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IPO Report: Sprouts Farmers Markets (SFM)

By  +Follow July 31, 2013 12:02PM
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Business

Sprouts Farmers Markets ($SFM) is a specialty food retailer that competes with Whole Foods (WFM) , Natural Grocers by Vitamin Cottage (NGVC) , Trader Joes and some Target markets.  SFM stores are clustered in the southwest.

As of July 19, 2013, SFM had 163 stores located in eight states.

SIx other IPOs were scheduled for the week of July 29. The full IPO calendar can be found at IPOpremium.

SFM is based in Phoenix, AZ, and scheduled a $278 million IPO with a market capitalization of $2.16 bilion at a price point mid-range of $15, for Thursday, August 1. 2013.

S-1 filed July 22, 2013

Manager, Joint Managers:  Goldman; Credit Suisse; BofA Merrill
Co-Managers:  Apollo Global; Barclays;Deutsche; UBS; Guggenheim; Wolfe Research Securities


Valuation

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

Profit

annualizing Q1 ’13

Cap (mm)

Sls

Erngs

BkVlue

TanBV

Margin

Sprouts Farmers Markets (SFM)

$2,160

0.9

27.0

6.2

-10.6

3.5%

Whole Foods (WFM)

$20,440

1.7

36.0

5.6

7.1

4.7%

Natural Grocers by Vitamin Cottage (NGVC)

$807

1.9

62.7

10.2

10.3

3.0%

Glossary

SFM is priced at a price-to-sales and P/E discount relative to WFM and NGVC.

Conclusion

Buy SFM on the IPO.

Half the stores were not Sprouts Stores

In 2002, Sprouts Farmers Markets, LLC, an Arizona limited liability company opened the first Sprouts Farmers Market store in Chandler, Arizona. In 2011, SFM was formed when Sprouts Arizona combined with Henry’s Holdings, LLC,  which operated 35 Henry’s Farmers Markets stores and eight Sun Harvest Market stores. 

The Henry’s Transaction was led by investment funds affiliated with, and co-investment vehicles managed by, Apollo Management VI, L.P. The Apollo Funds are affiliates of Apollo Global Management, LLC.  In May 2012, SFM acquired Sunflower Farmers Market, Inc., which operated 37 Sunflower Farmers Market stores.

There were 80 non-Sprout stores which are now being marketed as ‘Sprout’ stores, out of 154 total stores as March 31, 2013.

Seasonality

SFM’s business is subject to modest seasonality. Average weekly sales fluctuate throughout the year and are typically highest in the first half of the fiscal year. Produce, which contributes 25% of net sales, is generally more available in the first six months of the fiscal year due to the timing of peak growing seasons.

Competition

Competition includes conventional supermarkets such as Kroger and Safeway, as well as other food retailers such as Whole Foods, Natural Grocers by Vitamin Cottage and Trader Joe’s.  In some markets Target is also a competitor.

5% stockholders pre-IPO

Apollo Funds, 52%
SFM Liquidating Trust, 36%
KMCP Grocery Investors, LLC, 7%

Use of proceeds

SFM expects to net $248 million from the IPO from selling 17.7 million shares.  Shareholders expect to sell 797,785 shares.

Proceeds are allocated to repay debt.

Results for SFM
iHugo Albert
18 Apr 14 17:21:34
$SFM Milton Farmers Market first Fourth Friday set April 25 http://t.co/YzoXY9S2Xf
iHugo Albert
18 Apr 14 16:49:03
$SFM Earth Day Festival 2014 Highlights Announced by Community Environmental ... http://t.co/hzwPwpAUje
iHugo Albert
18 Apr 14 14:05:10
$SFM North Bay jobless rates continue downward in March http://t.co/XO4yT6ooeA
Ambrose Long
18 Apr 14 09:42:19
$SFM Sprouts Farmers Market Sets Date http://t.co/fnGNAqyLzJ
Thad Bannister
18 Apr 14 06:14:50
$SFM Sprouts Farmers Market Sets Date http://t.co/ZDksXIRuhw
Lars Anders
18 Apr 14 05:39:22
$SFM Sprouts Farmers Market Sets http://t.co/MmihFjTUr2
Leighton Kingston
18 Apr 14 05:00:00
$SFM Sprouts Farmers Market Sets Date http://t.co/bXAF31q20z
iHugo Albert
18 Apr 14 02:21:34
$SFM Rocking and rolling way out west http://t.co/uHP9SOpxhM
Cecily Humphrey
17 Apr 14 16:48:48
$SFM Sprouts Farmers Market Sets Date http://t.co/u6vDeXLYnX
Fox Galvan
17 Apr 14 16:40:16
$SFM Sprouts Farmers Market Sets http://t.co/coXAuIJAuf
Adria Mosley
17 Apr 14 10:18:06
$SFM Sprouts Farmers Market Sets Date http://t.co/O68IcSG20r
Alfred Ip
17 Apr 14 08:55:49
posted this past couple weeks $wfm working to fill gap (short) $sfm $tfm luxury grocery not well http://t.co/yaQ6RhXAKU
Dmitri Magnuson
17 Apr 14 08:33:27
$SFM Sprouts Farmers Market Sets Date http://t.co/JxE96fUT10
Louie O'Malley
17 Apr 14 08:22:30
$SFM Sprouts Farmers Market Sets Date http://t.co/sOtionWw06
Malissa Arsenault
17 Apr 14 08:10:18
$SFM Sprouts Farmers Market Sets Date http://t.co/kEWINCJH73
iHugo Albert
17 Apr 14 04:13:04
$SFM Sprouts Farmers Market Sets Date for First Quarter 2014 Earnings Release and Conference Call http://t.co/cEVXopsG4h
immoderacyf
17 Apr 14 03:48:24
$SFM Sprouts Farmers Market Sets Date http://t.co/lQXdhCJZjX
iHugo Albert
17 Apr 14 03:45:34
$SFM Agritourism embracing Valley's natural abundance http://t.co/MXRqu5XjFv
iHugo Albert
17 Apr 14 00:27:06
$SFM LC Style: Easter is vivid in high-desert country http://t.co/jgEUjZzrru
iHugo Albert
16 Apr 14 23:48:23
$SFM Wooden tokens open Rochester Public Market to poor http://t.co/kGfsYs3SMa
Elvis Cadwell
16 Apr 14 20:53:10
$SFM Sprouts Farmers Market Sets Date http://t.co/De9TlPhLC4
Mike Lansing
16 Apr 14 20:07:53
$SFM Sprouts Farmers Market Sets http://t.co/3jwOOMZxyP
Risa Whittaker
16 Apr 14 18:31:49
$SFM Sprouts Farmers Market Sets http://t.co/4vsUzEkYGi
Brice Latimer
16 Apr 14 17:03:06
$SFM Sprouts Farmers Market Sets Date http://t.co/a05ctvYf4C
Boaz Boulstridge
16 Apr 14 15:03:35
$SFM Sprouts Farmers Market Sets http://t.co/SQOUQt6pE1
CABuyer
16 Apr 14 14:39:11
$SFM Sprouts Farmers Market Sets Date for First Quarter 2014 Earnings Release and Conference Call http://t.co/H7VIjWB5VR
Ernst Grosz
16 Apr 14 13:57:11
$SFM: Sprouts Farmers Market Sets Date for First Quarter 2014 Earnings Relea... http://t.co/fNr6imjDef
Informer
16 Apr 14 13:45:10
$SFM: Sprouts Farmers Market Sets Date for First Quarter 2014 Earnings Relea... http://t.co/zVide5JBVw
StockNewsNet
16 Apr 14 13:30:38
$SFM - Sprouts Farmers Market Sets Date for First Quarter 2014 Earnings Relea... -> http://t.co/SdyPKld0RD #stock #stocks #stockaction
CABuyer
16 Apr 14 13:30:38
$SFM Sprouts Farmers Market to hire 500 in metro Atlanta http://t.co/ClFQhxYhe1
4-traders.com
16 Apr 14 13:10:19
Sprouts Farmers Market : Sets Date for First Quarter 2014 Earnings Release and Conference Call http://t.co/gSb1hAR724 $SFM
CABuyer
16 Apr 14 12:57:32
$SFM HOT LIST: PUSHMETHOD at Mercury Lounge, an Urban Gardening Class and ... http://t.co/GpBP8RSiK6
Klaus Daimler
16 Apr 14 12:37:11
@RetroWallSt @jimcramer @JDR1024 That and the quarter was horrific vs $SFM
CABuyer
16 Apr 14 11:50:05
$SFM Rocky Mountain Flatbread Co. chef shows how to make your own pizza http://t.co/NCEFe38bWK
CABuyer
16 Apr 14 10:48:06
$SFM Where's the Beef? http://t.co/hxvqg9AL8C
CABuyer
16 Apr 14 10:36:18
$SFM 3 Ways to Make Green on Organic Food Stocks http://t.co/XyC6EjLjcc
CABuyer
16 Apr 14 10:30:33
$SFM Sprouts slated to open June 4 http://t.co/FOXoDwpZdR
CABuyer
16 Apr 14 10:03:24
$SFM CEC Announces Highlights of Santa Barbara Earth Day Festival http://t.co/9oKsoK4PbL
CABuyer
16 Apr 14 09:57:07
$SFM Home and Garden calendar http://t.co/I5NtYBgNmZ
Fox Galvan
16 Apr 14 04:21:34
$SFM Is Sprouts Farmers Market (S http://t.co/TgKFbeE3Uv
CABuyer
16 Apr 14 01:37:05
$SFM Say cheese and smile http://t.co/5J35YoxEin
CABuyer
16 Apr 14 00:22:35
$SFM Market Fresh: Community Supported Fishery delivery starts in May http://t.co/R5BoTK2Nrd
CABuyer
15 Apr 14 23:32:07
$SFM In season: D-FW farmers markets pick up steam http://t.co/mKzVVmCWYF
CABuyer
15 Apr 14 22:58:05
$SFM Food trends for 2014: What's hot? http://t.co/F9HRQaPjpI
CABuyer
15 Apr 14 21:57:10
$SFM Local Orbit hopes to sprout new food economy http://t.co/eCtlj10LZG
CABuyer
15 Apr 14 21:18:07
$SFM Kolasa: Have a happy Easter http://t.co/TrMuKHeiI0
Deon Carter
15 Apr 14 19:39:47
$SFM Is Sprouts Farmers Market (SFM) http://t.co/vF06CcoT3D
TLT
15 Apr 14 18:33:32
$SFM vulnerable under 34
Rob McGavern
15 Apr 14 17:08:54
$SFM Is Sprouts Farmers Market (SFM) http://t.co/AizPL2iEFw
CABuyer
15 Apr 14 16:06:33
$SFM In season: D-FW farmers markets pick up steam http://t.co/mKzVVmCWYF
				
				
By  +Follow July 31, 2013 12:02PM
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