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The Fresh Market Inc. reported total net sales of $462 million for its 13-week first quarter of fiscal 2015 ended April 26, a 7.2 percent increase from the year-ago period, although comparable-store sales dipped 1 percent, to $404.2 million.
The Greensboro, N.C.-based specialty grocer attributed the decline to a "0.1 percent increase in the number of transactions [that] was offset by a 0.2 percent decrease in average transaction size," further noting that severe winter weather during the quarter forced it to temporarily close a "significant number" of stores, which led to an approximately 50 basis-point negative impact on comps. Sales also suffered as a result of a shift in The Fresh Market's pricing and promotional activity versus the prior fiscal-year period, and what the retailer described as a "challenging macro environment."
The grocer's gross profit rose 8.4 percent, or $12.4 million, to $160.6 million in Q1, compared with last year, while gross margin increased 40 basis points to 34.7 percent, versus the year-ago period. According to The Fresh Market, the higher gross profit margin was primarily due to adjustments to the price-to-cost relationship of merchandise sold, and lower supply chain costs as a percentage of net sales, partly offset by a 30 basis-point impact related to its decision to replace HBC items with "higher-growth, food merchandise product categories."
Also during Q1, The Fresh Market invested $23.8 million in capital expenditures, of which $21 million concerned new and remodeled stores. The company opened two new stores in the quarter, one in North Carolina and the other its first-ever location in Missouri, and closed three locations as part of its previously announced exit from the California market.
"We achieved adjusted diluted earnings per share growth of 16.8 percent, reflecting the expense and operating improvements we have implemented in a challenging environment," said interim CEO Sean Crane. "These results demonstrate our ability to leverage expenses with relatively flat comparable-store sales, and we believe this flexibility will enable us to invest in initiatives and help increase customer frequency and attract new customers as we grow our store base and position The Fresh Market for long-term growth."
Added Crane: "As we look at the remainder of fiscal 2015, we remain confident in our ability to drive earnings growth and generate strong cash flow. Focusing on greater consistency of earnings, we continue to take steps across the organization to further leverage our cost structure to fund incremental investments that will support building brand awareness, enhancing our culture and improving our long-term prospects."
For fiscal 2015, the company projected that it would open a total of 19 new stores, and remodel or refresh 10.
Based in Greensboro, N.C., The Fresh Market operates 170 stores in 27 states.