Shares rose 1.5% after market close on May 23, 2014, the day after The Fresh Market, Inc. (TFM) turned around after posting poor results in the second half of fiscal 2013. This specialty grocery retailer beat the Zacks Consensus Estimate for both earnings and revenues on strong comps, which offset the adverse weather conditions during the quarter.
The Fresh Market’s first-quarter earnings of 43 cents declined 7% year over year mainly due to higher operating losses and other expenses at stores in California and Texas. However, earnings surpassed the Zacks Consensus Estimate of 42 cents by 2.4%. Adjusted earnings excluded store closure charges of 9 cents per share.
Quarter in Detail
Total revenue increased 17.6% to $431.0 million. Revenues also beat the Zacks Consensus Estimate of $423 million by 1.9% due to higher-than-expected comps during the quarter. Comparable sales increased 2.5% due to 1.8% increase in number of transactions and 0.7% increase in average transaction size as a result of promotional activity inthe Easter holiday season. Although stores remained closed frequently due to inclement weather conditions in February, situations improved in the subsequent months which helped the company attain decent a top line during the quarter.
Gross profit went up 14.6% to $148.2 million backed by higher sales. Gross margin decreased 90 basis points (bps) to 34.4% due to a decline in merchandise margin rate as a result of heavy promotional activity in some new markets. Rising occupancy costs also hurt margins. Gross margin, however, increased 90 bps sequentially.
As a percentage of revenues, selling, general and administrative (SG&A) expenses increased 70 bps to 22.9% due to higher store labor costs at non-comparable stores and pre-opening expenses associated with seven store openings. Operating margin declined 330 bps to 6.4% in the quarter due to weak gross margins and higher SG&A ratio.
The Fresh Market opened seven stores in the quarter bringing the store count to 157 stores in 26 states as of May 22, 2014.
2014 Outlook
The Fresh Market reaffirmed its fiscal 2014 earnings outlook and expects earnings in the $1.56 to $1.66 range, excluding store closure costs. The company expects comps in the range of 1.5% to 3.5%.
In 2014, the company plans to open 23 to 24 stores and remodel 4 to 5 stores.
Other Stocks to Consider
The Fresh Market carries a Zacks Rank #4 (Sell). Better-ranked companies in the retail/supermarket segment are Coty Inc. (COTY), The Kroger Company (KR), Ingles Markets, Inc. (IMKTA). Whilte Coty carries a Zacks Rank #1 (Strong Buy), Kroger and Ingles Markets carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment