The Fresh Market not worried about price competition

The Fresh Market isn’t particularly worried about the more competitive price positioning of Whole Foods Market, executives said in an earnings conference call Thursday.

“Our view is that people are coming to us for the quality of the service, the quality of the food and a different shopping experience,” said Jeffrey Ackerman, CFO of The Fresh Market, Greensboro, N.C. “They don't see us as an organic, all-natural retailer. There's a couple others out there that are organic, all natural retailers. People are coming to us for something different.

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“So we think that gives us a little different platform on which to compete and may make our customers less prone to price sensitivity of what our competitors do.”

The company continues to test new promotions, however, using themed offers that highlight specific departments. In March for example, The Fresh Market implemented a weekly “meal deal” event that the company said has seen a “growing response." It is also continuing to ramp up its private-label and prepared-foods offerings.

On the real estate front, the fast-growing company said it expects to complete an assessment of its opportunities in the Southeast in the next 90 to 120 days. Plans for fiscal 2014 call for 23 or 24 new stores in total, seven of which will be in Florida.

After a failed expansion effort in Sacramento, Calif., and struggling in its debut in Houston, The Fresh Market said its newest store in Houston is faring better. It plans to open one store in Laguna, Hills, Calif., this summer, and it has three stores in the Dallas-Fort Worth area slated to open in the next 12 months.

In the first quarter, comparable-store sales rose 2.5%, with average transaction volume increasing 1.8% and transaction size up 0.7%. Net sales increased 17.6% to $431 million.

Net income was down slightly, to $16.6 million, reflecting store closure costs. Adjusted operating income was $34.6 million, compared with $35.4 million a year ago.

Analysts were cautiously optimistic on the company's outlook.

“We were encouraged to see comps did not decelerate in Q1, traffic was positive, new store productivity is improving and the company is committed to its refocused real estate strategy,” said Kate Wendt an analyst with Wells Fargo. “On the other hand, we remain concerned The Fresh Market will have to lower its prices given the increasingly competitive grocery market, and will be entering a new metro market [Dallas], which could pose some risk if sales end up slower than its model predicts.”

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