Fresh Market cooks up higher profits -- and an exit plan

The Fresh Market will cede some of its market share to its biggest competitor even as it posted strong fourth quarter earnings and an upbeat outlook for 2015.

The company announced that it would be exiting California by the end of this month and closing all three of its remaining stores there, as it focuses on its stores in the eastern part of the United States. The company also cited slower “organic store growth” as another reason for the decision.

“Despite the improving results of these stores in California, the company concluded that the pace of organic store growth was going to be slower than anticipated and believes it can achieve more consistent financial results and a better return on its investments by continuing to grow in markets within or closer to its existing markets at this time,” the company said in a statement.

As the grocery industry becomes ever more competitive, and shoppers demand more high-quality food items, food retailers are under pressure to improve their assortments. When the Fresh Market entered California, Whole Foods Market had dominated the market there for years. Apparently, the Fresh Market was not able to fend off its rival, nor the many other California food retailers that specialize in upscale groceries.

"We remain focused on our key growth strategies," Interim CEO Sean Crane said, "including opening new stores in our core markets and continuing to increase shopper frequency."

For the fourth quarter ended Jan. 25, Fresh Market reported a profit of $20.2 million, or 42 cents a share, up from $2 million, or four cents a share, a year earlier. Revenue increased 13% to $480.5 million. Analysts expected revenue of $482.9 million. Same store sales rose 3%.

For the coming fiscal year, the company expects to open 19 new stores and anticipates sales growth of 9% to 11%, with comps rising 2% to 4%.

The Fresh Market operates 169 stores in 27 states.