Shares of The Fresh Market, Inc. (
) rose 7.2% in after-hours trading on Aug 21, the day the company
announced better-than-expected second-quarter fiscal 2014
This specialty grocery retailer beat the Zacks Consensus
Estimate for both earnings and revenues on strong comparable store
The Fresh Market's second-quarter adjusted earnings of 36 cents
surged 12.5% year over year on the back of solid sales which made
up for softer margins despite a competitive retail environment.
Lower tax rates also benefited the quarter. Adjusted earnings
excluded store closure and exit costs related to previously
announced store closings in California and Texas. Earnings also
beat the Zacks Consensus Estimate by a penny.
The Fresh Market Inc - Earnings Surprise |
Quarter in Detail
Total revenue of $422.2 million beat the Zacks Consensus
Estimate of $416 million by 1.5% and increased 19% year over year
driven by strong unit growth as well as improved comps during the
quarter. Comps increased 2.9% owing to a 2.7% increase in number of
transactions and a 0.2% increase in average transaction size.
Traffic improved in the quarter, which resulted from solid
execution of promotion and merchandising programs.
The improvement in sales also comes from the company's effort to
deliver fresh produced meat, upscale as well as stable groceries,
prepared foods and numerous natural and organic options throughout
the store. The company also focuses on higher margin items such as
Gross profit went up 18.5% to $143.7 million backed by higher
sales. However, gross margin decreased 20 basis points (bps) to 34%
due to input cost inflation, partially offset by a modest increase
in merchandise margin. Rising occupancy costs also hurt margins.
Gross margin decreased 40 bps sequentially.
As a percentage of revenues, selling, general and administrative
(SG&A) expenses increased 20 bps to 23.5% due to higher store
labor and benefit costs. Adjusted operating margin declined 50 bps
to 6.8% in the quarter due to weak gross margins and higher
The Fresh Market opened four new stores, including two stores in
Florida and one each in Texas and New York, bringing the total
store count to 158 in 26 states as of Jul 27, 2014. The new stores
opened also exceeded company's expectations.
Fiscal 2014 Outlook Maintained
The Fresh Market reaffirmed its fiscal 2014 earnings per share
outlook and expects it in the $1.56 to $1.66 range, excluding store
closure costs of 21 cents. The company continues to expect comps
growth in the range of 1.5% to 3.5%.
In 2014, the company plans to open 22 stores and remodel 4 to 5
Third Quarter Fiscal 2014 Guidance
The company forecasts comps to be at the low to mid-point of
fiscal 2014 comps growth of 1.5% to 3.5% in the third quarter, as
the company expects increasing competitive pressure related to
store openings compared with the prior year. The company plans to
open 6 new stores in the third quarter.
The Fresh Market carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked companies in the retail sector include Citi Trends
), Mens Wearhouse Inc. (
) and Buckle, Inc. (
). While Citi Trends and Mens Wearhouse sport a Zacks Rank #1
(Strong Buy), Buckle Inc carries a Zacks Rank #2 (Buy).
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