Thanksgiving Leftovers – Food Earnings Previews

Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As it turns out, there are a few food-related earnings reports in store for this week.

First up, on Wednesday The Fresh Market (NASDAQ: TFM) will release quarterly results. Analysts are looking for earnings per share of $0.26. The growing provider of high-quality premium perishables has seen its shares climb nicely this year in tandem with solid net income growth. Its potential customer base is sizable, as evidenced by the ongoing profit gains at more ubiquitous peers like Whole Foods (NASDAQ: WFM). The Street has priced in much of the anticipated long-term profit expansion, but some momentum-based investors may be enticed.

TFM's July-quarter results were highlighted by a comparable-store sales gain and widened product margins. It outlined its full-year 2012 expansion plan, for the addition of 14 to 16 stores, an approximate 13% increase. It appears, as in other retail sectors, a smaller store with enhanced customer service and better-quality merchandise is gaining acceptance and popularity, even in largely untapped Southern and Midwestern regions.

For the second half of TFM's fiscal year, management is targeting share earnings of between $0.65 and $0.70, and for the year it looks to earn $1.33 to $1.38, versus last year's $1.07. In light of the amount of current leases signed and the demand environment, 2013 ought to be a good year, as well.    

Secondly, The Kroger Co. (NYSE: KR) is set to announce results on Thursday morning. Analyst consensus is $0.43 per share. The Cincinnati-based supermarket chain is keen on returning cash to shareholders through repurchases and dividends. Since its last earnings call, management has provided a long-term growth strategy that it believes will drive gains of 8% to 11% annually, the key components being an expansion of selling space, new digital and mobile customer channels, and new store formats. These initiatives will be in addition to its ongoing Customer 1st  strategy.

Kroger’s rate of profit upturn is apt to increase during the second half of 2012, bringing share profits to a range of $2.35 to $2.42 for the full year, as compared with the 2011 mark of $2.00. Modest same-store sales gains fluctuate a bit on gas prices. Of course, the grocery business is inherently low-margined, and can be susceptible to commodity cost hikes. Still, the recent 30% dividend hike is a good sign that management believes in the company’s prospects. KR shares are more likely to be considered for their 3 – to 5-year upside and income.

Finally, United Natural Foods(NASDAQ: UNFI) report, scheduled for Friday, will be an indicator of whether it can continue a strong run of earnings growth, and live up to its guidance for about a 15% to 20% advance in fiscal 2013 (ends in July). This gain would imply earnings per share of $2.14 to $2.24. The October-quarter analyst consensus is $0.46. Double-digit sales increases had stemmed from a major supermarket, where it commenced distribution in October, 2011. Thus, it will need to pursue other avenues of growth, particularly through the integration of its specialty business into the supermarket channel.

And, like with TFM, a shift towards healthy foods should assist demand for natural and organic items at a wider array of retail outlets (beyond Whole Foods), while the product selection is expanded in the meantime. This means some reduction in pricing, as it becomes more mainstream. But, the greater scale and scope ought to support improved efficiency. In all, the plan appears sound, and is likely to generate profit gains over the long haul.    


dctotal has no positions in the stocks mentioned above. The Motley Fool owns shares of Whole Foods Market. Motley Fool newsletter services recommend The Fresh Market and 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus