Sprouts Farmers Market, Inc. (NASDAQ:SFM) Q4 2022 Earnings Call Transcript

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And on the second hand, how do we get more customers who look like the customers that are loving us at the moment of which we know there are lots out there. So the work we’re doing in the broader customer communication and customer engagement is one, trying to work directly with those customers that love us, and two, drive get at more customers who should be loving us. And as we’ve talked about, there’s a significant opportunity for us to increase the number of people who are giving us the information. We’re pretty low relative to competitors in terms of the number of people that scan their information when they come through the register. And how to do that will be about making an experience for our €“ for those customers that differentiate Sprouts so that they can almost become a member of a club.

And the grocery environment for loyalty we’re seeing to be very different for us going forward. Our interpretation of what’s happening with loyalty cards, if you like in the grocery space is that it’s a pretty, it’s a zero sum game and everyone’s got the cards and nobody €“ we don’t want to be the next card in the wallet when people €“ or the purse when people open up, when people go through the register. So we’re working very hard at becoming differentiated in that space. And the timing of that will €“ we’re going to invest some money in it this year. We’ll make some progress on it this year, but this is going to be a multi-year effort to get us where we need to get to.

Anders Myhre: Thank you.

Operator: Thank you. Our next question comes from Edward Kelly with Wells Fargo. You may proceed.

Unidentified Analyst: Hey guys, you’ve got Anthony on for Ed. Thanks for taking our question. So first, I wanted to ask about trade down. I know you guys said bulk sort of seeing a turnaround as people care more about value. Can you just talk a little bit more about what you’re seeing from consumers in terms of value seeking behavior and then how does that dynamic typically impact you based on what you’ve seen historically?

Jack Sinclair: Yes. Well, I think what you €“ I think it’s across the industry you’re seeing some trading down across the Board. One of the things that we’ve picked out, because certainly when you look back at the history of Sprouts and you look forward, people kind of migrate to bulk a little bit because it allows them to get the portion control and allows a significant price advantage per pound against equivalent things in packaged parts of the store. So we’ve got a pretty extensive range in that space and we’ve seen some encouraging trends in that category as people move into that. And I think it’s partly economics is partly because the team have done a really nice job in trying to put the right products in the right place at the right time in that space.

So we’ve seen that, as I said a little bit earlier, we’ve seen a little bit of a trade down in the protein space across the €“ across different proteins as people migrate to slightly cheaper cuts in that category. We’ve seen some trade into Sprouts brand, which I think is a combination of new products that we’ve put into that space and this sort of chasing for a little bit better value as you go through the assortment. One of the things that happens in our environment, probably differently to the more traditional grocery environment is. We’ve got customers who are very focused on the attributes in the products that we sell very focused on, we sell more plant-based milk than dairy milk. So if you’re a plant-based chopper, you’re unlikely to translate to places where you can’t buy the whole plant-based.

So the elements of trading down in our environment I think is a little different to what it is in other places, but we are seeing that trend across our customer base coming into the store, if that helps in any way.

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