limits. Any judgment against us that is in excess of our policy limits would have to be paid from our cash
reserves, which would reduce our capital resources. Further, we may not have sufficient capital resources
to pay a judgment, in which case our creditors could levy against our assets.
As a fresh, natural and organic retailer, 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. Therefore, real or perceived quality or food safety concerns,
whether or not ultimately based on fact, and whether or not involving products sold at our stores or
vendors that supply us with products, would cause negative publicity and lost confidence regarding our
company, brand, or products, which could in turn harm our reputation and net sales, and could have a
material adverse effect on our business, results of operations or financial condition.
If we fail to maintain our reputation and the value of our brand, our sales may decline.
We believe our continued success depends on our ability to maintain and grow the value of the
Sprouts brand. Maintaining, promoting and positioning our brand and reputation will depend largely on the
success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality
customer experience. Brand value is based in large part on perceptions of subjective qualities, and even
isolated incidents involving our company, our suppliers or the products we sell can erode trust and
confidence, particularly if they involve our private label products, or result in adverse publicity,
governmental investigations or litigation. Our brand could be adversely affected if we fail to achieve these
objectives, or if our public image or reputation were to be tarnished by negative publicity.
The loss of key management could negatively affect our business.
We are dependent upon a number of key management and other team members. If we were to lose
the services of a significant number of key team members within a short period of time, this could have a
material adverse effect on our operations as we may not be able to find suitable individuals to replace
them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by
investors and analysts, which may cause our stock price to decline. We do not maintain key person
insurance on any team member.
If we are unable to attract, train and retain team members, we may not be able to grow or
successfully operate our business.
The food retail industry is labor intensive. Our continued success is dependent upon our ability to
attract and retain qualified team members in our stores and at our regional and store support offices who
understand and appreciate our culture and are able to represent our brand effectively and establish
credibility with our business partners and consumers. We face intense competition for qualified team
members, many of whom are subject to offers from competing employers. Our ability to meet our labor
needs, while controlling wage and labor-related costs, is subject to numerous external factors, including
the availability of a sufficient number of qualified persons in the work force in the markets in which we are
located, unemployment levels within those markets, unionization of the available work force, prevailing
wage rates, changing demographics, health and other insurance costs and changes in employment
legislation. In the event of increasing wage rates, if we fail to increase our wages competitively, the quality
of our workforce could decline, causing our customer engagement to suffer, while increasing our wages