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Fresh Market price investments not driving traffic: analyst

Moody’s lowers debt rating on privately owned chain

The Fresh Market has not been able to drive increased traffic through pricing investments, and same-store sales are expected to decline for the remainder of the year, according to a report from Moody’s Investors Service.

Moody’s issued the report after downgrading the Greenville, N.C.-based chain’s corporate family credit rating to Caa1 (indicating a very high credit risk), with a negative outlook. The rating previously had been B3.

"Fresh Market's operating performance for the last 12 months has been far below our expectations, and we do not expect credit metrics to improve to levels consistent with the current rating in the next 12 months," said Mickey Chadha, VP at Moody's, in issuing the downgrade.

Increasing pricing pressure and new store openings in The Fresh Market’s operating areas will “make it very challenging to meaningfully improve profitability in the next 12 months,” he said, citing in particular potential pressure from the Amazon-Whole Foods acquisition.

The Fresh Market has slowed its remodeling efforts — after completing 30 this year and 16 last year — to assess customer reaction to the enhanced service levels and improved inventory selection, Chadha said.

The company also reduced its savings expectation from the new Supervalu distribution agreement to $10 million, down from an initial estimate of $17 million to $20 million in savings.

Moody's also downgraded the rating on the company's $100 million revolving credit facility to B1 from Ba3 and downgraded the rating of its $800 million senior secured notes to Caa1 from B3.

The Fresh Market, once one of the industry’s fastest-growing public companies with its upscale, fresh offerings, was acquired last year by private equity firm Apollo Global Management for about $1.4 billion. It operates 176 stores in 24 states across the U.S., with a large concentration in the Southeast.

Last month the chain named Winn-Dixie veteran Larry Appel as its new president and CEO.

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