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Markets Mixed as Jobs Report Rally Dies

By Matt Thalman - Mar 7, 2014 at 1:00PM

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A number of grocery retailers are trading in mixed directions today.

The Labor Department released its February nonfarm employment data this morning, and surprised economists who had expected 150,000 new jobs to be created for February with a notably higher figure of 175,000. However, the unemployment rate rose from 6.6% to 6.7% as more Americans joined the workforce.

The economy is certainly still growing, just at a slow pace, but some believe the pace of improvement will increase in the coming months. Prior to the report being released this morning economists indicated that the jobs created number could have been 193,000 had it not been for February's miserable winter weather. It is unlikely the U.S. will have a massive snowstorm over the next few months, so we may see the Labor Department's job number get back above the 200,000 mark consistently, as it was prior to December when it averaged 205,000 a month.  

The major indexes today all moved higher at the opening bell on momentum following the jobs figure, but as of 1:10 p.m. EST they were mixed. The Dow Jones Industrial Average ( ^DJI 0.00% ) is up just 20 points, or 0.13%, while the S&P 500 dropped 0.08%, and the Nasdaq was down 0.58%.

A number of stocks are making moves within the grocery industry today: shares of The Fresh Market (NASDAQ: TFM) were down nearly 3%, Kroger ( KR -5.01% ) up 1.3%, and Safeway (NYSE: SWY) down 3%. Let's take a look at what's causing these moves.

The Fresh Market reported quarterly earnings yesterday and both revenue ($425.8 million ) and earnings ($0.39 per share) came in lower than analysts expected. Wall Street was looking for revenue of $428.63 million and earnings per share of $0.42. So why is the stock higher? There are a number of reasons, including that same-store sales rose 3.1% during the quarter. Management plans to increase the chain's footprint, though yesterday it announced that four stores would be closed due to lack of performance. That move shows management is knowledgeable and investors trust what it is doing. Lastly, an analyst at UBS upgraded the stock this morning from neutral to buy and increased the price target from $45 to $48.  

Shares of Kroger jumped on news from CNBC this morning that the company is not likely going to make an offer to buy competitor Safeway, which is instead set to be merged with the Albertsons chain by a separate buyer. This should be seen as good news by Kroger investors as the acquisition would likely load the company with a massive amount of debt for a mediocre product. The purchase would also likely cost Kroger even more money in the long run to fix up stores in order to someday see a profit.  

As for Safeway, it's likely that the news from CNBC's David Faber is helping push shares lower today. We know Cerberus Capital Management has offered to pay $9.4 billion for the company, and that Safeway agreed to that amount. But now that Kroger is out of the picture, Safeway shareholders can't hope for a bidding war in which they would get more than the offered amount. Furthermore, the $9.4 billion offer would indicate the per-share buyout price is $40. As this deal will take some time to go through, and current shareholders will only get $32.50 in cash and stock in Safeway's gift-card unit, some investors are likely just taking their money and running now.  

With moving into the grocery business, all three of the companies mentioned above have to worry about how the Internet and companies like Amazon will affect their business. This is something investors may want to consider.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
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The Kroger Co.
$42.81 (-5.01%) $-2.26

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