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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for SFM
Chris Mchugh
4 Jul 15 14:53:41
$SFM descending triangle #shortsetup http://t.co/fr5DPWVIDX
NSFoodsMemo
4 Jul 15 08:37:08
How about #Target outsourcing (aquisition, merger or JV) #grocery to @sproutsfm? Call it 'Sprouts @Target.' $TGT $SFM @jimcramer @BrianSozzi
Capital Market Labs
4 Jul 15 05:14:26
$SFM Trade Card -> http://t.co/kGmG2Rh2jB http://t.co/kW0tUV8D3y
Breaking News
4 Jul 15 04:49:02
$SFM: Sprouts Farmers Market's "Overweight" Rating Reiterated at ...: http://t.co/DNKFSH833I
Ophir Gottlieb
3 Jul 15 17:14:19
$SFM Trade Card -> http://t.co/XQiuMob5Un http://t.co/HUqY0G75NY
WatchTheFunds
3 Jul 15 16:57:02
$SFM Institutional ownership up 8.95% Q/Q, with 11,053,600 net purchase http://t.co/1T42ZSuiEk http://t.co/mtKOb8OWxW
Irma Doucet
3 Jul 15 12:33:55
$SFM Trade-Ideas: Sprouts Farmers Market (SFM) Is Today's "Water-Logged And ... http://t.co/OLxQKcXIOk
TimeForGrowth
3 Jul 15 10:13:02
$SFM: Wall Street analysts bullish on SFM's earnings growth: http://t.co/AQndrkbLj0 http://t.co/ki8Jbcy4yM
Invest | Donate
3 Jul 15 10:11:31
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3 Jul 15 09:50:04
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3 Jul 15 09:46:39
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Lucky Jimmy
3 Jul 15 09:46:07
SFM Surge Energy Inc. Shares http://t.co/o74g7DfwvR $SFM $XLE $TLT $FB #SFM #stocks #tradeideas
lookn4wins
3 Jul 15 09:46:07
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leahanne
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Investors Hangout
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SFM Surge Energy Inc. Open http://t.co/t0dnCjoKvc $SFM $EWH $CMG.TO $ASHR #SFM #invest #tradeideas
IH News Desk
3 Jul 15 09:46:06
SFM Sprouts Farmers Market Inc. % Change http://t.co/2NICXOp5QI $SFM $ECA.TO $TZA $SSO.TO #SFM #stock #stock
Investors Hangout
3 Jul 15 09:46:06
SFM Sprouts Farmers Market Inc. Ask Size http://t.co/IlptS51OsA $SFM $CM.TO $TDG.TO $IYT #SFM #pennystocks #stock
Emylers
3 Jul 15 09:46:05
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lookn4wins
3 Jul 15 09:45:42
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3 Jul 15 09:45:34
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3 Jul 15 09:45:34
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Rosner Stocks
3 Jul 15 09:45:20
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3 Jul 15 09:39:22
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3 Jul 15 09:39:14
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jim50
3 Jul 15 09:38:08
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leahanne
3 Jul 15 09:38:07
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Emylers
3 Jul 15 09:38:05
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3 Jul 15 09:37:34
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PolgarStocks
3 Jul 15 09:37:33
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By  +Follow July 31, 2013 12:02PM
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