Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM): Grocery Retailing Could Be Quite Appetizing

Page 1 of 2

The Fresh Market Inc (NASDAQ:TFM)As a value investor, I love beaten down stocks. I often search for investment opportunities in stocks which are trading around their 52-week lows. Recently, I came across one grocery store that has experienced a significant drop of nearly 18% since the beginning of the year.

That grocery store is The Fresh Market Inc (NASDAQ:TFM). The huge decline in the share price was due to the fact that its fourth-quarter earnings results have missed analysts’ estimates. However, The Fresh Market is in the portfolios of several famous institutions including Fidelity Management, T. Rowe Price Group, Inc. (NASDAQ:TROW), and Vanguard Group. Should investors get in The Fresh Market at its current price? Let’s find out.

Consistent growth in operating performance with little leverage

The Fresh Market Inc (NASDAQ:TFM) is considered a high growth specialty retailer, offering high quality and fresh food products to shoppers with around 129 stores in 25 states in different areas including the Southeast, Midwest, Mid-Atlantic, Northeast, and West regions of the U.S.

The majority of its revenue, around 65.8% of total 2012 revenue, was generated from perishable products, while non-perishable products accounted for 34.2% of total revenue. The business has been quite seasonal, with sales peaking in the fourth quarter.

In the past three years, The Fresh Market Inc (NASDAQ:TFM) has experienced decent comparable store sales growth in the range of 5% to 5.7%. In 2012, its comparable store sales increased 5.7%. Since 2010, its comparable store sales per gross square foot have advanced steadily, from $480 to $524.

What investors like about The Fresh Market Inc (NASDAQ:TFM) is its consistent growth in both top line and bottom line. While revenue increased from $798 million in 2008 to $1.33 billion in 2012, its net income rose from $19 million, or $0.40 per share, to $64 million, or $1.33 per share during the same period.

The company is also a cash cow, with an increasing operating cash flow from $60 million to $92 million in the past five years. Moreover, The Fresh Market Inc (NASDAQ:TFM) has quite a conservative capital structure. As of January 2013, it had $198 million in total stockholders’ equity, $9 million in cash, and only $42 million in long-term debt.

Kroger is a much better pick

Compared to its much bigger peers including Whole Foods Market, Inc. (NASDAQ:WFM) and grocery retailer The Kroger Co. (NYSE:KR), The Fresh Market is the worst performer on the market of late. While it experienced a significant decline of nearly 18%, Whole Foods declined only 5.6%. The Kroger Co. (NYSE:KR), on the other hand, has been the best performer with an appreciation of as much as 30% since the beginning of the year.

Whole Foods has higher comp store sales growth

Whole Foods Market, Inc. (NASDAQ:WFM)’ market value decline was due to the weak 2013 guidance. The company estimated that its full year 2013 revenue would be around $12.9 billion to $13 billion, lower than analysts’ estimates of $13.2 billion. It is one of the most well known natural and organic foods retailers in the U.S., operating around 345 stores in the U.S., Canada, and the U.K.

Page 1 of 2
Loading Comments...