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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
Kym L
31 Oct 14 12:38:22
Earnings Thursday $AOL $APA $BRCX $BDBD $BITA $CLVS $DIS $DTV $DVA $FSLR $HAIN $KATE $LGF $LOCO $MDRX $MNST $MPEL $NVDA $PBH $SFM $SUNE +
Boris Brdar
31 Oct 14 12:31:34
$sfm a buy program would make a serious difference right now.
Boris Brdar
31 Oct 14 07:13:36
$sfm crossing the 50 day with accumulation in front of earnings due this coming Tuesday. How much optimism do you have..
Boris Brdar
31 Oct 14 07:09:29
$sfm today some solid work on the 50 day moving average.
Stock Relay
30 Oct 14 08:39:06
wininstocks2014: Stock Charts: SFM 28.885 Stock Charts $SFM Sprouts Farmers http://t.co/5SE4S4AVTJ
wininstocks2014
30 Oct 14 08:36:53
SFM 28.885 Stock Charts $SFM Sprouts Farmers Market Inc. (NASDAQ) Last Updated: 10/30/2014 10:37:01 SFM Stock http://t.co/tqOdZ6LSz0
US Banking News
30 Oct 14 06:15:52
Sprouts Farmers Market Gets Average Rating of Buy from Analysts $SFM http://t.co/yguSVj9QnE
Boris Brdar
29 Oct 14 08:42:13
$sfm 10 day bounce minor in scope.
Boris Brdar
29 Oct 14 08:38:27
$sfm hard core value oriented efforts are appreciated by the fans.
Boris Brdar
29 Oct 14 08:34:37
$sfm the 50 day a task that needs to be completed and the overhead near $30 blend together.
Boris Brdar
29 Oct 14 08:17:28
$sfm the one and only solid catalyst has got to be those earnings. either things went smooth or they didn't.
Boris Brdar
29 Oct 14 07:34:12
$sfm looking for a long catalyst for this, experts positioning for the earnings report next week may do it.
Oscar Manrique
28 Oct 14 12:49:38
RT @WallStJesus: $SFM also looks like a put seller 522 Dec $32.5 Puts $3.701 BID
Wall Street Watkins
28 Oct 14 12:35:49
RT @WallStJesus: $SFM unusual opening buyer 1828 Dec $30 Calls $1.25
Wall Street Watkins
28 Oct 14 12:35:24
RT @WallStJesus: $SFM also looks like a put seller 522 Dec $32.5 Puts $3.701 BID
JE$US
28 Oct 14 12:30:03
$SFM also looks like a put seller 522 Dec $32.5 Puts $3.701 BID
JE$US
28 Oct 14 12:28:52
$SFM unusual opening buyer 1828 Dec $30 Calls $1.25
4-traders.com
27 Oct 14 09:20:02
Sprouts Farmers Market : A storehouse of vitality http://t.co/JUzwKjmM8m $SFM
Sleek Money
27 Oct 14 04:20:14
Northcoast Research Initiates Coverage on Sprouts Farmers Market $SFM http://t.co/tMlJINq0I3
Stock Relay
26 Oct 14 12:25:41
$GSOL Summary Click Here: http://t.co/ubw77znE7T Also See: $CZWI $O $FPO $SFM ~
KarateBoy
24 Oct 14 11:47:24
$SFM: Sprouts Farmers Market initiated buy at Northcoast Research Crap. Last time everyone like a stop like this I was wrong. Or was I?
Texas_Stella
24 Oct 14 09:25:21
Northcoast Research sees upside with Sprouts Farmers Market http://t.co/XgF3Scn8q4 $SFM
US Banking News
24 Oct 14 09:09:43
Sprouts Farmers Market Receives New Coverage from Analysts at Northcoast Research $SFM http://t.co/Ifx5TVoHv1
MarketCurrents
24 Oct 14 08:35:24
Northcoast Research sees upside with Sprouts Farmers Market http://t.co/UH6jjMesb9 $SFM
InterCooler
24 Oct 14 08:33:14
Sprouts Farmers Market Earns Buy Rating from Analysts at Northcoast Research $SFM http://t.co/R7hTksQ72t
Analyst Ratings
24 Oct 14 08:30:51
Sprouts Farmers Market initiated by Northcoast Research at buy. http://t.co/NUzcZ6cQ0E $SFM #SFM
US Consumer News
24 Oct 14 08:30:49
Sprouts Farmers Market initiated by Northcoast Research at buy. http://t.co/aKT9PLOeoe $SFM #SFM
KarateBoy
24 Oct 14 07:47:13
@BrattleStCap @DasanRedux Just like $SFM :P
Stock Relay
24 Oct 14 03:31:07
$SCOK Tick Click Here: http://t.co/tZMlRFcmZb Also See: $DEO $AMRC $DOM $SFM ~
				
				
By  +Follow July 31, 2013 12:02PM
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