The Fresh Market, Inc
) announced decent first-quarter fiscal 2013 results, beating
earnings but missing out slightly on revenues; a turnaround from
the weak results reported last quarter. The company also upped
its comparable store-sales (comps) guidance after seeing better
traffic trends this quarter.
The Fresh Market's first
quarter adjusted earnings of 46 cents beat the Zacks Consensus
Estimate of 44 cents by 4.5%. Earnings also improved 14.6% from
the prior-year quarter driven by higher gross margins and
improved comp growth, which made up for the increased operating
Quarter in Detail
Total revenue of this specialty grocery retailer increased
12.9% to $366.6 million driven by higher comp growth. Revenue
slightly missed the Zacks Consensus Estimate of $373 million.
Comparable sales growth was 3.0%, modestly better than 1.9% in
the fourth quarter of fiscal 2012, due to an improvement in
consumer traffic. The improving traffic trends showed some
stability from the slowdown witnessed in the fourth quarter which
the company blamed on a tremendous change in consumer behavior in
the winter holiday season.
Fresh Market's gross profit expanded 14.8% to $129.3 million
in the quarter, while gross margins improved 60 basis points
(bps) to 35.3% due to expansion of merchandise margins and
decrease in LIFO expenses.
Selling, general, and administrative (SG&A) expenses
increased 15.6% to $81.5 million. As a percentage of revenue,
SG&A expenses increased 50 bps to 22.2% due to
higher-than-normal employee healthcare claim costs and increased
share-based compensation costs.
Operating margins increased 10 bps in the quarter to 9.7% as
the tailwind from gross margin expansion was somewhat offset by
higher SG&A costs.
Fresh Market opened two new stores in the quarter (one each in
Virginia and South Carolina). As on Apr 28, 2013, the company
operated 131 stores in 25 states.
Outlook for 2013
Fresh Market slightly increased its previously provided 2013
comparable store sales guidance from a range of 2% - 4% to a
range of 2.5% - 4.5% based upon the increase in traffic and comps
seen in the first quarter.
Operating margins are expected to either remain flat or grow
modestly in fiscal 2013 as the company ramps up its store
openings and invests in other growth plans.
Earnings guidance was maintained in the range of $1.51 to
$1.58, representing an increase of 14% to 19% over fiscal 2012
earnings per share of $1.33. Second-half earnings growth is
expected to be higher than the first half.
Fresh Market plans to open 19 to 22 new stores in 2013, most
of them slotted to be opened in the latter half of the year. The
company expects to remodel approximately 3 - 5 stores in the year
but re-locate none. Capital expenditure is expected to range
between $130 million - $150 million.
Other Stocks to Consider
TFM carries a Zacks Rank #3 (Hold). Other companies in the
retail/supermarket segment that are currently doing well are
Etablissements Delhaize Fr
Harris Teeter Supermarkets, Inc.
The Kroger Co.
), all carrying a Zacks Rank #2 (Buy).
DELHAIZE-LE (DEG): Free Stock Analysis Report
HARRIS TEETER (HTSI): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
FRESH MARKET (TFM): Free Stock Analysis
To read this article on Zacks.com click here.