Sprouts Farmers Market 2015 Annual Report Download - page 46

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supporting our stores, product offerings and corporate partnerships, including the expansion of innovative
marketing and promotional strategies through print, digital and social media platforms.
Components of Operating Results
We report our results of operations on a 52- or 53-week fiscal year ending on the Sunday closest to
December 31, with each fiscal quarter generally divided into three periods consisting of two four-week
periods and one five-week period. Fiscal 2015 was a 53-week year ending on January 3, 2016. Fiscal
2014 and 2013 were 52-week years ending on December 28, 2014 and December 29, 2013, respectively.
In the discussion below, we discuss the impact of the 53rd week of Fiscal 2015 on our financial results.
Net Sales
We recognize sales revenue at the point of sale, with discounts provided to customers reflected as a
reduction in sales revenue. Proceeds from sales of gift cards are recorded as a liability at the time of sale,
and recognized as sales when they are redeemed by the customer. In 2015, we determined that we had
sufficient data to estimate gift card breakage. We began recording an allowance for breakage on gift
cards based on historical experience, and recorded $0.7 million of gift card breakage related to prior
period gift card sales. We do not include sales taxes in net sales.
We monitor our comparable store sales growth to evaluate and identify trends in our sales
performance. Pro forma comparable store sales growth reflects comparable store sales growth on a pro
forma basis calculated including all stores acquired in the Transactions. Our practice is to include sales
from a store in comparable store sales beginning on the first day of the 61st week following the store’s
opening and to exclude sales from a closed store from comparable store sales beginning on the day of
closure. We include sales from an acquired store in comparable store sales on the later of (i) the day of
acquisition or (ii) the first day of the 61st week following the store’s opening. This practice may differ from
the methods that other retailers use to calculate similar measures. We use pro forma comparable store
sales to calculate pro forma comparable store sales growth. See the table titled “Supplemental Pro Forma
Data—Net Sales” in Item 6. Selected Financial Data.
Our net sales have increased as a result of new store openings and comparable store sales growth
and the additional week in Fiscal 2015. Factors that influence comparable store sales growth and other
sales trends include:
xgeneral economic conditions and trends, including levels of disposable income and consumer
confidence;
xconsumer preferences and buying trends;
xour ability to identify market trends, and to source and provide product offerings that promote
customer traffic and growth in average ticket;
xthe number of customer transactions and average ticket;
xthe prices of our products, including the effects of inflation and deflation;
xopening new stores in the vicinity of our existing stores;
xadvertising, in-store merchandising and other marketing activities; and
xour competition, including competitive store openings in the vicinity of our stores and
competitor pricing and merchandising strategies.
Cost of sales, buying and occupancy and gross profit
Cost of sales includes the cost of inventory sold during the period, including direct costs of
purchased merchandise (net of discounts and allowances), distribution and supply chain costs, buying