Fresh Market Profit Falls, Yet Meets Estimate; Stock Up - Update

(RTTNews) - Specialty grocery retailer Fresh Market Inc (TFM), Thursday reported a decline in first-quarter profit, hurt by store closures and exit costs as well as other expenses that offset a double-digit growth in sales. Nevertheless, quarterly earnings were in line with Wall Street estimates, while sales exceeded expectations.

For fiscal year 2014, the company slashed its net earnings outlook, mainly reflecting store closure costs, but maintained its adjusted earnings and same store sales guidance.

Fresh Market shares rallied 10 percent in after-hours trade on the Nasdaq, following the announcement.

"We are pleased with our first quarter performance, especially given the weather-challenged start to the quarter in the majority of our markets," said CEO Craig Carlock.

Greensboro, North Carolina-based Fresh Market posted second-quarter net earnings of $16.6 million or $0.34 per share, compared with $22 million or $0.46 per share last year.

Results for the recent quarter included store closure and exit costs of $0.09 per share.

Excluding items, adjusted earnings for the quarter were $20.9 million or $0.43 per share. On average, 18 analysts polled by Thomson Reuters expected earnings of $0.43 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter climbed 17.6 percent to $431 million from $366.6 million a year ago. Analysts estimated revenues of $419.9 million for the quarter.

On a same store basis, sales for the quarter were up 2.5 percent.

Gross margin for the quarter dropped 110 basis points to 34.4 percent. This was chiefly due to a decrease in merchandise margins due to sales promotions and the company's decision to absorb some cost inflation.

Operating margin shrunk to 6.4 percent from 9.7 percent last year.

During the quarter, the company continued to focus on increasing store penetration in existing markets and opened seven new stores in core geographies, including Florida and North Carolina. As of April 27, 2014, the company operated 154 stores.

For fiscal 2014, Fresh Market now expect net earnings of $1.29 to $1.39 per share, from a prior range of $1.30 to $1.43 per share. The company still expects adjusted earnings of $1.56 to $1.66 per share. Same store sales are still expected between 1.5 percent and 3.5 percent.

Analysts currently expect earnings of $1.58 per share for the year.

Fresh Market stock closed Thursday at $28.70, down $0.69 or 2.35%, on a volume of 1.25 million shares. In after hours, the stock gained $2.90 or 10.10%, to trade at $31.60.