Morgan Stanley 'Still Looking For Freshness' At The Fresh Market

• Shares of The Fresh Market Inc TFM have been treading a downward path in 2015 and are down 41 percent year-to-date.
• Morgan Stanley’s Vincent J Sinisi maintained an Underweight rating on the company, with a price target of $21.
• The company’s fundamentals remain challenged and new initiatives are needed to improve the situation, Sinisi said.

The Fresh Market’s new CEO Rick Anicetti outlined four focus areas for improving the company’s operations. These included improving:

1. Operating effectiveness
2. Value equation with a goal of stabilizing and expanding comps through investments in services
3. Merchandise and pricing
4. Brand differentiation and customer engagement via advertising enhancements and implementation of a loyalty program

The company, however, needs to provide greater clarity on these planned initiatives, analyst Vincent Sinisi said. He added, “While plans are encouraging, we continue to see a long road ahead to drive any potential turnaround, with sales and margin risks remaining.”

The Fresh Market reported 3Q15 adjusted EPS of $0.23, ahead of the Morgan Stanley estimate of $0.21, with the beat attributable to higher-than-forecasted gross margins. The company’s revenues of $433 million were marginally short of the Morgan Stanley estimate of $433 million.

The company reduced its full-year EPS guidance from $1.55-$1.65 to $1.55-$1.60 and comps guidance range from -1.0 percent to - 2.5 percent to -2.0 percent to -2.6 percent.

The Fresh Market is conducting a strategic and financial review of the business with various value enhancing initiatives being considered. Although the company’s core fundamentals remain unchanged, potential strategic updates need to be monitored, Sinisi pointed out.