Earnings season has almost come to a close, but there are still a few companies left to report. One of those companies is The Fresh Market Inc (NASDAQ:TFM), a grocer with 131 stores in 25 states that focuses on high-end customers by providing a “farmer’s market feel” with several specialty goods. The grocer will be reporting earnings on Wednesday, after the market closes.
Source: The Fresh Market .
Following are the bare bones of what the market is expecting from The Fresh Market Inc (NASDAQ:TFM), but read further to find out what three metrics investors should keep their eye on to really see if this grocery store is worth your investment dollars.
| Expected Earnings Per Share | Expected Revenue |
|---|---|
| $0.32 | $357 million |
Source: E*TRADE.
Profit margins
Because grocers often only bank a penny or two of profit for every dollar spent in-store, even small changes in one’s profit margin can mean big things for a company’s bottom line. If we look at how The Fresh Market Inc (NASDAQ:TFM) has performed during the second quarter of the past three years, we see a solid move toward more profitability.
Source: SEC filing.
It should be noted that the dramatic increase between 2010 and 2011 was partially due to my having to estimate what income taxes would have been paid during 2010. At the time, The Fresh Market Inc (NASDAQ:TFM) was treated as an entity in which shareholders paid taxes, and the company did not.
Either way, the improvement of 21 basis points was a positive step for the company, especially given its lofty valuation. Given expectations, Wall Street is expecting these margins to expand beyond 4.30%. If The Fresh Market Inc (NASDAQ:TFM) is able to come in ahead of these expectations, it would be a very good sign.
Sales per square foot
Because the grocery business has such tough economics, efficiency is key. Profit margins tell part of the story, but by monitoring sales per square foot, you can get a better idea of how the physical space is being used. This is especially important for The Fresh Market Inc (NASDAQ:TFM), as its stores average just 21,000 square feet — far below that of traditional grocery stores.
Last year during the second quarter, The Fresh Market had $127 worth of sales per square foot, or SSF. To see whether the company is keeping up with larger trends, let’s look at how some peers performed over the last quarter. Whole Foods Market, Inc. (NASDAQ:WFM), Fairway , and Sprouts Farmer’s Market all represent newer-age grocery stores that, like The Fresh Market, focus on fresh, locally sourced, and organic goods.
| Company | Q2 2012 SSF | Q2 2013 SSF | Change |
|---|---|---|---|
| Whole Foods | $218 | $225 | 3.2% |
| Fairway | $251 | $243 | (3.2%) |
| Sprouts | $108 | $141 | 30.5% |
| The Fresh Market | $127 | ??? |
Source: SEC filings.
