Here is another grocery retailer, The Fresh Market (TFM, Financial), which has joined the league of specialty grocers such as Whole Foods Market (WFM, Financial) by posting better than expected results. Both the retailers cater to upscale market customers who are generally health conscious. Their products are generally higher priced compared to retailers such as Kroger (KR, Financial) and Supervalu (SVU, Financial), which cater to customers who are highly price sensitive and look to make the most of their available dollars. But a positive point to note here is that these higher priced specialty retailers have managed to perform much better than the cheaper priced competitors this quarter.
This comes as good news since the economy has not yet recovered for customers to spend lavishly. Let’s take a closer look at Fresh Market first quarter earnings announced recently.
A look at the results
Revenue for the quarter surged 15% and net income stood jumped 34% on an adjusted basis. The same store sales rose 8.2%, boosted by an increase in frequency of customers and their transaction size. Also, the three new stores added to the sales of the perishable goods retailer. Moreover, this performance came in when the company experienced an increase in costs of almost 22%. In fact, these costs as a proportion of sales have decreased mainly due to higher sales in the quarter. This highlights how strong the first quarter was.
Some key specialties of the company is that it offers high margin products such as cheese and also offers additional services to its customers such as butchers in the stores. Another point to note here is Fresh Market’s stores, when compared to general supermarkets, are smaller in size. This lowers their cost to a great extent.
Expansion plans
The organic food grocer has a number of expansion plans for the fiscal year. It plans to open 14 new stores, relocate 1 and renovate 2 existing stores. The company is also looking forward to expand its foothold in the West Coast region. Fresh Market has already made a lot of real estate investments and plans to spend another $100 million on the same. Despite such expensive plans in place, the company has raised its outlook for the year.
Conclusion
The specialty food sector has been doing well recently which is evident by the quarter results of the players in the market. In fact, rival Whole Foods Market had performed much better than Fresh Market. Nonetheless, it’s not the first time that the Greensboro based company has witnessed growth in revenues. With 116 stores doing well in 21 states and plans of further growth this company looks fresh and fruitful for the investors.
