The Fresh Market moves forward with IPO

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The Fresh Market is proceeding with an official filing for an initial public offering, marking the second time that the company will go public.

Parent company The Fresh Market Holdings Inc. submitted an S-1 registration statement for an IPO on July 16 with the Securities and Exchange Commission (SEC). That followed a draft IPO registration statement filed on March 12, as well as several amended filings.

Related: The Fresh Market finishes first on USA Today top 10 supermarkets list

The S-1 filing indicated that the number of common shares in the offering and the price range have yet to be determined. Greensboro, N.C.-based The Fresh Market listed a placeholder offering amount of $100 million for calculation of the registration fee. Its common stock would list on the Nasdaq Global Select Market exchange under the symbol TFM.

“With this offering, we will return to the public markets, which we believe will allow us significant flexibility in funding our strategy, including allowing us to refinance a significant portion of our debt,” The Fresh Market President and CEO Jason Potter said in a letter to potential stockholders that was included in the filing.

Related: The Fresh Market eyes initial public offering

“Our core product offering of high-quality fresh food, hard-to-find ingredients and specialty foods, local items, and curated meal offerings is resonating with our guests, both old and new. We believe The Fresh Market is positioned to capture the secular trend of consumer preference for higher-quality, fresh food,” Potter (left) explained. “Our stores have consistently been regarded as exceptionally clean, and we have established safety and sanitation committees to ensure every store meets new enhanced protocols under the COVID-19 environment. As others in the industry have become more conventional, we have continued to differentiate our offering to create excitement about our brand’s reputation.”

IPO specialist Renaissance Capital estimated that The Fresh Market could fetch up to $250 million in the IPO. Currently, the specialty grocer operates 159 stores in 22 states.

“The Fresh Market provides high-quality, fresh foods and difficult-to-find items in a small, intimate store footprint with high-touch guest service and exceptional cleanliness,” Greenwich, Conn.-based Renaissance Capital said in a research note on the S-1 filing. “The company maintains a supply chain and distribution partners that allow it to deliver food from farm to shelf in 14 days or less. It also has a dedicated team that sources local products to ensure differentiation from conventional retailers.”

The Fresh Market’s preliminary IPO filing this past March came almost five years to the day after the retailer unveiled plans to go private.

New York-based Apollo Global Management and The Fresh Market announced on March 14, 2016, that the retailer agreed to be acquired by an affiliate of the private equity firm for $28.50 per share in cash, totaling about $1.36 billion. The Fresh Market founder and chairman Ray Berry and his son Brett Berry, who together owned 9.8% of the chain’s outstanding shares, agreed to roll over the vast majority of their holdings in the transaction with Apollo. At the time, The Fresh Market operated 186 stores in 27 states, and the deal was completed in April 2016.

“As others in the industry have become more conventional, we have continued to differentiate our offering to create excitement about our brand’s reputation.” — Jason Potter, The Fresh Market CEO

Founded in 1982, The Fresh Market had gone public via a $290 million IPO in November 2010, when the company had 100 stores in 20 states.

In last week’s IPO filing, The Fresh Market reported that sales for fiscal 2020 (53 weeks ended Jan. 31) rose 24% to nearly $1.89 billion from $1.52 billion in fiscal 2019 (52 weeks ended Jan. 26, 2020), with same-store sales up 22.3% versus a prior-year decrease of 1.8%. The bottom line climbed from a $65.4 million net loss in fiscal 2019 to net earnings of $26.9 million in fiscal 2020.

For the 13-week fiscal 2021 first quarter, ended May 2, The Fresh Market’s sales rose 9.4% to $489.5 million from $447.2 million in the prior-year period. Comparable-store sales gained 7.3% versus 12.9% a year ago. Net income totaled $10.5 million, compared with a $15.6 million net loss in the 2020 first quarter.

In the IPO prospectus, The Fresh Market said it plans to grow through the appeal of its easy-to-shop small-box stores (an average of 21,000 square feet) in major markets with strong shopper demographics, as well as via its extensive fresh food and meal offerings, which account for about 70% of its sales. The latter includes the expansion of its Market Meal Kits, sales of which grew 45% in fiscal 2020, and a new ready-to-eat dining concept dubbed Kitchen Square.

“We expect to pilot this new concept in two to three stores in fiscal 2021 by redesigning the layout of the floorspace to allow for a completely new restaurant look and feel,” The Fresh Market stated in the prospectus. “This will become a convenient destination for dine-in, order ahead and ‘grab and go’-focused guests. An inviting atmosphere filled with inspiring selections will transition throughout the day from a morning coffee and croissant, to a made-to-order salad for lunch, to a pizza and real Carolina BBQ for dinner. The goal is to provide additional restaurant quality choices for our guests and attract a younger demographic to our stores.”

Fresh food, including meal offerings, account for about 70% of The Fresh Market’s sales and represent a big growth opportunity, the company said.

The Fresh Market also plans to pursue new store openings after a pause over the past three fiscal years as it focused on solidifying its core business. Near-term opportunities total about 75 “high visibility, low risk” sites at in-fill locations and surrounding metropolitan areas within core markets, such as Florida and the Carolinas, the grocer reported.

“These 75 locations provide an ample pipeline for our near-term store openings and exceed the number of new store openings planned for the next five years,” The Fresh Market said in the filing. “We believe we have the ability to expand beyond our core markets in the long term by increasing the penetration of our secondary markets and expansion of our core geographies. We plan to open one new store in fiscal 2021 and an average of approximately 10 new stores per year for the following four years.”

On the e-commerce side, The Fresh Market already provides Instacart same-day delivery through all stores, and the grocer now aims to enhance its online storefront and expand curbside pickup.

“We are in the process of redesigning our e-commerce sales portal, a project that began in the second half of fiscal 2020,” the company’s prospectus said. “We believe this program and improvements to our curbside pickup experience with our personal shopper store team members hand-picking products has significantly increased our e-commerce sales. We believe curbside pickup will be the driver of growth within our digital business, where we can differentiate the experience through our expertise in high-touch guest service.”

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