Sprouts Farmers Market LLC (Phoenix), the organic grocery chain backed by Apollo Global Management LLC (New York), saw its shares more than double on its first day of trading.
It was the biggest IPO gain in the U.S. in more than two years.
The 160-unit retailer raised $333 million.
“Investors like the story, they like the space — obviously there’s a lot of momentum in natural and organic,” said Sprouts ceo Doug Sanders. “Consumers today are wanting to feel better about the food they eat, and they want to make sure they don’t pay too much.”
Bloomberg News reports the grocer is targeting the Southeastern U.S. for store growth, starting with a new location in Atlanta next year. Sprouts will open 20 new stores in 2014 and is forecasting 12 percent annual unit growth and 15 percent annual sales growth going forward, he said.
At the same time, industry leader Whole Foods Market Inc. (Austin, Texas) lowered its annual same-store sales forecast. Revenue in its third quarter trailed analysts’ estimates and same-store sales growth slowed to 5.8 percent. Whole Foods reported that it now sees annual growth of as much as 7.3 percent, slightly below a previous forecast.
The grocer, which plans to increase its store base to 1000 U.S. locations, said it’s feeling the competition from the likes of Sprouts and Fairway Market.
Fairway, focusing on the greater New York area, raised $204.1 million in an initial public offering in April. Also, food industry gadfly Ron Burkle is reportedly in talks to buy the Fresh & Easy chain from Tesco Plc (Cheshunt, U.K.), using those stores to reintroduce the Wild Oats brand, which vanished in 2007 when the Boulder, Colo., chain was acquired by Whole Foods.
Undaunted by the increased competition, Whole Foods reiterated to analysts that its revenue would increase as much as 11 percent this fiscal year and that it plans to open between 33 and 38 new stores in fiscal 2014.