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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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for SFM
HotKeyTrading
22 Oct 14 15:00:06
Insiders Buying: $ITG $BPFH $M $BIOF $SBH $MAT $HBAN $SNY $NPBC $FMBI $EXAS $UNH $THLD $JAZZ $SFM http://t.co/Vv2VEn80mr #analytics #stocks
KarateBoy
22 Oct 14 13:46:21
@MicroFundy @modestproposal1 109K sale of $SFM by CFO isn't instructive either...10b5-1 plans :)
Brattle St. Capital
22 Oct 14 11:19:57
@gotok30 totally a regional thing... $SFM is crushing them on west coast, I don't have any feel for it, never been to one
HotKeyTrading
22 Oct 14 03:00:07
Insiders Buying: $BIOF $SBH $MAT $HBAN $SNY $NPBC $FMBI $EXAS $UNH $THLD $JAZZ $SFM $RCAP $TMH $AYI http://t.co/Vv2VEn80mr #dow #mkt #stock
HotKeyTrading
21 Oct 14 15:01:27
Insiders Buying: $MAT $HBAN $SNY $NPBC $FMBI $EXAS $UNH $THLD $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG http://t.co/XQITF0lRKD #trader #nyse
Jon Springer
21 Oct 14 11:39:23
#Sprouts Farmers Market COO Jim Nielsen named Retailer of the Year by Ariz. Food Marketing Alliance $SFM Video: https://t.co/zgPMqTs3t0
Boris Brdar
21 Oct 14 11:30:08
$sfm but is it justified?
Boris Brdar
21 Oct 14 11:24:34
$sfm the 50 day moving average
HotKeyTrading
21 Oct 14 03:01:32
Insiders Buying: $FMBI $EXAS $UNH $THLD $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD http://t.co/XQITF0lRKD #finance #dow
Jack
21 Oct 14 01:02:24
RT @StockSignaling: Insider Buys: $EXAS $ACM $UNH $HSP $ADVS $FMBI $SFM $TSLX $REGN $SNY $USDP $BDJ $BGY $HYT $BTZ http://t.co/Vtx6dLy0Nw #…
Stock Signaling
21 Oct 14 01:02:18
Insider Buys: $EXAS $ACM $UNH $HSP $ADVS $FMBI $SFM $TSLX $REGN $SNY $USDP $BDJ $BGY $HYT $BTZ http://t.co/Vtx6dLy0Nw #investing #wallstreet
Brattle St. Capital
20 Oct 14 20:45:27
@TigreCapital prob short both to be honest. I would really like $SFM long if it was 30-40% cheaper.
Rosalynn Goff
20 Oct 14 20:34:56
$SFM final thoughts after 5 hours of work; unit growth #'s just too lofty. Who wants to wait for 15 years for 1200 store "long-term goal"...
Brattle St. Capital
20 Oct 14 20:34:28
$SFM final thoughts after 5 hours of work; unit growth #'s just too lofty. Who wants to wait for 15 years for 1200 store "long-term goal"...
WKRB News
20 Oct 14 17:10:10
Traders Purchase High Volume of Put Options on Sprouts Farmers Market $SFM http://t.co/iazUn4UHke
Brattle St. Capital
20 Oct 14 16:41:50
Still working on $SFM, valuation isn't exactly appealing, but 27 straight quarters of positive comps is nothing to sneeze at
US Banking News
20 Oct 14 16:34:59
Sprouts Farmers Market Sees Unusually High Options Volume $SFM http://t.co/3uPHsXWO0e
InterCooler
20 Oct 14 16:20:15
Sprouts Farmers Market Sees Unusually High Options Volume $SFM http://t.co/8oQP3nRdOS
HotKeyTrading
20 Oct 14 15:00:17
Insiders Buying: $THLD $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI http://t.co/XQITF0lRKD #daytrading
KarateBoy
20 Oct 14 06:13:59
@BrattleStCap On top of that, $SFM is one of the most over-valued stocks on my screen. 18.5x 2014 EBITDA for a co w/shelves? Just insane.
KarateBoy
20 Oct 14 06:12:28
@BrattleStCap Just $SFM. Disagree w/view that $SFM is "winning" while $WFM is losing. Entire industry is bad. Organic food sales=commodity.
KarateBoy
20 Oct 14 06:07:00
$WFM will launch its first ever national advertising campaign today, focusing on quality and value. Value = margin enhancement, right? $SFM
HotKeyTrading
20 Oct 14 03:00:06
Insiders Buying: $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI $NLS http://t.co/Vv2VEn80mr #daytrader #dow
Stock Signaling
20 Oct 14 01:02:24
Insider Buys: $ADVS $FMBI $SFM $TSLX $REGN $SNY $BDJ $BGY $HYT $BTZ $CYBX $COG $RCAP $HAWK $JAZZ http://t.co/Vtx6dLy0Nw #investing #finance
HotKeyTrading
19 Oct 14 15:00:07
Insiders Buying: $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI $NLS http://t.co/Vv2VEn80mr #daytrading #dow
HotKeyTrading
19 Oct 14 03:00:06
Insiders Buying: $JAZZ $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI $NLS http://t.co/XQITF0lRKD #stockmarket
ClickMediaUK
18 Oct 14 03:54:36
RT @HotKeyTrading: Insiders Buying: $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI $NLS $FDO http://t.co/XQITF0lRK…
4-traders.com
18 Oct 14 03:15:03
Retailers help build natural with store brands http://t.co/A3gbGyns5p $KR $SWY $SFM
HotKeyTrading
18 Oct 14 03:00:06
Insiders Buying: $SFM $RCAP $TMH $AYI $ATU $COG $SPPI $EVTC $THO $BRCD $ANGI $ASBC $AFSI $NLS $FDO http://t.co/XQITF0lRKD #dow #analytics
Stock Signaling
18 Oct 14 01:02:12
Insider Buys: $ADVS $FMBI $SFM $TSLX $REGN $SNY $BDJ $BGY $HYT $BTZ $COG $RCAP $HAWK $JAZZ $BRCD http://t.co/Vtx6dLy0Nw #stock #mkt #analyst
InsiderTradingWire
17 Oct 14 15:00:19
Amin Maredia N., Chief Financial Officer of Sprouts Farmers M Sells $2,961,144 Worth of $SFM - #Form4 ... - http://t.co/VW0FHci1TQ
Shiraz Lakhi
17 Oct 14 09:46:37
Top 5 #stocks in the Food/Staples industry with HIGHEST Pr/Sales - trading DOWN $LBMH $SFM $TFM ++ (Click "View") http://t.co/K70p9ytNzQ
Conor Sen
15 Oct 14 13:39:17
@FZucchi Same deal for $SFM and $WFM.
12Stocks.com
15 Oct 14 13:00:46
MidCap #Stocks Performance $SWN $LNG $SD $COG $SGEN $AR $GPOR $TAHO $HP $ARIA $PTEN $SFM $UPL $P $DRQ more@ http://t.co/tf79gD96D3
Boris Brdar
15 Oct 14 12:13:19
the buy list $five $sfm $now $zoes
oversubscribed
15 Oct 14 12:08:05
High beta names catching a bid... $LNKD $PANW $SFM $SPLK $TWTR
				
				
By  +Follow July 31, 2013 12:02PM
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