Analysts Chime In On The Fresh Market's First Quarter

The Fresh Market TFM reported strong results for its first quarter after the close Thursday, initially moving its shares more than 10 percent higher.

Sales rose 17 percent for year, while same-store sales increased just 2.5 percent. $431 million of sales beat the analyst consensus by 2.66 percent. Earnings fell 6.5 percent year-over-year, but were inline with the analyst consensus.

Jefferies: Maintains Hold, Lowers Price Target From $36 to $35

Mark Wiltamuth of Jefferies likes The Fresh Market’s earnings report, but is maintaining his hold rating because of tough competition, falling margins and cautious outlook from management.

Regarding inflation, Wiltamuth commented, “Inflation, not competition, weighs on gross margins: Gross margins declined 90bps on record year ago numbers with 60bps coming from increased inflation as the company's decided to hold price firm. We expect these pressures to persist into 2H14.”

The $35 price target is the result of 15 times forward PE, below the historical 25 to 30 times range.

Related: Shares Of Whole Foods Tumble On Weak Guidance Given With The Q2 Earnings Report

Raymond James: Maintains Outperform and $41 Price Target

Raymond James’ Benjamin Brownlow was especially impressed with The Fresh Market’s same-store sales.

Looking forward, Brownlow commented, “growth in customer traffic remained consistent into 2Q, we believe summer sales could benefit from pent up demand and continue to see 2H14 as well positioned for accelerated earnings growth reflecting a better balance of store openings and pre-opening expenses y/y.”

Raymond James’ $41 price target was derived with a 22 times forward EPS estimate and nine times EBITDA.

Deutsche Bank: Maintains Hold, $34 Price Target

Although Deutsche Bank liked the earnings report, the firm sees several concerning factors moving forward:

“1) gross margins fell 90bp y/y as TFM elected to absorb rising costs… 2): SG&A, ex-items, de-levered +70 BP y/y due to higher store labor at non-comparable stores and higher preopening costs; 3) 41 stores were impacted by competitive openings, a bit increase from LY; 4) FY14 EPS guidance remains back-end weighted, raising the earnings-risk profile, particularly given the heightened competitive environment and rising inflation.”

Shares of The Fresh Market were last up 4.32 percent to $29.94.