The Fresh Market (TFM, Financial) is reaping the benefits of its investment targeted to grow its store base and customer traffics. Looking forward, the company expects to gain from its strength in its business model that focuses on eying execution, unique combination of its quality products, high-touch customer service and appealing shopping experience.
Organic food market looks promising …
The Fresh Market looks solid to capitalize on this strong outlook that looks good across the world. It is opening up new stores in high-traffic regions. It has opened six new stores in New Jersey, Virginia, Tennessee, Florida and California. Also, it has opened its first store in the state of Iowa. Moreover, the company is expected to open approximately 22 new stores this fiscal year and remains on track to open about five new stores in the current quarter. It has already opened one store in Charlotte, North Carolina, thus making its total count 18 stores in the region.
In addition, The Fresh Market is focused on its key strategic priorities. These priorities include such things as offering a unique and differentiated shopping experience, competing successfully across markets, conveying robust store unit growth and pursuing structural and operational initiatives. The company expects these initiatives to enhance its operating margins and drive performance for its bottom line going forward.
It is making significant progress against each of these priorities. The company has conducted a comprehensive national research of late with the quantitative and qualitative analysis of customers and consumers. The main purpose of executing this research was to identify its strength, weakness, competitive position and opportunities. It found a lot of growth potential and opportunities that can certainly enhance its competitiveness amidst of growing shopping experience at multiple channels and retailers. Also, this research is expected to drive its growth in the long run with its unique and differentiated offerings, which is its first priority.
Alongside, the company enjoys a relatively strong position across many markets that indeed create a competitive edge against its peers. Further, it is engaged in differentiating its stores, products and service position that should help the company remain competitive across the broad range of markets. It is additionally concentrating on driving the frequency of shopping for its customers rather than acquiring new customers. It is increasing its focus on brand awareness particularly in the holiday season that should assist the company in tapping the multiple opportunities for the special food occasions.
This move should help the company stick customers to its stores while offering them what they want. It has recently redefined its offering. It now remains focused on mailing these redefined offerings to more homes and potential customers. The Fresh Market is also focused on establishing itself in the minds of customers and consumers for the best choice of shopping trips and wants to be the first in the category of special food experience going forward. These initiatives should certainly increase its competitiveness in the future that remains its second key strategic priority.
In addition, the company remains solid on driving its store unit growth, which is its third priority. It remains confident of its ability to deliver double-digit store unit growth. The Fresh Market has efficiently rationalized its innovative pipelines of products and services coupled with many strategic moves. The company expect these strategic moves to deliver approximately 12% to 15% unit growth in fiscal 2015. The Fresh Market plans to open approximately 70 new stores over the period of three years. This is really an exciting growth rate and should return handsome value to its shareholder.
Furthermore, it is strategically engaged in expanding its operating and profit margins. At present, the company is optimizing its initiatives across the board. It has identified many grounds that could lead to lower unit costs such as supply chain that should enhance its position during the times of volume growth. It is additionally expanding its suppliers and logistics options and exploring many options to effectively leverage its SG&A expense structure. The company expects these strategic priorities to drive growth for its top and bottom lines in the long run and yield attractive returns to its shareholders.
Final words and valuation
The Fresh Market looks like a good bet, considering the robust outlook and its strategic moves. The analysts expect its earnings to grow at CAGR of 16.75%, higher than average industry CAGR of 13.68% for the next five years. This demonstrates strong growth potential for its earnings in the future. Also, the stock offers attractive short-term gains. Its earnings are expected to grow 12.10% this year and 15.30% by next year respectively.
Moreover, the stock shares cheap valuations. It is currently trading at the trailing P/E multiple of 42.84 and forward P/E multiple of 21.77 that indicates a lot of growth areas for its earnings in the future. Also, it has PEG ratio of 1.55 that continues to support its growth over the next five years. Its balance sheet carries total cash of $19.86 million and has total debt of $29.97 million. The Fresh Market has operating cash flow of $133.96 million and levered free cash flow of $34.61 million.
