Sprouts Farmers Market 2015 Annual Report Download - page 31

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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.
Increasing energy costs, unless offset by more efficient usage or other operational responses,
may impact our profitability.
We utilize natural gas, water, sewer and electricity in our stores and use gasoline and diesel in
trucks that deliver products to our stores. We may also be required to pay certain adjustments or other
amounts 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 and persisted through
2015, 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.