The Fresh Market Isn't very Popular On Wall Street Right Now

Shares of

plunged nearly 20 percent early Friday afternoon, establishing a new 52-week low of $21.05 after investors and traders were not impressed with the company's second quarter results and outlook. The Fresh Market reported it earned $0.36 per share in the second quarter, short of the $0.40 per share analysts were expecting. Revenue of $442.095 million also fell short of the $458 million expected. The company also issued weak guidance, revising its full year earnings per share guidance to $1.55 to $1.65 (from a prior $1.85 to $1.93 per share estimate), falling below the consensus estimate of $1.85 per share. Here is a summary of what Wall Street's top analysts are saying.

Phil Terpolilli of Wedbush commented in a note that a key read for the earnings print is the company's gross and operating margins falling short of his estimate (by nearly 20 basis points and 60 basis points, respectively) as the company "meaningfully" increased its promotional and pricing investments. Terpolilli continued that The Fresh Market's comparable-store sales and new store growth faces greater challenges. In addition, the company's emphasis on price investments rather than gross margin expansion is a strategy that may not necessarily pay off. The analyst stated that he prefers to take a "wait and see" approach if comp store trends stabilize in the future. Terpolilli concluded that he sees "limited' upside in fiscal 2016 and beyond. Shares remain Neutral rated with a price target lowered to $27 from a previous $38.

Karen Short of Deutsche Bank commented in a note that The Fresh Market's sales "deteriorated" in the quarter due to a tough macro environment, heightened competition, cannibalization and deflation. At the same time, the company's guidance was "cut sharply" which implies trends can decline even further throughout the rest of the year. According to Short, The Fresh Market should adapt a strategy where it invests in price to drive traffic and comps while lowering its unit growth until the core business stabilizes. She noted that investors won't reward the company for unit growth at the same time that its business is declining. In addition, the company's announcement of a share buyback program "rarely drives shareholder value" and should be done only at a time when fundamentals are stable. Short also suggested that investors looking at the stock thinking it represents an "attractive" valuation should avoid buying until management addresses key issues, including negative traffic trends and weak price positioning. Shares remain Hold rated with a price target lowered to $27 from a previous $35.

Vincent Sinisi of Morgan Stanley commented in a note that The Fresh Market's long-term growth outlook is at risk as the company's initiative are not yielding results. At the same time, the CEO search remains ongoing, further executive turnover was announced and management disclosing that it is reviewing its real estate pipeline. Sinisi continued that the company's revised outlook implies "steep" comp deceleration in the remainder of the year. As a result, the analyst lowered his 2015 and 2016 earnings per share estimates to $1.58 and $1.65, respectively, from a prior $1.85 and $2.03. Shares were maintained at Underweight with a price target slashed to $21 from a previous $35. The analyst noted that shares deserve to trade at a 13x 2016e EPS multiple which is below the stock's two-year historical range of 14-24x and post-IPO range of 14-36x.

Edward Kelly of Credit Suisse commented in note that The Fresh Food reported another "disappointing" quarter as structural issues continue to "pressure" on results. Specifically, the company's gross margin fell 30 basis points while the analyst was expecting a "modest" expansion due to price investments. Meanwhile, the company's "aggressive" cost control prevented an "even more significant" earnings miss. Coupled with the surprise CMO departure announcement signifies the business is "clearly struggling to retain its footing" and the quarterly print makes this thesis even more evident. Finally, Kelly noted that The Fresh Market continues to suffer from a lack of differentiation versus its peers while earnings likely have further risks. Shares remain Underperform rated with a price target lowered to $22 from a previous $30.

David Magee of SunTrust Robinson Humphrey commented in a note that The Fresh Market "couldn't get out of harm's way" in the quarter as a macro "sluggishness" environment and produce deflation doesn't bode well for its "somewhat discretionary" client base. On the other hand, Magee suggested that there were some good items hidden in the print that investors may be ignoring. Specifically, a flattish scenario year over year isn't "the end of the world" as implied by Friday's plunge in the stock. Moreover, even if the company hits the high-end of its revised forecast, it would still mark a "record year" for the company. Magee continued and added that management demonstrated good expense controls while the company can continue generated positive free cash flow. In addition, the company's balance sheet remains unleveraged. Shifting to the negative aspects, Magee suggested that while the company's share buyback program theoretically implies a 15 percent contraction in the share count, it provides "little consolation" given the continued operation challenges. Shares remain Neutral rated with a price target lowered to $28 from a previous $35.