An 8% same store sales increase is atypical for a food retailer which is why The Fresh Market’s second quarter performance is so noteworthy.
The company’s sales for the second quarter ended July 29 increased 20.6% to $313 million and profits rose 26.9% to $13.3 million, or 28 cents a share, from $10.5 million, or 22 cents a share, the prior year. The top line growth was attributable to an 8% same store sales increase, roughly two thirds of which was due to increased customer traffic and one third the result of growth in average transaction size at the company’s typical 21,000 square foot stores.
"We are extremely pleased with our strong second quarter performance for both sales and earnings growth," said Craig Carlock, president and CEO of the 124 store Fresh Market chain. He noted the increase came despite the incremental costs associated with being a public company and a legal settlement that combined to reduce second quarter earnings per share by two cents. "We continue to be extremely enthusiastic about the consistency of our business and are therefore raising our fiscal 2012 guidance to reflect not only the strong first half performance but our continued confidence in our second half growth prospects."
Carlock said the company expects comparable sales growth to be in the range of 5.5% to 6.5% and that earnings per share would be in between $1.33 and $1.38, including the absorption of equity offering transaction expenses and incremental legal costs incurred this quarter. The company had previously indicated full year profits would range from $1.28 to $1.34.
Fresh Market is enjoying a higher level of profitability on its sales. In the second quarter, gross margins increased by 140 basis points to 34.1% as the company realized improved supply chain efficiency and a reduction in shrink.
Expenses as a percent of sales at the rapidly growing company also increased by 100 basis points to 23.7%. However, the increases were due to things such as costs related to the company’s public stock offering and the settlement of legal matters.
The company was founded in 1982, but growth has accelerated the past few years and is poised to do so in the years ahead as Fresh Market completed a public stock offering in 2011 and a secondary stock offering earlier this year. During the second quarter, the company opened five new stores and plans call for a total of 14 to 16 new stores this year.