Market Overview

Fresh Market Shares Respond Following Disappointing Q3 Earnings

Fresh Market Shares Respond Following Disappointing Q3 Earnings

Shares of The Fresh Market (NASDAQ: TFM) respond following disappointing third quarter fiscal 2013 earnings.

On Thursday, The Fresh Market reported that net sales increased 13.4 percent to $364.5 million and comparable store sales increased 3.1 percent compared to 3Q12. The company reported third quarter EPS of $0.23 versus the estimated $0.26, missing by $0.03.

EPS were Unchanged from the same quarter last year. Revenue came in at $364.50 million versus the estimated $378.57 million. Management also lowered its FY13 guidance from $1.50-$1.55 to $1.42-$1.47.

J.P. Morgan analyst Ken Goldman lowered estimates and the price target from $50 to $48. The FY13 estimate went from $1.58 to $1.42 and the FY14 estimate dropped to $1.58 from $1.89.

Goldman commented, "Investors with high risk tolerance may view today's likely stock dip (TFM was indicating down 13% after-hours last night) as a buying opportunity. We are tempted to do the same, as we have seen TFM's comps rebound in the past from temporary dips. But this time feels different to us because more than just comps came in light. New store productivity also disappointed for the second straight quarter, with recent additions in Houston and Sacramento underperforming expectations. Considering that much of TFM's multiple probably derives from the potential for new store growth, we are more hesitant this time around to forecast a near-term stock bounce-back until we get more comfortable that new store productivity has not been permanently impaired."

Sean Naughton from Piper Jaffray reduced their multiple and therefore their price target to $54 from $59. The multiple decrease will better reflect "the more challenging operating environment and the fact we are extending our multiple out to CY15 estimates."

Stern Agee analyst Charles Grom focused on three main points following the earnings release. Grom noted that growing pains on the building brand equity front could equate to lower new store returns in the future, a more competitive background will expose both peak margins and LT store targets, and that the company's macro picture is not conducive for the TFM shopper.

Stern Agee lowered 4Q13 EPS from $0.51 to $0.44 and FY14 estimates from $1.97 to $1.75. The analyst also decreased the price target from $59 to $44.

Mark Wiltamuth from Jefferies maintained a Hold rating and lowered the PT from 54-50.

Wiltamuth commented, "While Sprouts and Natural Grocers by Vitamin Cottage posted better than expected quarterly comps, two of the largest natural/organic grocers, Whole Foods and The Fresh Market, both posted disappointing comps and cited a slowing consumer with eroding trends towards the end of the quarter. We view this as more temporary in nature, and don't see it as a structural change in natural/organic demand or a competition problem."

Deutsche Bank analyst Karen Short lowered guidance estimates and the price target as well following the third quarter miss. The analyst revised the FY13 guidance from $1.50-$1.55 to $1.42-$1.47 following the decrease of FY13 and FY14 EPS. Deutsche Bank lowered FY13 EPS from $1.53 to $1.45 and FY14 EPS from $1.86 to $1.74. Short lowered the price target from $58 to $48.

Goldman Sachs analyst Stephen Grambling commented, "We would expect the stock to come under heavy pressure today on another miss and lower guidance where softer new store productivity has also called into question the sustainability of the expansion strategy."

Shares of the Fresh Market closed at $50.40 on Thursday and is currently trading at -18.33 percent.

Latest Ratings for TFM

Apr 2016Credit SuisseTerminatesNeutral
Apr 2016Stephens & Co.DowngradesOverweightEqual-Weight
Mar 2016Morgan StanleyUpgradesUnderweightEqual-Weight

View More Analyst Ratings for TFM
View the Latest Analyst Ratings


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