By PAUL WHITFIELD, INVESTOR'S BUSINESS DAILY
Posted 06:08 PM ET
California-based Smart & Final Stores (NYSE:SFS) is back on the stock market after a complicated journey.
The company had a French connection when it debuted in the stock market in 1991. France's Casino Guichard-Perrachon acquired Smart & Final's parent firm Thriftimart in 1984.
In 2007, Apollo Management took the company private, ending the French control. Five years later, Ares Management bought Smart & Final from Apollo.
And on Wednesday, the return to the stock market was completed. Smart & Final opened at 13.10 a share after its share offering priced at 12, the low end of an expected range of 12 to 14.
The company operates 250 grocery and food service stores in six Western states, 13 in northern Mexico and 52 Cash & Carry stores.
Cash & Carry is a warehouse food store and, like Smart & Final, has no membership fee.
Smart & Final is in IBD's Retail-Major Discount Chains industry group.
The timing of the IPO isn't ideal. The stock market has shown hesitation recently, and the discount chain industry group is a laggard. As of Wednesday's IBD, the group was No. 160 of 197 groups.
The retail sector was No. 20 of 33 sectors as of Wednesday's paper.
A vigorous market uptrend, a strong industry group and a leading sector can help a stock advance. Smart & Final lacks all three right now.
However, several factors could be shaping up in Smart & Final's favor.
• A new format: Smart & Final is known for its small stores, but the company is converting some outlets to a larger format and opening new stores in the big format. The company reported in SEC documents that margins and same-store sales are higher at the big stores than the traditional stores. A third of Smart & Final's stores are now large format.
• Geography: With stores in the small number of states, the company has room to grow. Management believes the U.S. market could support 1,250 stores, including 100 more in California.
• Mexico: Favorable trends south of the border could offer additional opportunities for Smart & Final.
• Revenue revving up: The company says its has delivered same-store sales growth in 24 of the past 25 years. Last year, same-store sales growth was 4%.
Earnings grew 50% to 3 cents a share in the March-ended quarter and 200% to 15 cents a share in the June quarter. Revenue grew 6% and 10% over the same period.
The June quarter was remarkable because the previous 13 quarters involved earnings gains in the 2 cents to 5 cents a share range.
Company officials were unable to comment on the strong results because of a quiet period related to the current quarter.
Investors, though, should not consider buying this stock until it forms a proper IPO base.
A historical note: When the company was taken private in mid-2007, the stock had rallied 569% from its March 2003 low.
http://news.investors.com/092414-718805-smart-and-final-ipo.htm?ven=yahoocp&src=aurlled&ven=yahoo
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