A pre-IPO silent period prevents Sprouts Farmers Market President and CEO Doug Sanders from talking about his first time appearing on the SN Power 50 list, though the prospectus filed in May shouts loud and clear the sunny outlook for the Phoenix-based chain of 157 natural food stores.
"We expect to achieve 12% or more annual new store growth over at least the next five years, balanced among existing, adjacent and new markets," the filing states.
Sanders joined Sprouts in 2002 when the company consisted of a single store. He rose quickly through the ranks, serving stints as vice president of IT, chief administrative officer, COO and president.
When Sprouts founder Shon Boney transferred the CEO title to Sanders in August of last year, the chain was well on its way to posting comparable sales growth of 9.7% for 2012, eventually earning $20 million on sales of $2 billion. According to the filing, the retailer achieved positive comparable-store sales for 23 consecutive quarters — no small feat considering that period includes the recession.
Sanders was part of the executive team through each of those quarters and was instrumental in helping Sprouts integrate rival Sunflower Farmers Markets after the latter was acquired in early 2012.
The retailer hopes to raise $300 million from the upcoming IPO to primarily fund expansion, both within its current markets and into new regions. Industry analysts say Sanders seems to have the company’s priorities straight.
"I think Sprouts’ S-1 filing hits on the right growth areas: New stores, continued same-store sales growth, improvement of operating margins and growing the Sprouts brand," said Janica Lane, a partner at Partnership Capital Growth, San Francisco. "I would suggest that Sanders also focus on paying down debt since the company is relatively highly levered versus its peers and ensuring that the public market appropriately rewards new unit growth."
Sprouts’ low prices and small-footprint stores will play a key role in the coming year. Industry observers note that stores average a site-friendly 25,000 square feet, yet feature more than 16,000 value-priced natural and organic SKUs ranging from produce, bulk foods and dietary supplements, to grocery, meat and natural household products.
It’s a combination of factors that allows the chain to set up shop in almost any market and fill a niche in the natural foods channel.
"A smaller total box and bigger produce creates an fresh-forward impression on the shopper, and that’s their calling card," said Jay Jacobowitz, president of Retail Insights, Brattleboro, Vt.
It’s a card that could soon be calling coast to coast. Sprouts officials have said they foresee approximately 1,200 locations operating under the current format.
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