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For its 13-week first quarter ended April 27, 2014, The Fresh Market Inc. reported a total net sales increase of 17.6 percent to $431 million, while comparable-store sales rose 2.5 percent to $368.3 million, from Q1 of fiscal 2013.
According to the Greensboro, N.C.-based specialty grocer, which operates 157 stores in 26 states nationwide, the rise in comps was attributable to a 1.8 percent increase in the number of transactions and a 0.7 percent increase in average transaction size following promotional activity and a strong Easter holiday, partly offset by the severe winter weather early in the quarter.
"Our positive comparable-store sales and steady trends in customer traffic throughout the quarter were a result of our ongoing promotional successes and decision to hold prices steady despite higher food costs," noted President and CEO Craig Carlock. "During the quarter, we also continued to focus on increasing store penetration in existing markets and opened seven new stores in our core geographies, including Florida and North Carolina."
Higher Gross Profit
The grocer's gross profit increased 14.6 percent, or $18.8 million, to $148.2 million in Q1 of fiscal 2014, versus the year-ago period. Gross margin rate was 34.4 percent, compared with 35.3 percent last year. According to The Fresh Market, the lower gross margin rate was due to a decrease in merchandise margins as a result of its decision to absorb some cost inflation, and favorable responses to sales promotions, which spurred a slight increase in the percent of revenue sold on promotion, as well as a small uptick in occupancy expenses as a percentage of net sales.
Operating income for Q1 of fiscal 2014 was $27.6 million, or 6.4 percent of sales, versus $35.4 million, or 9.7 percent of sales, last year. The grocer’s operating income included store closure and exit costs of $7 million. Excluding these costs, adjusted operating income was $34.6 million, or 8 percent of sales, for the quarter.
During Q1 2014, The Fresh Market invested $24.4 million in capital expenditures, of which $22.6 million went to new and remodeled stores.
"As we look at the remainder of fiscal 2014, we continue to be encouraged about our business and our growth prospects in the expanding specialty retail market and believe our real estate strategy and initiatives to drive awareness of the convenience of our stores and quality of our products will position us well for long-term growth," said Carlock.
Based on Q1 results and the outlook for the remainder of the year, The Fresh Grocer affirmed its fiscal 2014 forecast of adjusted earnings of $1.56 to $1.66 per diluted share.