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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
Ralphopotomia
21 Aug 14 12:05:23
@BorisB2 stores in current markets could double, with new markets $SFM easily grow to WFM size in 15 years
Ralphopotomia
21 Aug 14 11:38:12
@BorisB2 most definitely is. $sfm
Market Monitor
21 Aug 14 10:46:13
$SFM: Sprouts Farmers Market, Inc. Reports Second Quarter 2014 Results http://t.co/hF1sujkgmf http://t.co/3PdKJ0YRgE
US Banking News
21 Aug 14 10:20:40
Sprouts Farmers Market major shareholder Sells $375,379,760 in Stock $SFM http://t.co/50LScfvpnc
Sleek Money
21 Aug 14 10:13:38
Sprouts Farmers Market major shareholder Sells $375,379,760 in Stock $SFM http://t.co/qpurWFIp8r
Boris Brdar
21 Aug 14 07:52:50
$sfm I wonder if their 30% gross margin is a competitive edge.
Derald Muniz
21 Aug 14 07:20:20
$SFM is making new Intraday Highs as it heads into Earnings
Kate Davies
20 Aug 14 17:35:36
RT @BarbarianCap: Sprouts Outpaces Whole Foods With Cheaper Organic Fare $sfm winning the crossover shopper http://t.co/hBAlzkwonC
Barbarian Capital
20 Aug 14 17:29:24
Sprouts Outpaces Whole Foods With Cheaper Organic Fare $sfm winning the crossover shopper http://t.co/hBAlzkwonC
InterCooler
20 Aug 14 09:37:03
Sprouts Farmers Market major shareholder Sells $375,379,760 in Stock $SFM http://t.co/pl6pvnldeQ
Financial News
20 Aug 14 07:46:02
$SFM: Has the healthy eating movement hit an inflection point? http://t.co/6TIRlpamWp http://t.co/9LIyVwekqY
Kevin Orland
20 Aug 14 07:24:38
How Sprouts is becoming the strongest challenger to Whole Foods http://t.co/oSyaUEPGCK via @BloombergNews $SFM $WFM
AlphaNotBeta
20 Aug 14 04:36:20
$WFM $SFM Sprouts Fights Whole Foods Putting Organic Kale on Sale. http://t.co/3PKI9IKYwN
Ticker Report
19 Aug 14 18:16:32
Insider Selling: Sprouts Farmers Market major shareholder Sells 12,930,753 Shares of Stock $SFM http://t.co/fY6luWIh8o
US Banking News
19 Aug 14 17:55:22
Sprouts Farmers Market major shareholder Apollo Management Holdings Gp, Unloads 12,930,753 Shares $SFM http://t.co/8y2U9QOEET
InsiderTradingWire
19 Aug 14 14:05:37
Management Apollo Holdings GP, LLC, of Sprouts Farmers M Sells $375,315,106 Worth of $SFM - #Form4 #InsiderTrading - http://t.co/xuSDWCRHci
Stock Updates
19 Aug 14 13:46:11
$SFM: Investor Stock Updates: McDonald's Corporation (NYSE:MCD), Sprouts Farmers ... http://t.co/qtQCKapawA http://t.co/xL4UCdU0xf
OMAR  STOCKTRADER
19 Aug 14 13:13:33
Whole Foods Market Investors Need To Relax, But Don't Overpay $WFM $KR $SFM http://t.co/PHnHWtu0Sh
Seeking Alpha
19 Aug 14 12:51:19
Whole Foods Market Investors Need To Relax, But Don't Overpay http://t.co/Qcz5gXjqVx $KR $SFM $WFM
WeeklyOptionsTrader
19 Aug 14 07:35:34
$SFM is my favorite grocery store. Much preferred to $WFM....
MarketCurrents
18 Aug 14 10:39:17
Sprouts Farmers Market reports on secondary offering http://t.co/MhZ2i2L8nI $SFM
4-traders.com
18 Aug 14 10:30:03
Sprouts Farmers Market : Announces Closing of Public Offering by Selling Stockholders http://t.co/FDe2Qp98Ar $SFM
Rod Surley
18 Aug 14 09:20:42
@JormaStarratt $sfm added some here @ $29.50
Market Updates
18 Aug 14 08:45:55
$SFM: Sprouts Farmers Market Announces Pricing of Public Offering by Selling Stockholders http://t.co/ez44zi555C http://t.co/wQkd4P1FCj
Jerry Efremides
18 Aug 14 08:11:40
$SFM experiencing some post-deal indigestion while $WFM outperforms. Shorting both here for a trade.
Eric Diaz
17 Aug 14 12:40:46
RT @SeekingAlpha: Sprouts Farmers Market: Is Now The Time To Buy? http://t.co/6PwLRmapf4 $SFM
Dwayne Membrane
15 Aug 14 12:55:21
@Lily24K Don't give up if you're already in! (Cried the man who gave up a day too soon, whereupon $SFM folded over like origami).
Dwayne Membrane
15 Aug 14 12:53:21
I am still curious how they kept Sprouts propped up at $30 yesterday. (And vaguely pissed off, but not seriously). $SFM
Boris Brdar
15 Aug 14 11:04:03
$sfm how does the market see the beat and raise quarter reported 1 week ago?
Evener Investment
15 Aug 14 01:10:43
RT @SeekingAlpha: Sprouts Farmers Market: Is Now The Time To Buy? http://t.co/6PwLRmapf4 $SFM
Seeking Alpha
15 Aug 14 01:02:27
Sprouts Farmers Market: Is Now The Time To Buy? http://t.co/6PwLRmapf4 $SFM
Business News Now
14 Aug 14 15:45:51
$SFM: Here's Why Sprouts Farmers Market Gained Today http://t.co/oYRt25Yx3T http://t.co/rhSNTtbou1
KarateBoy
14 Aug 14 15:34:51
@cramer just confirmed that $SFM is in a tough market. Combined with my negative view, what else do YOU need?
Mark Holder
14 Aug 14 14:15:08
Commented on: "Sprouts Farmers Market: Be Patient Until Insider Sales End" http://t.co/GupSlSUz0V $SFM $APO
Derek Pietro
14 Aug 14 13:09:01
Bought: $SFM Sold: $EVR Added shares: $MWIV $BX market sets up for an interesting day tomorrow. continue to like the move in $XLI vs. $SPY
Stuart Bush
14 Aug 14 13:02:03
Killed those Sprouts Puts before close. Stock is garbage, market is being manipulated in a clever way. $SFM
Dwayne Membrane
14 Aug 14 13:01:26
Killed those Sprouts Puts before close. Stock is garbage, market is being manipulated in a clever way. $SFM
Financial News
14 Aug 14 08:45:59
$SFM: Sprouts Farmers Market's "In-Line" Rating Reaffirmed at Imperial Capital (SFM) http://t.co/CvcCOe81al http://t.co/W0bycVgMB8
Seeking Alpha
14 Aug 14 08:29:38
Sprouts Farmers Market: Be Patient Until Insider Sales End http://t.co/i6ZfemE0k3 $APO $SFM
Ashley Kritzer
14 Aug 14 06:58:17
After seeking sites throughout Fla. last year, #Sprouts has put those plans on hold, sources say http://t.co/3ajCV9n7n6 $SFM @SN_News #CRE
Ashley Kritzer
14 Aug 14 06:58:17
After seeking sites throughout Fla. last year, #Sprouts has put those plans on hold, sources say http://t.co/tGItKkXkh4 $SFM @SN_News #CRE
				
				
By  +Follow July 31, 2013 12:02PM
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