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TheStreet Open House

The Fresh Market, Inc. Reports Second Quarter And First Half Fiscal 2012 Earnings

Stocks in this article: TFM

The Company's gross profit increased 25.6%, or $21.8 million, to $106.7 million in the second quarter of fiscal 2012, compared to the corresponding thirteen week period of fiscal 2011. For the same period, the gross margin rate increased 140 basis points to 34.1% compared to the corresponding prior year period. This increase in the Company's gross margin rate was attributable to an increase in our merchandise margin rate, primarily as a result of improved supply chain expense and a reduction in shrink expense. For the first half of fiscal 2012, the Company's gross profit increased 25.7%, or $44.9 million, to $219.4 million, compared to the corresponding twenty-six week period of the prior year. For the same period, the gross margin rate increased 110 basis points to 34.4%, compared to the prior year period. The change in the Company's gross margin rate for the first half of fiscal 2012 was mostly attributable to increased merchandise margin, as well as slight leverage in occupancy cost, offset by slight deleverage in supplies expense. For the second quarter and first half periods, estimated LIFO expense did not change materially as a percentage of sales, compared to the corresponding periods in fiscal 2011.

Selling, general, and administrative expenses for the second quarter of fiscal 2012 increased $15.2 million to $74.0 million as compared to the corresponding thirteen week period in fiscal 2011.   Selling, general, and administrative expenses increased by 100 basis points as a percentage of sales to 23.7% for the period as compared to 22.7% for the corresponding thirteen week period in fiscal 2011. This increase in the selling, general and administrative expense rate was primarily attributable to higher corporate expenses, driven by approximately $0.5 million in transaction expenses incurred in connection with the Company's public offering of common stock during the second quarter of fiscal 2012, approximately $0.6 million representing the net amount of a settlement payment made which was partially offset by a settlement payment received in connection with two legal matters and approximately $0.6 million of incremental expenses mostly attributable to the Company's share-based compensation programs as a result of its public company status. For the first half of fiscal 2012, selling, general, and administrative expenses increased $26.7 million to $144.5 million, or 22.7% as a percentage of sales, from $117.8 million, or 22.5% as a percentage of sales, for the comparable twenty-six week period in fiscal 2011. These expenses included higher corporate expenses, driven by approximately $1.3 million of incremental expenses attributable to the Company's public company status primarily as it relates to its share-based compensation programs, and approximately $0.6 million related to legal settlements, which together adversely impacted selling, general and administrative expenses as a percentage of sales by approximately 30 basis points during the first half of fiscal 2012. In addition to these higher corporate expenses, the Company also had transaction costs associated with the Company's public offering of common stock in the second quarter of fiscal 2012 totaling approximately $0.5 million, compared to approximately $1.1 million of transaction costs incurred in connection with the Company's public offering of common stock in the first half of fiscal 2011. 

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