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Why Fresh Market Shares Got Trashed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of high-end grocery chain Fresh Market (UNKNOWN: TFM.DL  ) were looking wilted today, falling as much as 14% after a subpar earnings report.

So what: The Whole Foods-competitor said that comparable sales grew just 1.9% in the last quarter, well below the 4.2% rate that analysts expected. Overall sales grew 15.3% to $369.9 million, largely driven by new store additions, though that figure also missed expectations by about $10 million. Earnings per share of $0.43 missed estimates by a penny. CEO Craig Carlock noted a "sudden slowdown in customer traffic" around the holidays, but did not offer any explanation.

Now what: Looking ahead to 2013, Fresh Market plans to add between 19 and 22 stores, increasing its total store count by about 16%. Since most of the new stores will be opened in the second half of the year, the company expects earnings to be slower in the first half. For the year, it guided EPS at $1.51 to $1.58, below expectations of $1.68.

With comparable sales expected to grow by just 2% to 4%, investors have to be wondering if Fresh Market is now saturating the market for its product, especially with Whole Foods expanding as well. Shares are priced for growth, but expansion alone isn't enough. Pay close attention to the current quarter to see if the grocery chain can break the "sudden slowdown" we saw recently.

You can receive automatic updates by adding the Fresh Market to your Watchlist here.

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Related Tickers

12/31/1969 7:00 PM
TFM.DL $0.00 Down +0.00 +0.00%
The Fresh Market CAPS Rating: ***