The Fresh Market Sees Earnings Drop Amid Inflation Squeeze

(Bloomberg) -- The Fresh Market, the grocery chained backed by Apollo Global Management, saw its third-quarter earnings drop under the dual pressures of inflation and a labor shortage, according to people with knowledge of the private company’s performance.

Earnings before interest, taxes, depreciation and amortization was $40 million, down 9.6% from 2020, but up 84% from 2019, said the people, who asked not to be identified discussing confidential results. Revenue came in at $447 million, up 1.7% year-over-year and up 26% from 2019.

The grocery chain recorded 34.3% in gross profit margin, up 50 basis points from the second quarter, but down 20 basis points from a year earlier, the people added. 

The Fresh Market saw higher selling, general and administrative expenses, and its price hikes only partially offset inflationary pressures, the people said.

Shoppers also cut down spending at the chain during the quarter. Total transaction size per customer was $38.70, down 2.4% from 2020 but up 21% from 2019. Same-store sales edged up 1.9% year-over-year and increased 27.1% from 2019, the people said.

The Fresh Market primarily draws higher-income shoppers who didn’t benefit from stimulus checks during the pandemic. The company has 159 stores across 22 U.S. states, according to its website.

The Fresh Market didn’t respond to a request for comment, while a representative for Apollo declined comment.

The company’s earnings for the trailing 12 months totaled $201 million, or about 4.6 times its gross debt and roughly 3.7 times its net debt, the people said. The chain’s $800 million of 9.75% notes due 2023 traded at 103 cents on the dollar on Wednesday, according to Trace bond-pricing data. The company saw its bonds sink to as low as 39 cents in March 2020. 

At quarter-end, The Fresh Market had $185 million in unrestricted cash, its sole source of liquidity, the people said. 

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