The Fresh Market said Thursday it plans to discontinue operations in California by March 31 “to focus on higher growth opportunities.”
The Greensboro, N.C.-based specialty grocery retailer operates stores in Palo Alto in Northern California, Santa Barbara in Southern California and Laguna Hills south of Los Angeles in Orange County. The chain closed three locations in the Sacramento market in March 2014.
The company said the decision to exit California is consistent with its previously announced strategy to concentrate its growth resources over the next three years in the Eastern half of the U.S.
According to Sean Crane, the company’s EVP and COO and interim president and CEO, “Despite improving results in California, the company concluded the pace of organic store growth was going to be slower than anticipated and believes it can achieve more consistent financial results and a better return on its investments by continuing to grow in markets within or closer to its existing markets at this time.”
The company said operating losses and other expenses from its California stores totaled approximately $4.8 million, excluding impairment charges. As a result of the store closures, it said it anticipates additional charges in fiscal 2015 of approximately $20 million to $26 million related to recognition of lease liabilities, asset disposals, severance and other costs.
For the 13-week fourth quarter ended Jan. 25, The Fresh Market said net income rose more than 900% to $20.2 million off a year-ago comparison that included charges for asset impairment, a leadership change and store closures. Sales for the quarter rose 12.8% to $480.5 million, and comparable store sales rose 3%.
For the year net income increased 24.1% to $63 million, while sales were up 16% to $1.8 billion and comps rose 2.9%.
Crane said The Fresh Market expects to generate increased sales during fiscal 2015 and to expand operating margin as it executes its real-estate strategy “and work[s] to drive greater promotional and operational efficiencies while making strategic investments for the long-term growth of the company.”
He said the chain expects to open approximately 19 new stores this year — two in the first quarter, five or six in the second and 11 or 12 in the second half, all within or near existing markets in the Eastern U.S. — and to complete 10 remodels, most in the first half.
The chain expects total sales growth between 9% and 11%, with comps growing between 2% and 4% and earnings increasing to $1.77 to $1.85 per share (compared with $1.30 in the fiscal year just ended), with capital spending of $100 million to $110 million, Crane said.