Sprouts Farmers Market, Inc.

Good day and thank you for standing by. Welcome to the Sprouts Farmer Market third quarter 2021 earnings conference call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Susanna Livingston, Vice President, Investor Relations and Treasury. Please go ahead.

Thank you and good afternoon, everyone. We are pleased you have taken the time to join Sprouts on our third quarter 2021 earnings call. Jack Sinclair, Chief Executive Officer, and Chip Molloy, Chief Financial Officer, are with me today. The earnings release announcing our third quarter 2021 results, the webcast of this call, and quarterly slides can be accessed through the investor relations section of our website at investors.sprouts.com. During this call, management may make certain forward-looking statements, including statements regarding our expectations for 2021 and beyond. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For more information, please refer to the risk factors discussed in our SEC filing, along with the commentary on forward-looking statements at the end of our earnings release issued today. Our remarks today include references to non-GAAP measures. For a reconciliation of non-GAAP measures to the GAAP figures, please see the tables in our earnings release. In addition, because our results for the third quarter of 2020 were impacted by the COVID-19 pandemic, This presentation will also include certain comparisons to results in the third quarter of 2019. As a reminder, to account for the 53rd week in fiscal 2020, we shifted each week back one week, thereby ignoring the first week of fiscal 2020 to better align holidays for comparison purposes. Because of this, the two-year stat comp will not be the simple addition of two periods. For more information, can be found at investors.sprouts.com. under additional reports if needed. With that, let me hand it over to Jack.

Thank you, Susannah, and good afternoon, everyone. I'd like to start today by first welcoming Chip as our new Chief Financial Officer. Chip recently made the decision to resign from our Board of Directors after nine years and join us full-time. I'm excited to have him as a partner and key member of our leadership team. During today's call, I'll start with a few highlights Chip will then provide a review of our financial results and outlook, and then I will return to provide details relating to our third quarter activities and updates on key elements of our strategy. We have the right strategy and are excited about moving it forward piece by piece, making great progress on our supply chain, differentiated merchandise, new format and real estate selections. However, our initial marketing messages fell short in a few areas. We fully expected to see a positive two-year stack in the back half of this year, and through the third quarter, we did not. With this in mind, we're focused on delivering a clear message that highlights our sharp produce pricing, innovative products, and a farmer's market experience to drive additional transactions in the quarters and years ahead. Taking a step back, many of you remember in the middle of 2019, we began a journey of a strategic transformation. The catalyst for that journey was recognising that efforts to acquire new customers, primarily through an onslaught of aggressive and ever-increasing promotions, would result in continued margin and brand erosion, which was not in the best long-term interest of our stakeholders. We immediately pulled back on many of the ineffective and unprofitable promotions and experienced a slight decrease in traffic, as expected, but also improvements in our margins. Shortly thereafter, as we all know, COVID became a major factor. It impacted virtually all retailers in a variety of ways. For Sprouts, one of the most important points to understand is that in the second quarter of 2020, we lost approximately 25% of our transactions, and to date, they have not returned. Certainly, COVID played a significant role in changing the shopping patterns of our customers during the height of the pandemic, Additionally, our change in promotional approach resulted in a loss of coupon clippers. What is encouraging is that those pre-pandemic customers that make up the 75% of transactions that have stuck with us are putting more units in their basket today than they did in 2019, paying higher average prices via a combination of mix, fewer promotions and inflation, resulting in record third quarter profits. Our sales in the third quarter of this year were up 5% and our earnings per share was up 155% when compared to the same period in 2019. The impacts of COVID have also reinforced our strategic direction, which includes the need to win with our target customers, refining our brand and marketing approach with everyday great pricing and unique product offerings, creating a supply chain that provides the freshest produce while also updating our store prototype. A prototype that continues to provide our customers with a unique experience with differentiated product, yet in a smaller, more efficient store, resulting in higher financial returns and the ability to grow faster in new markets, building density and brand awareness. Before providing more details relating to the quarter's activities, I'd like to turn it over to Chip, who will review our financial results and our outlook.