Fresh Market Soars in IPO

MARK HAMSTRA

GREENSBORO, N.C. — Shares of specialty grocer Fresh Market have zoomed up quickly after an initial public offering this month.

Fresh Market executives rang the opening bell at Nasdaq last week.

The company went public at $22 per share and quickly shot up nearly 50% in the first day of trading as investors seemed to seize on the company's growth prospects, analysts said.

“I believe that people were exited about the combination of growth, good returns and being in a stable industry,” said one industry analyst, who asked not to be identified. “People seemed to feel there is untapped demand for this concept, and the small size of the stores should make it easy for them to find a lot of locations. It's hard to find companies with good growth.”

As previously reported, the IPO had been expected to be priced at $18 to $20 per share. The $22 price reaped about $290 million for the founders and executives who sold a portion of their shares.

The company itself did not seek to raise funds through the sale.

As of late last week, the share price of nearly $33 gave The Fresh Market, which operates 100 high-end, small-format stores in the East and Midwest, a market capitalization of about $1.5 billion. It is trading under the ticker symbol TFM.

Some analysts likened the company's financial performance to that of Austin, Texas-based Whole Foods Market, which has also seen a surge in its stock price this year. Both companies share customers seeking high-quality perishables, analysts said, although some noted that Fresh Market's growth prospects might be even greater with its smaller format — averaging about 21,000 square feet.

With third-quarter margins of about 32.4%, Fresh Market outperforms many traditional supermarket companies. Through the first nine months of the current fiscal year, the company said it expected to report net income of $41 million on $685 million in sales, increases of 45% and 13%, respectively, over year-ago levels. Comps rose 5.1% for the third quarter and 4.6% for the nine-month span.

After the offering, founder Ray Berry, his family and other executives participating retain control of more than 63% of the shares, and the Berry family itself retains more than 50% of the voting shares for the purposes of electing directors.

The sale was led by Bank of America Corp., JPMorgan and Goldman Sachs Group.