Fresh Market Shares Tumble As Q3 Results Miss View, Again Cuts Full-year Outlook

(RTTNews) - Shares of Fresh Market, Inc. (TFM) tumbled more than 13 percent in extended trades Thursday after the grocery retailer's results for the third quarter missed analysts' expectations and the company once again lowered its earnings for fiscal 2013.

The company profit for the third quarter rose 2 percent from last year as higher revenues were partly offset by an increase in operating expenses. However, both revenue and earnings per share missed analysts' expectations.

Looking ahead, the company lowered its earnings outlook for fiscal 2013, saying that it expects its recent comparable and new store sales performance as well as expense trends to continue for the rest of the fiscal year.

The Greensboro, North Carolina-based company's net income for the third quarter was $11.06 million, up from $10.89 million in the corresponding period last year. However, on a per share basis, earnings were flat with last year at $0.23.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 13 percent to $364.46 million from $321.49 million in the same period last year. Analysts had a consensus revenue estimate of $378.57 million.

Comparable store sales for the quarter increased 3.1 percent, reflecting a 2.8 percent increase in transaction volume and a 0.3 percent increase in average transaction size.

During the latter part of the quarter, Fresh Market said it experienced an unanticipated sales slowdown across its store base, which it attributed to changing economic conditions and softening consumer confidence. Sales from stores in new markets were mixed.

Craig Carlock, President and Chief Executive Officer of Fresh Market said, "Our base business continues to perform well, although we experienced increasingly challenging economic conditions as the quarter progressed. Even under these conditions, comparable store sales growth exceeded three percent this quarter and gross margin continued to expand."

Gross margin rate increased 40 basis points from the year-ago period to 33.5 percent, primarily attributable to improvement in the merchandise margin rate as a result of reduced shrink expense, partially offset by a rise in occupancy costs as a percentage of sales.

However, operating margin decreased 40 basis points to 5.2 percent, reflecting a 60 basis point increase in selling, general, and administrative expenses as well as an increase in depreciation expense. This was partially offset by a 40 basis point improvement in gross profit margin.

During the third quarter of fiscal 2013, Fresh Market opened ten new stores. As of October 27, 2013, the company operated 146 stores in 26 states.

For fiscal 2013, Fresh Market now forecasts earnings in a range of $1.42 to $1.47 per share, down from its previous guidance range of $1.50 to $1.55 per share. Analysts currently expect full-year earnings of $1.53 per share.

The company projects comparable store sales for the year to increase 3.0 percent to 3.5 percent, and expects to open 22 new stores in the year.

TFM closed Thursday's regular trading session at $50.40, up $1.44 or 2.94 percent on a volume of 1.73 million shares. However, in after-hours, the stock declined $6.89 or 13.67 percent to $43.51.