The Fresh Market (TFM, Financial) performed impressively in the third quarter. The company delivered an improvement in sales and earnings on the back of solid execution and a smart business model. The Fresh Market is confident of achieving further improvement in its metrics in the future. It is mainly focusing on a combination of quality products, customer service, and an attractive shopping environment. The company is focusing on making selective investments in price and promotion of its products and expects better customer engagement to drive its sales.
Improving at a good pace
The company impressed every one with good improvement in sales as well. A 3.3% improvement in the comp store sales clearly indicates that The Fresh Market is seeing good traction in the market. It is now focusing on various aspects to improve its profitability. it has choked out some key areas of focus which it thinks can be drivers for the company in future. It is mainly concerned about the store ambience and growth. For this it is putting efforts to provide a unique and differentiated shopping experience which is expected to benefit the company with robust store unit growth.
In addition, The Fresh Market is also pursuing some structural and operational initiatives which are expected to hold good profit margins for the company. In the past The Fresh Market had conducted qualitative and quantitative customer and consumer research and is pleased to score 10. Which is impressive. With this it is confident of providing good customer experience in its stores. Further with the research, The Fresh Market is well aware of the broader customer trends. It is now aligning itself to accelerate these opportunities for betterment.
Upgrading the product portfolio
The company enjoys customer loyalty which is mainly due to the differentiated store, products and service position across broad range of markets. The Fresh Market concerned about increasing the frequency. The research carried out in the past have revealed that about 2% of its customers shop at its stores on a weekly basis. The company wants to improve this and for this it would like to evidence significant increase in the coming quarters.
Further for the coming quarters, The Fresh Market is positive and is refining its offering, also extending the mailings to more homes. The main focus of the company in this lies on those potential customers whose demographics and proximity to its stores have scored the highest in the test carried out by it in the past. In the short term The Fresh Market is largely focusing on replenishing the real estate pipeline. Further, it is also planning to expand the store count. Under this it is planning to add another 70 stores in next three years.
To improve its margins, the company is also pursuing expense optimization initiatives. In the supply chain, the company is seeing good opportunities to lower the unit costs as it is seeing impressive growth in the volume.
Conclusion
Moving to the fundamentals, with trailing P/E of 44.26 the stock looks slightly over valued but the forward P/E of 22.50 shows good earnings growth in the near term. Even the stock can be a good long term holding as its earnings are growing at a CAGR of 16.75% which is more than the industry average of 13.68%. So as per investment, The Fresh Market is a good pick.
