Why Is The Fresh Market’s Return on Assets Declining?



A look at The Fresh Market’s return on assets

In this section, we’ll discuss the return earned by The Fresh Market (TFM) on its assets. We’ll also compare TFM’s ROA (return on assets) to that of its close competitors Whole Foods Market (WFM), Sprouts Farmers Market (SFM), and supermarket giant Kroger (KR), which has been taking away some market share from organic and specialty retailers.

ROA is a metric commonly used to measure how efficiently a company’s management uses its assets. It is calculated by dividing the net profit of a company with its assets.

The above comparison is for the last reported quarter. The quarter-end dates for the above retailers are as follows:

  • The Fresh Market: October 25, 2015
  • Kroger: November 7, 2015
  • Whole Foods Market: September 27, 2015
  • Sprouts Farmers Market: September 27, 2015
  • SuperValu: December 5, 2015
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TFM boasts higher ROA than peers

The Fresh Market (TFM), Whole Foods Market (WFM), and Sprouts Farmers Market (SFM) have trailing-12-month profit margins of 3.5%, while Kroger has a lower profit margin, with 1.8%. TFM, however, has the highest return on its assets. The company’s ROA stood at 11.7% in the last reported quarter, compared with WFM’s 9.3% and SFM’s 8.7%.

ROA declines amid rising competition

It, however, should be noted that TFM’s ROA has seen a significant decline, from over 20% in fiscal 2010 to 11.7% in 3Q16. This decline reflects the management’s inability to preserve the company’s margins amid increasing competition. Kroger’s ROA has improved from just 0.3% in fiscal 2010 to the current figure of 6.4%.

ETF exposure

The Fresh Market (TFM), Kroger (KR), Whole Foods Market (WFM), and Sprouts Farmers Market (SFM) are part of the Fidelity MSCI Consumer Staples ETF (FSTA) and account for 2.6% of the index weight. In the next part of this series, we’ll analyze TFM’s returns on equity.


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