Same-store sales fall with rising competition
The sales performance of retailers depends mainly on two major factors: the change in store count and the level of same-store sales. In this part of the series, we’ll look at The Fresh Market’s (TFM) same-store sales performance, and in the next section, we’ll discuss TFM’s store locations and expansion plans.
TFM has witnessed a continuous decline in its same-store sales, from 8.2% in 1Q13 (quarter ended April 29, 2012) to -3.7% in 3Q16 (quarter ended October 25, 2015). The main reason for this decline has been the rising competition, not only from other specialty grocery store chains such as Sprouts Farmers Market (SFM) and Trader Joe’s, but also from conventional grocery chains such as Kroger (KR) and mass merchants such as Walmart (WMT) and Costco Wholesale (COST).
Increasing demand for natural and organic food products has pulled Kroger (KR), Costco (COST) and Walmart (WMT) into the organic food business. These companies offer products at competitive prices and have started drawing some of the market share away from the specialty and organic players.
TFM sales comps lowest among food retailers
TFM’s same-store sales stood at 2.9% in fiscal 2015 (fiscal year ended January 25, 2015). During fiscal 2016, the comps turned negative and dipped to -3.7% in 3Q16 (quarter ended October 25, 2015). The Fresh Market’s performance in terms of comps (comparative sales) has been the worst in its peer group. While Kroger boasted comps of 5.4% for the quarter ended August 2015, Sprouts Farmers (SFM) registered an even better same-store sales growth of 5.8% during the last reported quarter. Though Whole Foods Market (WFM) registered negative comps of 0.2%, it still outperformed TFM.
ETF exposure and a look at what’s next
Investors looking for exposure to food retail stocks could invest in the SPDR S&P Retail ETF (XRT). The Fresh Market (TFM), Kroger (KR), Whole Foods Market (WFM), and Sprouts Farmers Market (SFM) have a combined weight of 4.1% in XRT. Continue to the next part of this series for a discussion on TFM’s store locations and expansion plans.