Longbow Upgrades The Fresh Market, Says Risk Priced Into Shares

In a report published Tuesday, Longbow analysts upgraded their rating on The Fresh Market, Inc. TFM to Neutral.

"While we continue to believe The Fresh Market and its peers will face a challenging environment as traditional and mass grocers ramp up their natural & organic offerings, this risk is seemingly priced into the shares currently," the analysts said.

Apart from facing competition from non-specialty grocers, the analysts believe that the company's comp and/or margin profile is likely to be under threat in the longer term due to the increasing presence of Sprouts Farmers Market, Inc. SFM and Trader Joe's Company.

According to the Longbow report, "Longer term, we are concerned TFM will face substantial pressure on both a comparable sales and margin front as domestic grocers allot increased shelf space for specialty foods (especially organic/natural items)."

Not only are specialty and traditional grocers expanding into organic/natural food offerings, but mass retailers have also now joined the fray. In fact, mass retailers, such as Sprouts, are expanding their store footprint into The Fresh Market's key Southeast market.

This threat is seemingly coming from all sides as specialty grocers, traditional grocers and most recently, mass retailers have either expanded organic/natural food offerings or are expanding their store footprint into TFM's core Southeast market (namely Sprouts).

However, the analysts believe that all these negatives are already priced into the company's shares.