UPDATE: Benchmark Downgrades The Pantry, Comps Expected to Improve

In a report published Friday, Benchmark analyst Ronald Bookbinder downgraded The Pantry, Inc. PNTY from Buy to Hold, based on limited upside to its target price of $18.00.

According to the report, the shares are believed to be close to fully valued as the 57.8% rally in share price since October 8 at $11.00, to yesterday’s close of $17.36, and its 43.1% year to date increase.

“While the merchandise comps continue to improve, driven by company specific initiatives, such as localized merchandising, enhanced food service, and store remodels, the fuel comp remains negative, and we believe consumer spending could be under pressure in 2014 due to increased healthcare costs,” the report said. “For 2014, our EPS estimate is $0.60 EPS estimate, based on a 3% merchandise comp, a continued negative fuel comp, and controlled SG&A.”

Some highlights from the report included:

- ”Higher margin foodservice segment represents a significant opportunity for the company.”
- ”The Company continues to roll out its localized merchandising, focusing on the complete product offering in the stores in order to increase the rate of merchandise sales growth.”

PNTY closed Thursday at $17.03.