Cencosud primes The Fresh Market for expansion

Chilean retailer Cencosud is marking its first anniversary as parent of The Fresh Market with near-term plans to grow the U.S. specialty grocer’s store count by double digits.

In reporting fiscal 2023 second-quarter results late Friday, Santiago, Chile-based Cencosud said The Fresh Market tallied sales of about $457.1 million (398.2 million Chilean pesos), or approximately 11% of the company’s consolidated revenue of $4.52 billion (3.62 billion CLP, 12.9 year over year) for the quarter. The Fresh Market also accounted for 10.2% ($44.7 million) of Cencosud’s adjusted EBITDA (379.7 million CLP, 17.2%) in the period.

Cencosud acquired 67% of The Fresh Market—its first U.S. venture—from private-equity firm Apollo Global Management in May 2022 in a deal valued at $676 million. Greensboro, North Carolina-based The Fresh Market and Brazilian cash-and-carry supermarket chain GIGA Atacado were integrated into Cencosud’s operations in first-quarter 2023.

During Q2, The Fresh Market opened its second location in Carmel, Indiana, bringing the chain’s store count back up to 160 across 22 states and marking its first store opening under Cencosud. The Chilean retailer noted that, including financial and commercial synergies, The Fresh Market generated a total financial impact of $75.8 million in its first year under the company’s management.

“In these 12 months, The Fresh Market has contributed with an adjusted EBITDA of $210 million and an adjusted EBITDA margin of 10.4% to the company’s consolidated result, exceeding estimates,” Cencosud CEO Matías Videla said in a statement. “In addition, during this quarter, we opened the first store post-acquisition and plan to add 22 additional stores in the next 24 months.” Such an expansion would enlarge The Fresh Market’s store base by nearly 14%.

Increased foot traffic lifted The Fresh Market’s same-store sales by 1.2% year over year in the second quarter, with online sales climbing 5.8%, Cencosud reported.

The Fresh Market also continues to provide a boost in private label. Cencosud’s Jumbo stores in Chile began carrying The Fresh Market private-brand products starting in March, and now own-brand items from U.S. banner also have been rolled out to Prezunic Brazil and Wong Perú stores. Cencosud’s private-label revenue rose 3.9% to $620 million in Q2 from $597 million in Q1, and private-brand penetration advanced 106 basis points year over year to 14.6%, fueled by 29.5% penetration (30.8% in food) by The Fresh Market in Q2.

Overall, Cencosud operates more than 1,400 retail locations—including supermarkets, home improvement stores and department stores—under a variety of banners in Chile, Argentina, Brazil, Peru, Colombia and the United States, as well as over 60 shopping centers. The company holds a put option to buy the remaining 33% of The Fresh Market. In its fourth-quarter 2022 presentation, Cencosud said it sees an opportunity to triple the size of The Fresh Market’s business, including 75 “new, low-risk” stores, for a potential $900 million in added sales.