After a lengthy search, The Fresh Market has named Rick Anicetti as the company’s new president and chief executive officer. The appointment became effective September 1. He takes over from VP and COO Sean Crane, who had also been serving as interim CEO since the resignation of former CEO Craig Carlock in January of this year. Anicetti has also been elected to the board of the Greensboro, NC based specialty food retailer.
Anicetti’s more than 30 years of experience began at Hannaford Brothers in 1980. After Hannaford was acquired by Delhaize in 2001, he moved to that company’s Food Lion division as COO before being named president in 2001 and CEO in 2002. He also served as co-CEO of Delhaize America.
After leaving Delhaize in 2010, he joined Ares Capital as a strategic advisor and served on the board of two of their portfolio companies, Number Holdings, Inc., the parent company of 99 Cents Only Stores LLC and of publicly-traded Smart & Final.
Ray Berry, founder of The Fresh Market and chairman of its board, commented, “After an extensive search, we are delighted that Rick Anicetti will join us as the chief executive officer of The Fresh Market. Rick is a highly accomplished food retail executive serving in leadership roles at Hannaford and Delhaize. He and I have spent time together reviewing the competitive marketplace and I am impressed with his knowledge of store operations, as well as his demonstrated vision, innovation and ability to successfully run large grocery organizations. We have every confidence Rick will lead The Fresh Market effectively and creatively and are assured of the company’s future under his direction. We remain grateful to Sean Crane for his efforts towards improving our operations in this time of transition.”
“I am honored and excited to have the opportunity to lead The Fresh Market,” said Anicetti. “I have admired the company’s brand and unique shopping experience for many years and believe that we have tremendous opportunity to further evolve our offerings and services. I look forward to working with our leadership team and employees to realize the growth potential of The Fresh Market.”
Rich Noll, lead independent director of The Fresh Market’s Board of Directors, commented, “As we look to return the company to growth, we focused on identifying a performance-driven leader with the ability to create a performance-driven culture. Rick will be the first CEO hired from outside the company, and we believe that he has the right combination of strategic leadership and personnel skills to lead The Fresh Market into a new phase of growth and build value for our stockholders in the coming years.”
The appointment of Anicetti comes as The Fresh Market continues to struggle, reporting negative comp store sales for its second quarter and first half ended July 26.
Net income for the quarter rose 53.5 percent to $17.5 million and overall sales were up 4.7 percent to $442.1 million. However, comparable store sales dropped one percent in the quarter and 0.6 percent for the first half of the year. The company said the quarterly comp sales declines were the result of a 0.7 percent drop in transaction count combined with a 0.3 percent dip in transaction size. Adding to the poor third quarter performance was a pre-tax charge of $14.9 million for the quarter and $16.8 million for the first half resulting from leadership transitions costs and store closures as the retailer completed its exit from the California market.
Crane commented, “Our second quarter results reflect changes in our pricing and promotional investments, which were less effective than anticipated in a more challenging macro environment. However, the financial health of the business remains sound as we continue to deliver some of the strongest adjusted EBITDA margins and returns on invested capital in the industry. We are committed to increasing our profitability as we work to stabilize and improve our future comparable store sales. As we move forward, we remain focused on our initiatives to build The Fresh Market brand, elevate our in-store experience and food offering, and capture greater operational efficiencies.”
Jeffrey Ackerman, The Fresh Market’s EVP and CFO told analysts after the financial release was issued on August 20: “…we were disappointed with our sales in the second quarter, but The Fresh Market team continues to effectively control cost and achieve savings at the store level and corporate office. Stores unaffected by competitive events in the prior 12 months continued to show solid growth, up low-to-mid single-digits. The net impact of competitive store openings, remodels and cannibalization on comparable store growth was approximately 340 basis points, which was in line with expectations.”
The upscale merchant claimed the primary cause of the retailer’s comp sales decline was lower than expected levels of success with the revisions the retailer made to pricing and promotional programs in the quarter, Ackerman told analysts.
He also cited cost inflation in beef combined with greater than expected deflationary pressures, especially in the produce category, as well as increased competition, cannibalization and remodels.
Gross profit for the second quarter of fiscal 2015 increased 3.7 percent, or $5.3 million, to $149.0 million, compared to the second quarter of fiscal 2014. Gross margin for the second quarter of fiscal 2015 was 33.7 percent, compared to 34.0 percent in the second quarter of fiscal 2014.
The retailer generated $14.8 million in cash flow from operations during the second quarter of fiscal 2015, compared to $12.0 million in the second quarter of the prior fiscal year, and ended the quarter with a cash balance of $73.4 million.
Operating income was $28.5 million, or 6.4 percent of net sales, for the second quarter of fiscal 2015, compared to $19.1 million, or 4.5 percent of net sales in the second quarter of fiscal 2014. The company’s second quarter of fiscal 2014 operating income included net store closure and exit costs of approximately $9.8 million. Excluding these charges, adjusted operating income was $28.9 million, or 6.8 percent of net sales, for the second quarter of fiscal 2014.
During the second quarter of fiscal 2015, The Fresh Market generated $14.8 million in cash flow from operations and invested $30.6 million in capital expenditures, of which $27.3 million related to new and remodeled stores. For the year to date fiscal 2015 period, the company generated $77.4 million in cash flow from operations and invested $54.3 million in capital expenditures, with $48.3 million spent on real estate activities.
During the second quarter of fiscal 2015, The Fresh Market opened six new stores, including two stores in Texas and one each in North Carolina, Georgia, Louisiana and New York. As of July 26, 2015, the company operated 174 stores in 27 states.
Answering a question regarding the retailer’s plans for new stores, Crane said: “So what we had said we were doing is really just looking at the pipeline that we have, and of course that would include any signed leases. And as we always continue to do, we monitor those, evaluate those, but in light of the lower comps and the margin pressure we’re changing some of our assumptions, as we look at the pipeline and reevaluating that. And if we need to make adjustments to it, then we will.” The Fresh Market announced last August, under the leadership of Carlock, that it would double its number of stores in the southeast U.S.
During the investor conference, Crane also announced two personnel changes at The Fresh Market (at the time of the conference call, the appointment of Anicetti had not yet been announced). Crane told investors that senior VP and chief marketing officer Marc Jones would be leaving the company effective immediately. Crane commented: “We appreciate Marc’s contributions over the years. A search is already underway for his replacement, as we are targeting an individual who will help us accelerate the improvement of our pricing, selection and merchandise offering.” In the interim, Crane said he will be working closely with the sales and merchandising team to “continue to promote and find ways to promote that drive profitable traffic.”
Additionally, the retailer recently named Maria Ross to the newly created position of vice president of supply chain. With more than 20 years of supply chain experience, Ross will take have responsibility for supply chain, including procurement, warehousing, logistics and transportation management. Most recently, Ross was VP-supply chain strategy for BJ’s Wholesale Club and her other prior experience includes time at The Home Depot and Oldcastle.
She joins Karen Stout, who was named this spring as interim senior VP-operations, to lead its store teams. Stout joined The Fresh Market in 2009.