Oct. 20--The Fresh Market, an upscale grocery chain with nine Illinois stores, said Tuesday that it is conducting a financial review that could lead to the sale of the company.
The Greensboro, N.C.-based chain, known for its high-quality produce and prepared foods, is facing rugged competition in the grocery industry, where more stores are increasingly offering similar products for less, some analysts say. The company said its review could lead to "continuing to pursue value-enhancing initiatives as a standalone company, capital structure optimization, or a sale of the company or other business combination."
The news comes just a few days after Reuters reported that Fresh Market chairman and founder Ray Berry was exploring a private equity buyout for the publicly traded company.
Fresh Market is facing a "competition pinch," said Andy Wolf, an analyst with BB Capital Markets. Increasingly, consumers are finding high-quality food and organic produce at cheaper prices elsewhere, which hurts companies like Fresh Market and Whole Foods.
That's especially true in the Chicago area, he said, where the market's become inundated with choices -- a problem for a store like Fresh Market trying to attract middle-income consumers and continue its growth.
"The Range Rovers are already in the parking lot of Whole Foods and, to some extent, Fresh Market," Wolf said. The challenge for such companies is attracting "the guy driving the Toyota."
The company reported a 1 percent sales decline in Fresh Market stores open at least 16 months in the second quarter that ended July 26, compared to a 2.9 percent uptick in the same period a year ago.
"Why should you build more stores when sales in the stores you have are negative?" Wolf said.
After the reports of Berry exploring taking the company private, Sean Naughton and Dan Wesser, analysts at Piper Jaffray, kept their outlook "neutral" on Fresh Market, given the increased competition and comparatively high profit margins at the company.
"While we don't think margins need to go all the way down to traditional competition given the mix of products, we do think the current rate is too high," the analysts wrote in a research report.
Competition like Whole Foods, Sprouts and Trader Joe's likely will continue to grow in the Southeast, which historically has been a stronghold for Fresh Market, according to the Piper Jaffray analysts.
Rick Anicetti was recently announced as Fresh Market's new CEO. He's expected to provide an update on the company's attempt to improve sales and cut costs next month when the company reports its third-quarter earnings.
gtrotter@tribpub.com
