The Fresh Market (TFM) Tops Q4 EPS by 4c; Will Shutter Some California Operations

The Fresh Market (NASDAQ: TFM) reported Q4 EPS of $0.55, $0.04 better than the analyst estimate of $0.51. Revenue for the quarter came in at $480.5 million versus the consensus estimate of $482.9 million.

The Company’s fourth quarter comparable store sales were driven by a 3.7% increase in the number of transactions, partially offset by a 0.7% decrease in average transaction size. The acceleration in the number of transactions was attributable primarily to the marketing activities and direct mail campaign that the Company launched in the quarter.

Strategic Initiative

The Fresh Market announced today that, after careful consideration of expected future cash flows, the long-term strategic importance of individual stores, and the anticipated timeline of store openings in California, the Company has decided to close its operations in California, which include stores in Palo Alto, Santa Barbara and Laguna Hills in order to focus on higher growth opportunities. This decision is consistent with the Company’s previously announced strategy to concentrate its unit growth resources in the eastern half of the United States over the next three years. Despite the improving results of these stores in California, the Company concluded that the pace of organic store growth was going to be slower than anticipated and believes it can achieve more consistent financial results and a better return on its investments by continuing to grow in markets within or closer to its existing markets at this time.

For fiscal 2014, operating losses and pre-opening related rent and other expenses attributable to operations in California totaled approximately $4.8 million, or approximately $0.06 per diluted share, excluding impairment charges.

As a result of the store closures, the Company anticipates additional charges in fiscal 2015 of approximately $20 million to $26 million related to the recognition of lease liabilities, asset disposals, severance and other costs associated with the closure of operations in California. The stores will be closed to customers by March 31, 2015 and the Company expects store closure activities to be completed in fiscal 2015.

The Fresh Market sees FY2015 EPS of $1.77-$1.85, versus the consensus of $1.80.

For earnings history and earnings-related data on The Fresh Market (TFM) click here.

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