The Fresh Market (NASDAQ:TFM)

CAPS Rating: 2 out of 5

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Player Avatar TMFBreakerForce (78.18) Submitted: 11/12/2010 2:22:48 PM : Outperform Start Price: $32.69 TFM Score: -72.49

I’ve been doing some research on a very recent IPO - The Fresh Market (TFM), and here are my notes so far. I plan to pick up some shares on Monday (Thanks to the new MF trading rules! woo hoo! hehehe)The Fresh Market TFMRecent Price: $32.85Market Cap: $1.57 BillionFounded by Ray and Beverly Berry in 1982 in Greensboro, N.C., The Fresh Market is specialty retailer that offers high quality food products, with a special emphasis on fresh, premium perishables. The company IPO’d on 11/5/10, selling 13,175,000 shares at $22. They now have 47,991,045 shrs o/s post IPO.TFM operates 100 stores in 20 states – covering the Southeast, Midwest, and Atlantic Region. Their biggest market is Florida with 24 stores, followed by North Carolina with 15, and Georgia with 10. The company has grown from 53 stores in 2005, to 92 at the end of 2009. TFM opened 10 new stores this year. Management believes the market can support at least 500 locations, meaning there is plenty of growth opportunities ahead.Interestingly, the company stores are only 21,000 square feet and carry between 9,000-10,000 SKU’s. The average conventional supermarket is 40,000-60,000 sq feet with around 45,000 SKU’s. In the prospectus the company states that the smaller box concept allows them to focus on higher margin products.Revenues have climbed from $728mln in 2007 to $862mln in 2009. Revenues throught 9 months (9/26/10) are $684.8mln with Q4 to follow.Cash Flows have outpaced Net Income as well:2007 2008 2009 Thru 9/26/10Net Income: $30.29mln $31.56mln $49.2mln $41.05mlnCFFO: $49.02mln $60.38mln $84.7mln $78.5mlnIn Feb of 2007, the company entered into a Bank Credit Facility – a 5 year $175mln revolver. Currently they have borrowed $98.2 mln.The cash balance is low at $6.28mln, but their cash flows appear strong.Competitors:Conventional: Kroger, SafewayRegional: Publix, Harris TeeterNational Big Box: Wal Mart, TargetAlternatives: WFMI, Trader Joe’sPlus all your local supermarkets, farmers mkts, etcRay Berry, the founder was the company CEO from 1981-2007. He is now chairman, B.O.D.. Previously he had worked for Southland Corporation (the previous 7-11 parent co) and was a SVP who oversaw 4,000 7-11 locations.Insiders seem to have 60% of the outstanding shares.Seasonality – 4th quarter is their strongest, due to holiday shopping.Link to company filings:http://ir.thefreshmarket.com/sec.cfmThoughts? :) Let me know while everything is still fresh (ahem hehehe), in my mind...Matt

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Member Avatar Borisbmx (< 20) Submitted: 1/28/2011 12:06:14 PM
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the premium and the valuation metrics are big. The growth will need to be strong to sustain the valuation, let alone grow it. The footprint of the store does make me optomistic the growth pattern is going to be special. I am not sure they are as authentic as WFMI. we will see. WFMI has been building smaller stores. TFM has done well competing against Publix which is unusual. Even WFMI has clashed with Publix in Florida.

Member Avatar TMFBreakerForce (78.18) Submitted: 1/28/2011 2:47:21 PM
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My reason for investing in TFM has more to do with the smaller store size, very high margins, and the small numbers of locations. With only 100 stores, management believes the market can support at least 500, leaving plenty of room for growth.

Member Avatar XMFConnor (97.02) Submitted: 6/13/2012 8:10:19 PM
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^ But is it profitable growth? The company has no durable competitive advantage-- it's a grocer at ~40X earnings with increasing competition trying to expand out of its base. I think this is a compelling short

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