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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
Russell Barbour
21 Dec 14 21:10:58
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21 Dec 14 21:09:36
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21 Dec 14 20:31:19
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StarBreakouts
21 Dec 14 15:40:57
$SFM lot of hd funds short this name and $WFM. Interesting long play detailed on our email watchlist. http://t.co/3VCrMmKLtq
Russell Barbour
21 Dec 14 09:32:05
http://t.co/MTBJqkovRA  Use coupon code PROFITMAS on any Profitly newsletter 50%+ discount! $HYGS $QLYS $CLS $CUDA $SFM
PennyStock Zone
21 Dec 14 09:29:45
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Maleah
21 Dec 14 08:20:51
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Russell Barbour
21 Dec 14 04:18:51
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Russell Barbour
20 Dec 14 22:40:33
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SmallCaps
20 Dec 14 21:57:07
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Russell Barbour
20 Dec 14 21:51:33
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PennyStock Zone
20 Dec 14 20:07:29
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Russell Barbour
20 Dec 14 19:33:02
http://t.co/MTBJqkovRA  Use coupon code PROFITMAS on any Profitly newsletter 50%+ discount! $HYGS $QLYS $CLS $CUDA $SFM
Maleah
20 Dec 14 14:59:37
http://t.co/IQr4K3PgzM  Use coupon code PROFITMAS on any Profitly newsletter 50%+ discount! $HYGS $QLYS $CLS $CUDA $SFM
Russell Barbour
20 Dec 14 14:54:54
http://t.co/MTBJqkovRA  Use coupon code PROFITMAS on any Profitly newsletter 50%+ discount! $HYGS $QLYS $CLS $CUDA $SFM
SmallCaps
20 Dec 14 14:04:11
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PennyStock Zone
20 Dec 14 13:17:12
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StockNewsWires
20 Dec 14 07:38:07
$AVT $SFM: Stocks to Track - Avnet, (AVT), MEDIOLANUM ADR(OTCMKTS ... http://t.co/mAbrb7tMD2 http://t.co/QB58LclWT9
Chris Racc
18 Dec 14 10:35:44
RT @stevenplace: Looking at "Basic White Girl Breakouts" in $RH, $WFM, $KORS, $TIF, $SFM
Sunrise Trader
18 Dec 14 07:09:42
RT @stevenplace: Looking at "Basic White Girl Breakouts" in $RH, $WFM, $KORS, $TIF, $SFM
Gregory Scott
18 Dec 14 06:52:50
$SFM bullish Weekly.
StockNewsWires
17 Dec 14 15:43:04
$NGVC $SFM: Supermarket Industry Group Climbing In Rankings http://t.co/sd4NzkVFcF http://t.co/0Wo7MNzeYN
Boris Brdar
17 Dec 14 14:46:59
$sfm chart finally etching something positive and back over the 50+200 DMA.
DailyStockPicks
17 Dec 14 14:18:02
$ECIG buyout target of $0.50. 400% upside. Positive EBITDA and $200MM revenue in 2015 $CMS $SFM $SBH traders read: http://t.co/xi3978GuDs
12Stocks.com
16 Dec 14 16:03:36
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4-traders.com
16 Dec 14 03:35:02
Sprouts Farmers Market : Blinds Supermarket unwraps the rising cost of Christmas http://t.co/oUZCtPGAim $SFM
StockNewsWires
15 Dec 14 04:08:05
$MAN $SFM: News Recap- ManpowerGroup Inc.(MAN), Con-way Inc(CNW ... http://t.co/yoznwjK1ue http://t.co/fwAaCbpGkq
4-traders.com
14 Dec 14 10:25:02
Sprouts Farmers Market : homes & gardens http://t.co/Oum6Myi3pl $SFM
				
				
By  +Follow July 31, 2013 12:02PM
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