CEO: 'The center of the store is not generating the kind of performance that we would like'

New CEO at The Fresh Market to cut prices, reinvent center of store, launch loyalty scheme

By Elaine Watson

- Last updated on GMT

Rick Ancietti: “I think in some ways we’ve drifted more towards appearing and looking like a supermarket, which is not our heritage."
Rick Ancietti: “I think in some ways we’ve drifted more towards appearing and looking like a supermarket, which is not our heritage."

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The Fresh Market can be fixed, but it’s going to have to cut prices of key-value-items (KVIs), and “reinvent” the center of the store, says its new president and CEO Rick Anicetti, who has spent his first few weeks at the helm “looking under the hood” of the North Carolina-based retailer.

Speaking on the firm's Q3 earnings call, Anicetti said The Fresh Market had “enormous untapped potential​”, but had lost its way a little in recent years as competitors had upped their game: “While The Fresh Market is still loved by millions of shoppers, the company’s overall value proposition has been challenged in today’s dynamic food retail shopping environment​.”

As part of a transformation plan, Anicetti (who joined on September 1) will focus on the following areas:

PRODUCTIVITY: ​The Fresh Market must adopt best practice processes and systems to “significantly improve our operations in areas such as store labor, shrink our supply chain, and promotional effectiveness”​, he said. “Based on our initial work, we believe 200 to 300 basis points of margin improvement is possible over the next few years.”

PRICING​: The immediate priority is to stabilize and then grow same store sales by reinvesting in service, merchandising, and price, said Anicetti: “We took action starting in November to selectively reduce prices on several hundred items with the greatest gaps relative to competition. In Q1 2016, we will establish a list of key value items and begin to adjust prices as necessary to better align the price with the degree of differentiation or quality of each items.”

CENTER OF THE STORE​: “As we move into 2016, we will focus attention on reinventing the center of our store, so that we could begin testing concepts in 2017​,” he explained. “The center store represents a significant portion of real estate and is the least differentiated in terms of product selection, customer facing appeal, and compatibility with our brand.”

He added: “With regard to the center store, it’s a significant portion of the real estate in our stores, it’s about 40% of the space... And that 40% of the space is generating currently about 20% of sales... On a per square foot basis, it’s not generating the kind of performance that we would like.

“I think in some ways we’ve drifted more towards appearing and looking like a supermarket, which is not our heritage."

The center store represents a significant portion of real estate and is the least differentiated in terms of product selection, customer facing appeal, and compatibility with our brand.”Rick Anicetti, president and CEO, The Fresh Market

BRANDING AND CUSTOMER ENGAGEMENT: ​In general The Fresh Market needs to better articulate its value proposition, “and not just around special occasions or holidays​”, he said. “For example, we will expand our efforts with new branded in-store and out of store communication that better conveys the differentiated quality and value of our food.”

LOYALTY SCHEME:  ​The Fresh Market is “piloting a loyalty program in a single store this month and we’ll expand it to five stores by the end of January with the goal of a company-wide rollout of a fully functional loyalty program projected to begin in 2016​”, revealed Anicetti, who explained that “our program does not envision a card.”

Rick Ancietti
Rick Ancietti has more than 30 years' experience in the food retail trade having cut his teeth in senior roles at Hannaford Bros and Food Lion

The scheme will also pave the way for more targeted offers, he said: “We’ll begin to able to communicate on a unique basis with individual customers based on their demographic profile, their shopping profile, their affinity, their price sensitivity, and be able to start delivering unique offerings that may be different from guest to guest, based on the information of their shopping behavior, which we have.”

Q3 2015 results

In the 13 weeks to October 25, GAAP net income at The Fresh Market was $10m, vs $14.9m in the third quarter of fiscal 2014. Total sales at the 180-store chain – which opened six new stores in the quarter - rose 3.3% to $433.1m year-on-year, while same store sales decreased 3.7% to $386.5m.

Referring to the firm's October 20 announcement, in which it unveiled plans to conduct a comprehensive strategic and financial review of the business that included the possibility of selling it​, ​Anicetti said: "This review has started in earnest and is ongoing.

"The overall goal is to identify the best way to deliver maximum value to our stockholders. We will provide an update when the Board approves a specific action or concludes the review." 

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