Fresh perspective has Fresh Market ready to grow
Fresh Market’s new CEO Rick Anicetti said he is making changes as fast as possible to restore growth to a retailer he contends has enormous untapped potential.
Fresh Market’s potential was not evident during the company’s third quarter when sales declined 3.7% due to a decline in store traffic while total sales increased 3.3% to $386.5 million due to the addition of six locations. Net income declined to $10 million, or 21 cents a share, from $14.9 million, or 31 cents a share. On an adjusted basis to exclude charges related to store closures and a change in senior leadership, earnings per share declined to 23 cents from 27 cents.
Anicetti, a veteran food retailer who joined Fresh Market Sept. 1, maintains he is excited about the opportunity to guide the company's future direction even if the long-term direction isn’t entirely clear. Six weeks after he joined the company, Fresh Market announced it had begun a strategic review of the business, which could result in the company continuing to pursue value-enhancing initiatives as a standalone company, capital structure optimization, a sale or other business combination.
“As our management team and board conduct a comprehensive strategic and financial review of the business, we are simultaneously moving forward aggressively with a number of initiatives to strengthen our foundation, increase productivity, drive store traffic, and regain operating momentum,” Anicetti said. “With the holiday season fast approaching, we are making changes as quickly as prudently possible to our productivity, price optimization and brand differentiation to help stabilize traffic trends and drive sales during this key shopping period."
Among the changes the company the company is making, Anicetti highlighted four broad areas during a call with investors. First, the company is focused on operating effectiveness and adopting best-practice processes and systems to drive improvement in areas such as store labor, shrink, supply chain and promotional effectiveness. Second, the company is looking to define, deliver and communicate a more compelling value message to consumers by reinvesting in service, merchandising, and price. Third, to drive differentiation the company plans to emphasize quality and freshness in our perishable departments, take a phased approach to reinventing the center store and incorporate that work into remodels beginning in 2017. Fourth, Anicetti said Fresh Market will focus on customer engagement to more proactively engage and develop a dialogue with customers inside and outside of stores.
“While it's only been a few short months since I took the helm, we are intently focused on driving traffic and sales and improving our operating model,” Anicetti said.
Meanwhile, competitors are focused on similar objectives. Whole Foods is looking to rebound after it reported a 0.2% same-store sales decline in its fourth quarter ended Sept. 29 and indicated that business conditions will get worse with a 2% comp decline forecast in the first quarter. Comps are expected to be flat in the second and third quarter before accelerating to a 3% increase by the company’s fourth quarter.
"There has never been a time where customers have had more interest in what they eat, where it comes from and who's growing it. Our company mission, commitment to transparency, and culture of innovation are more relevant than ever, and we see tremendous growth potential as food consciousness continues to evolve," Walter Robb, co-CEO of Whole Foods said when the company reported its fourth quarter results.
While the growth potential reference by Robb and Anicetti has not been evident of late at their respective companies, others in the natural and organic space are doing just fine.
The 216 unit Sprouts Farmers Market chain said its third quarter same-store sales increased 5.8% and total sales increased 18% to $903 million thanks to the addition of eight new stores. The company’s profits increased to $32 million, or 21 cents a share, from $26.1 million, or 18 cents a share.
That performance had Sprouts CEO Amin Maredia singing a different tune than his peers.
"Sprouts' commitment to health and value continues to resonate with customers seeking fresh, natural and organic products at great prices, driving 34 consecutive quarters of positive comparable store sales growth," Maredia said. “Top-line sales increased through strong promotions and operational execution which drove increased customer traffic trends. Looking ahead, we continue to focus on product innovation, private label growth, great operational execution and 14% unit growth coast-to-coast."