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  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    I bought some stock on Friday, but I submitted the article for publication on Thursday night.
    May 24 02:34 PM | 1 Like Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    The potential entrants exist but Amazon would likely be competing with WMT and COST rather than with people like SFM, WFM, TFM or NVGC. My view is TFM is differentiated in a way that SFM and WFM are not. NVGC is also differentiated but they don't really compete with TFM yet. Currently, it makes most sense to consider TFM and WFM direct competitors with SFM, NVGC and Trader Joes as growing potential competitors (my evaluation of Trader Joes is very weak because they are a private company). I could be wrong in that assessment but that is how I view it.

    I view it as a minor threat to margins but not too dramatic since TFM stocks different goods than WFM (among others).
    May 24 01:07 PM | 1 Like Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    "I am sure you would have given the same advice not to short when the stock was in the 50's."

    You really think I would have paid the equivalent of $2.85 billion for this company? Come on. I am recommending it because it fell from a ridiculous valuation to a fairly cheap one, considering its prospects. So no, you are incorrect on that one.

    "Also, let's not forget that the insiders sold a large percentage of their stock at the IPO price and have limited experience in the grocery business."

    The CEO has been with the company for 15 years and owns $6.3 m worth of stock. The last three insider transactions, March 27th through April 1st, were insider buys at between $32.99 and $34.45 for a total of over $1 million.
    May 24 01:03 PM | 1 Like Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    Interesting, where you located if you don't mind me asking?
    May 24 12:47 PM | Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    Thanks foodman. I read the conference call too.

    "The competitors who are opening have smaller stores (lower occupancy and energy costs) higher sales per sq. foot, higher inventory turnover and they sell the same or similar products for less."

    Who are you talking about specifically?

    "These are facts, you can make your own conclusions what the future holds for TFM and their stock price."

    Actually, those are all the negative facts as presented by you. Their are other facts: like their history of successful expansion, their history of growing comps, managements history of being upfront about the whole thing (I mean, I have *never* heard a management team be so specific with store level competition -- specifically mentioning the 41 stores effected), their strong capital return, their strong cash flow.

    So, yes, they are not comping at 8.5% or something -- but they still comped at 2.5% last quarter and grew revenue by 17%+ y/o/y. Is that really so terrible?

    "Give a customer consistent attentive and informative customer service, great products at a great price in a clean, easy to shop environment and never take the customer for granted and your chances of success multiply exponentially."

    The way I see it -- that is what the TFM is doing. They have created a specific shopping experience carrying niche and high quality products. The execution will not be perfect, but up to now it has been pretty good. Thanks for commenting foodman.
    May 24 12:31 PM | 1 Like Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    PChan444, I think I will quote from myself:

    "The Fresh Market specializes in niche products. This means that if a product becomes too successful and, say, Whole Foods or even Safeway begins to carry it, The Fresh Market drops the product as the gross margin on the product declines. The Fresh Market is, again, return oriented and not market share oriented. I would argue that Whole Foods is trying to be both. Furthermore, The Fresh Market only carries 9,000 to 10,000 SKUs at one time. This allows for greater leverage and bargaining power but it also fits the company's generally smaller stores. Whole Foods, on the other hand, carries 21,000 SKUs.

    Hence, we are talking about fundamentally different strategies even though they appear to be addressing the same market. The Fresh Market is more curated, more specific, and more niche. Whole Foods is more mainstream and hence carries more items. The Fresh Market requires, further, a per location investment payback of "less the 4 years" while Whole Foods requires payback in "5 years or less.""

    I actually am long the stock in accounts I manage. I wasn't when the article was published, however.
    May 24 12:24 PM | 2 Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    Randy336633, see my response to Michael Ranalli above. Thanks for commenting.
    May 24 12:19 PM | Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    Great comment Michael, really glad you're reading my articles.

    "They closed 3 stores in California and one in Houston. This is a troubling sign (maybe the canary in the coal mine) to me as they may have been chasing growth at the expense of execution and achieving high ROA and ROEs."

    It could be a red flag but managements reasons for the failure are convincing. Apparently they took a different tract with CA. Normally, they expand in near geographies where they are able to leverage their local mind-share. For instance, TFM doesn't really do advertising in their core markets and most growth is word of mouth. However, in CA they bought muliple stores, apparently paying much more in capital expenditures. I think they did overreach in a way... but not in a way that breaks the long-term outlook in south eastern and north eastern markets. They will need a strategy for crossing the country but thus far I am satisfied with managements answers and executive responses to the failure of their initial go to market strategy in California.

    "Specially, you further explain how they will fund the build out of its footprint from 151 stores to 500 stores? I haven't reversed engineered TFM's financial statements, but I would suspect that it costs upwards of $10 million to build out a store. TFM doesn't generate enough FCF to finance this with out dilution or taking on debt."

    I actually discuss part of that question above. The per store new capital costs: only $3.4 million in Q1 2014. That was similar to what is was in the past (say, 2011). I think in 2013 upfront capital costs got as high as $5 million -- which I assume is due to the overpriced California locations (not 100% sure on this, however). They company is mostly auto financing its expansion. Most cash from operations is flowing into new growth capex. In fact, I would argue that the expected capital expenditures for next year is a good way to estimate the expected cash from operations next year. They are not really letting the cash build up -- but that is because there is a market share race going on.

    "TFM doesn't generate enough FCF to finance this with out dilution or taking on debt." I disagree with you on this one and you can see hints on the cash flow statement. I mean, if they generate $150 million in CFO and $40 million is maintenance capex, that leaves $110 million for growth capex or, assuming $4.25 million in capital expenditures per location, or the ability to build out 25 locations.
    May 24 12:16 PM | 2 Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    Thanks for the comment. The store you cited was in Houston? You should check out their other new store in the area and get back to us. Thanks. Management commented on the new store in the most recent conference call*:

    "While we normally don’t highlight individual store performances, I’d like to comment on our new store in the Houston area. This store has only been open a couple of weeks but based on its solid initial sales and relatively low capital requirements, we are very encouraged about its potential to be a high return store for the Company."

    * http://seekingalpha.co...
    May 24 12:04 PM | 3 Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    What is the company's PE my friend?
    May 24 12:03 PM | 2 Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]
    They are not a one stop shop. They believe their shoppers use multiple groceries. I wouldn't advise shorting, but do you as must.
    May 24 12:02 PM | 4 Likes Like |Link to Comment
  • Pandora Is Not Worth $1.6 Billion [View article]
    Well, this article didn't turn out well: when this was written, Pandora traded at $9.91 and today it trades at $25.50.
    May 23 06:16 PM | Likes Like |Link to Comment
  • Southside Bancshares: Great Bank, Sold Off For Shortsighted Reasons [View article]
    You're repeating truisms as if they are criticisms...? Since when I have I not taken into account dilution? Besides, I was just commenting on using the corporations figures rather than per share figures. Ever heard of the anchoring bias*? One means of conquering that, in my view, is to analyze businesses as a whole rather than on a per share basis. But just because that is my approach doesn't mean I ignore shares outstanding. Furthermore, it is not necessarily more relevant since the mathematics is all the same provided the denominator isn't moving around all over the place. I would hope that would be obvious, particularly in light of my other articles (e.g., share repurchases and their anti-dilutive effects play a big role in my thoughts** on FactSet).

    * http://bit.ly/1gWZ7UM

    ** http://bit.ly/1ibDbzY
    May 23 12:49 PM | Likes Like |Link to Comment
  • Southside Bancshares: Great Bank, Sold Off For Shortsighted Reasons [View article]
    "When you say you're taking into account share dilution by multiplying the pro forma number of shares in the deal by SBSI's current share price and calling it the market's pro forma valuation it's insinuating that purely by issuing more shares you can create value."

    I am not insinuating that at all, sorry for the misunderstanding. Other numbers noted in the article wouldn't make sense if that *was* what I was insinuating.

    "It should be clear to readers that more stock doesn't make it a better deal because $770>$621mm, which you've implied with your math and saying that dilution has been considered. The value that we really care about is the per share value. All else equal, as you issue more shares you dilute EPS, tangible book value per share, and the per share valuation."

    You've misunderstood what I was saying. And while the dilution lesson is appreciated, it is not like that fact is ignored when we consider the future consolidated corporation and compare it with its future consolidated market cap. Either you do all per share or you do it all aggregated. If you do it aggregated, you need to make sure there is not substantial dilution going on and, if there is, you do it aggregated and then convert it to per share.

    Anyways, I didn't imply those things. Now, if I was an OABC shareholder I wouldn't have minded getting 100% stock since I happen to like SBSI. Of course, that would change the dilution. Thanks for the comment.
    May 21 06:07 PM | Likes Like |Link to Comment
  • Southside Bancshares: Great Bank, Sold Off For Shortsighted Reasons [View article]
    Good comment: "There is very little correlation between all the demographic growth statistics that get strewn about and returns to shareholders." Point taken.

    Could you elaborate on this:

    "+ On what planet does the stock / cash mix of a deal materially change the pro forma valuation? By your "simple math", if SBSI were instead to pay 100% cash for OABC the valuation the pro forma valuation would balloon from ~$620mm to $770mm. Too bad its not that easy to create value."

    Thanks.
    May 20 07:05 PM | Likes Like |Link to Comment
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