US grocer The Fresh Market has upped its full-year profit forecast after an increase in first-half earnings.
The retailer raised its full-year outlook to earnings of $1.33 to $1.38 per share with 5.5% to 6.5% same-store sales growth. That is up from its previously increased guidance of $1.28 to $1.34 per share on same-store sales growth of 4.5% to 6.5%.
Earnings in the six months to the end of June, increased 35.9% to US$32.6m. The second quarter included $1.1m of transaction costs related to its IPO and legal settlement payments, while the year-ago quarter included a $6m income-tax provision.
Operating income increased 25.9% to $52.8m, the retailer reported. As a percentage of sales, operating margin increased by 80 basis points to 8.3% for in the first half from 7.5% last year. This was a result of an increase in gross margin rate and a year-over-year decrease of transaction expenses related to its IPO.
Net sales climbed 21.7% to $637.8m. Comparable-store sales increased 8.1%.
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The Fresh Market, Inc. Reports Second Quarter and First Half Fiscal 2012 Earnings
Total sales increased 20.6% for the second quarter and 21.7% for the first half
Comparable store sales increased 8.0% for the second quarter and 8.1% for the first half
Company raises guidance for fiscal 2012
GREENSBORO, N.C., Aug. 29, 2012 (GLOBE NEWSWIRE) -- The Fresh Market, Inc. (Nasdaq:TFM), a high-growth specialty retailer, today announced unaudited sales and earnings results for its second quarter and first half period ended July 29, 2012.
Financial Overview
In the second quarter of fiscal 2012, net sales increased 20.6% to $313.0 million and comparable store sales increased 8.0%, compared to the corresponding thirteen week period last year. Net income in the second quarter of fiscal 2012 increased 26.9% to $13.3 million, from $10.5 million in the corresponding thirteen week period in fiscal 2011. Diluted earnings per share in the second quarter of fiscal 2012 was $0.28, an increase of 26.4% over diluted earnings per share of $0.22 for the corresponding period in fiscal 2011.
First half fiscal 2012 net sales were $637.8 million, a 21.7% increase as compared to the corresponding twenty-six week period in fiscal 2011, while comparable store sales increased 8.1%. Net income increased 35.9% to $32.6 million as compared to $24.0 million in the corresponding twenty-six week period in fiscal 2011. Diluted earnings per share for first half fiscal 2012 increased 35.5%, to $0.68, compared to diluted earnings per share of $0.50 for the corresponding twenty-six week period in fiscal 2011. Items described under "Items Impacting Comparability" (below) impact the comparability of quarterly and first half results and should be reviewed by investors in order to assess the Company's ongoing operations on a comparable basis.
"We are extremely pleased with our strong second quarter performance for both sales and earnings growth," said Craig Carlock, President and Chief Executive Officer. "Our comparable store sales grew 8.0% in the second quarter, led by customer transactions and continuing the sales momentum we've seen over the past several quarters. Additionally, during the quarter we opened five new stores, we made significant progress on our California expansion plans and, despite incremental public company expenses, transactions costs due to our public offering and legal settlement costs incurred during the quarter, we were able to increase our operating margin to 6.9%. We continue to be extremely enthusiastic about the consistency of our business and are therefore raising our fiscal 2012 guidance to reflect not only the strong first half performance but our continued confidence in our second half growth prospects. We now believe that fiscal 2012 comparable sales growth will be 5.5% to 6.5% and that our earnings per share will be between $1.33 and $1.38, including the absorption of equity offering transaction expenses and incremental legal costs incurred this quarter."
Items Impacting Comparability
During the second quarter of fiscal 2012, the Company completed a public offering of common stock impacting the comparability of both the quarterly and first half fiscal 2012 results to the corresponding results in fiscal 2011. Transaction expenses related to the offering, which in general are not tax deductible, are included in selling, general and administrative expense and totaled approximately $0.5 million, resulting in a reduction in earnings per share of approximately $0.01 per share on a diluted basis. The costs associated with the offering include legal, printing, accounting and filing fees and expenses as well as other charges directly related to the offering. Additionally, as it relates to first half fiscal 2012 and fiscal 2011 comparisons, the Company completed a public offering of common stock during the first quarter of fiscal 2011 and incurred approximately $1.1 million in transaction expenses, resulting in a reduction in earnings per share of approximately $0.02 per share on a diluted basis.
The Company also resolved two legal matters during the second quarter of fiscal 2012. The net amount of the settlement payments made and received related to these matters is included in selling, general and administrative expense and totaled approximately $0.6 million on a pre-tax basis, resulting in a reduction in earnings per share of approximately $0.01 per share on a diluted basis. Legal fees and related expenses incurred in connection with these matters have been expensed as incurred.
Operating Performance
The Company had strong sales and earnings growth and significantly improved its operating margin in the second quarter of fiscal 2012. Total net sales increased 20.6% to $313.0 million in the second quarter of fiscal 2012, and comparable store sales increased 8.0% to $270.8 million, in each case compared to the corresponding thirteen week period in fiscal 2011. The second quarter comparable store sales increase resulted from a 5.3% increase in the number of transactions and a 2.7% increase in average transaction size. For the first half of fiscal 2012, total net sales increased 21.7% to $637.8 million and comparable store sales increased 8.1% to $554.5 million, compared to the corresponding twenty-six week period in fiscal 2011. The first half fiscal 2012 comparable store sales increase resulted from a 5.5% increase in the number of transactions and a 2.6% increase in average transaction size.
The Company's gross profit increased 25.6%, or $21.8 million, to $106.7 million in the second quarter of fiscal 2012, compared to the corresponding thirteen week period of fiscal 2011. For the same period, the gross margin rate increased 140 basis points to 34.1% compared to the corresponding prior year period. This increase in the Company's gross margin rate was attributable to an increase in our merchandise margin rate, primarily as a result of improved supply chain expense and a reduction in shrink expense. For the first half of fiscal 2012, the Company's gross profit increased 25.7%, or $44.9 million, to $219.4 million, compared to the corresponding twenty-six week period of the prior year. For the same period, the gross margin rate increased 110 basis points to 34.4%, compared to the prior year period. The change in the Company's gross margin rate for the first half of fiscal 2012 was mostly attributable to increased merchandise margin, as well as slight leverage in occupancy cost, offset by slight deleverage in supplies expense. For the second quarter and first half periods, estimated LIFO expense did not change materially as a percentage of sales, compared to the corresponding periods in fiscal 2011.
Selling, general, and administrative expenses for the second quarter of fiscal 2012 increased $15.2 million to $74.0 million as compared to the corresponding thirteen week period in fiscal 2011. Selling, general, and administrative expenses increased by 100 basis points as a percentage of sales to 23.7% for the period as compared to 22.7% for the corresponding thirteen week period in fiscal 2011. This increase in the selling, general and administrative expense rate was primarily attributable to higher corporate expenses, driven by approximately $0.5 million in transaction expenses incurred in connection with the Company's public offering of common stock during the second quarter of fiscal 2012, approximately $0.6 million representing the net amount of a settlement payment made which was partially offset by a settlement payment received in connection with two legal matters and approximately $0.6 million of incremental expenses mostly attributable to the Company's share-based compensation programs as a result of its public company status. For the first half of fiscal 2012, selling, general, and administrative expenses increased $26.7 million to $144.5 million, or 22.7% as a percentage of sales, from $117.8 million, or 22.5% as a percentage of sales, for the comparable twenty-six week period in fiscal 2011. These expenses included higher corporate expenses, driven by approximately $1.3 million of incremental expenses attributable to the Company's public company status primarily as it relates to its share-based compensation programs, and approximately $0.6 million related to legal settlements, which together adversely impacted selling, general and administrative expenses as a percentage of sales by approximately 30 basis points during the first half of fiscal 2012. In addition to these higher corporate expenses, the Company also had transaction costs associated with the Company's public offering of common stock in the second quarter of fiscal 2012 totaling approximately $0.5 million, compared to approximately $1.1 million of transaction costs incurred in connection with the Company's public offering of common stock in the first half of fiscal 2011.
Operating income increased $4.7 million to $21.7 million for the second quarter of fiscal 2012, compared to $17.0 million for the corresponding thirteen week period of fiscal 2011. Operating income as a percentage of sales for the second quarter of fiscal 2012 increased 40 basis points to 6.9%, compared to 6.5% for the corresponding period of fiscal 2011, including the approximately 50 basis point negative impact of the Company's public offering of common stock, incremental public company costs primarily related to share-based compensation expense and incremental net settlement payments made and received in connection with two legal matters. For the first half of fiscal 2012, operating income increased $13.7 million to $52.8 million, compared to $39.1 million in the corresponding twenty-six week period for fiscal 2011. As a percentage of sales, our operating margin increased by 80 basis points to 8.3% for the first half of fiscal 2012, compared to an operating margin of 7.5% for the corresponding period in fiscal 2011. The primary drivers of the increase in operating margin for the first half of fiscal 2012 were the increase in gross margin rate and a year-over-year decrease of transaction expenses incurred in connection with our public offerings of common stock, off-set by higher corporate expenses.
Original source: The Fresh Market
