Fresh Market Fiscal 2nd-Quarter Profit Slips on Higher Costs

   By Maria Armental 
 

Fresh Market Inc.'s fiscal second-quarter profit slipped 27% as the specialty grocery's bottom line was dragged down by higher costs that masked an increase in sales.

Still, the company beat estimates and offered a picture of growth, sending shares up 8% to $32.98 in recent after-hours trading Thursday.

Fresh Market, which went public in late 2010, focuses on higher-margin foods and services such as imported cheeses, organic produce and on-site butchers.

Located predominately in the southeastern U.S., Fresh Market has a smaller footprint than rival Whole Foods Markets Inc. but has been building new stores. Fresh Market opened four stores during the quarter and expects to open an additional six in the current quarter and five in the fourth quarter.

Based on a recent analysis, the company said it was raising its store growth potential in the Southeast.

For the current quarter, the company expects same-store sales in the low- to mid-point of the 1.5% to 3.5% range for the year.

For the period ended July 27, Fresh Market reported a profit of $11.4 million, or 24 cents a share, down from $15.6 million, or 32 cents a share, a year ago. On an adjusted basis, per-share profit was 36 cents.

Sales rose 19% to $422.2 million.

Analysts surveyed by Thomson Reuters expected a profit of 35 cents a share on $411.9 million in sales.

Same-store sales rose 2.9% to $357.3 million, driven by a 2.7% increase in the number of transactions and a 0.2% increase in the average transaction size.

Gross profit rose 18.5%, while gross margin narrowed to 34% from 34.2% for the year-ago period.

The company affirmed its full-year forecast.

Through Thursday's closing, shares were down 25% for the year.

Write to Maria Armental at [e-mail]

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