Why The Fresh Market Shares Went Bad

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of The Fresh Market were looking wilted today, falling as much as 12% after delivering a rotten earnings report.

So what: The Whole Foods imitator reported earnings of $0.32 per share, in line with estimates, while revenue increased 13%, to $354.8 million, $1 million short of estimates. Since The Fresh Market is considered a growth stock, with a P/E of just 35, the market wasn't shy about sharing its distaste for the revenue miss. Same-store sales increased 3.4%, an average pace, while the company's guidance added to the pain. The grocer sees a full-year EPS of $1.50-$1.55 due to higher costs, which is below the analyst consensus of $1.57.

Now what: This is an expansion play for investors, as The Fresh Market is increasing its store base by about 15% this year, or 21 to 22 stores. Considering that pace, however, a 13% sales increase is pretty weak. A stock valued so dearly should be seeing stronger top-line growth. However, the high-end grocer's results and outlook were barely worse than estimates; the problem seems to be that the stock was overvalued in the first place. I'd wait for this one to go on special before getting on board.

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The article Why The Fresh Market Shares Went Bad originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market and Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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