Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jan. 26, 2014 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation |
On June 12, 2012, the Company, certain stockholders of the Company who owned shares of Company common stock prior to the initial public offering and certain officers of the Company (the “2012 Selling Stockholders”) and an underwriter entered into an Underwriting Agreement pursuant to which the 2012 Selling Stockholders offered and sold 11,538,112 shares of Company common stock at $50.50 per share in an underwritten public offering. The public offering of the 11,538,112 shares closed on June 18, 2012. The Company did not receive proceeds from the sale of these shares and expensed approximately $500 of costs associated with the offering during the year ended January 27, 2013. This amount is included in the “Selling, general and administrative expenses” line item on the Consolidated Statements of Comprehensive Income. |
On April 27, 2011, the Company, certain stockholders of the Company who owned shares of Company common stock prior to the initial public offering (the "2011 Selling Stockholders") and several underwriters entered into an Underwriting Agreement pursuant to which the 2011 Selling Stockholders offered and sold 11,919,058 shares of the Company's common stock at $42.50 per share in an underwritten public offering. The secondary public offering of the 11,919,058 shares closed on May 3, 2011. The Company did not receive proceeds from the sale of the shares of common stock by the 2011 Selling Stockholders and it expensed approximately $1,100 of the costs associated with the offering during the year ended January 29, 2012, which is recorded in the "Selling, general and administrative expenses" line item on the Consolidated Statements of Comprehensive Income. |
Definition of Fiscal Year | ' |
Definition of Fiscal Year |
The Company reports its results of operations on a 52 or 53-week fiscal year ending on the last Sunday in January. The years ended January 26, 2014, January 27, 2013, and January 29, 2012 were 52-week years. |
Principles of Consolidation | ' |
Principles of Consolidation |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, ("U.S. GAAP"). The Company’s wholly-owned subsidiaries are consolidated and all intercompany accounts and transactions are eliminated upon consolidation. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassifications | ' |
Reclassifications |
In certain instances, amounts previously reported in the consolidated financial statements have been reclassified to conform to current year presentation. The reclassifications have no effect on net income or stockholders' equity as previously reported. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
Cash and cash equivalents include cash on hand, cash on deposit with banks and credit and debit card sales transactions which settle within a few business days of the reporting date. |
Accounts Receivable | ' |
Accounts Receivable |
Accounts receivable consist primarily of receivables from lessors for tenant improvement allowances, from vendors for certain promotional programs and other miscellaneous receivables and are presented net of an allowance for estimated uncollectible amounts of $186 and $246 at January 26, 2014 and January 27, 2013, respectively. |
Inventories | ' |
Inventories |
The Company's inventories are stated at the lower of cost or market. For approximately 96% and 95% of the Company's inventories at January 26, 2014 and January 27, 2013, respectively, cost was determined using the last-in, first-out, or LIFO method. This method results in a better matching of the Company's costs and revenues. Under the LIFO method, the cost assigned to items sold is based on the cost of the most recent items purchased. As a result, the costs of the first items purchased remain in inventory and are used to value ending inventory. The excess of the current cost of inventories over the LIFO value, or the LIFO reserve, was $6,727 and $6,711 at January 26, 2014 and January 27, 2013, respectively. |
The Company determines the current cost of its inventories using the first-in, first-out, or FIFO method. The FIFO value of inventories includes cost of goods and freight, net of vendor rebates and discounts. If the FIFO method had been used for all inventories, the carrying value of inventories would have been $62,383 and $50,696 at January 26, 2014 and January 27, 2013, respectively. |
Property and Equipment | ' |
Property and Equipment |
Except for capital and financing lease assets, property and equipment is stated at cost. Depreciation is provided using the straight-line method over the following estimated useful lives: |
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Buildings | | 30 years |
Leaseholds and land improvements | | 10 - 15 years |
Store fixtures and equipment | | 3 - 10 years |
Office furniture, fixtures, and equipment | | 5 - 10 years |
Automobiles | | 5 years |
Software | | 3 years |
Depreciation of leasehold and land improvements is recognized over the shorter of the estimated useful life of the asset or the term of the lease. The term of the lease includes renewal options for additional periods if the exercise of the renewal is considered to be reasonably assured. |
Capital and financing lease assets in the amount of $42,707 and $2,196 are primarily included within the "Buildings" line item on the Consolidated Balance Sheets as of January 26, 2014 and January 27, 2013, respectively. Accumulated depreciation related to capital and financing lease assets as of January 26, 2014 and January 27, 2013 was $2,029 and $642, respectively. Capital leases are recorded at the lesser of the net present value of the minimum lease payments or fair value. Depreciation on capital and financing leases is recognized over the lesser of the asset's lease term or economic life of the property. |
When property and equipment is sold or retired, the cost and accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the "Selling, general and administrative expenses" line item in the accompanying Consolidated Statements of Comprehensive Income. Expenditures for maintenance and repairs are charged to expense as incurred. |
Interest costs incurred on borrowed funds during the period of construction of capital assets are capitalized as a component of the cost of those assets. Interest costs of $464, $240, and $532 were capitalized during the years ended January 26, 2014, January 27, 2013, and January 29, 2012, respectively. |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
The Company assesses its long-lived assets, principally leasehold and land improvements, store fixtures, and equipment, for possible impairment whenever events or changes in circumstances, such as unplanned or significant negative operating cash flow or the manner in which the Company intends to utilize its long-lived assets, indicate the carrying value of an asset or asset group may not be recoverable. When assessing whether impairment exists, the Company aggregates long-lived assets at the individual store level, which the Company considers to be the lowest level for which independent identifiable cash flows are available. Impairment evaluations for individual stores take into consideration a store’s historical and projected operating cash flows, the period of time the store has been opened, and the operating performance in the related market. Recoverability is evaluated by comparing the carrying amount of the asset group to the future undiscounted cash flows expected to be generated by the asset group. If the carrying value of the asset group is greater than the future undiscounted cash flows, an impairment exists and must be measured and a loss is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value is estimated based on discounted future cash flows and/or market values of the long-lived assets. |
Restricted Cash | ' |
Restricted Cash |
During the year ended January 27, 2013, the Company executed an agreement with a third party entity to acquire certain lease rights to four new store locations. In connection with the execution of the agreement, the Company was required to make a payment to an escrow account with an independent escrow agent. At January 27, 2013, the Company held $14,205 in this restricted account, which it recorded in a separate line item as "Restricted cash" on the accompanying Consolidated Balance Sheets. The amount was transferred from the escrow account to the entity during the year ended January 26, 2014, as each property was delivered to the Company in the condition specified by the agreement. |
Closed Store Reserve | ' |
Store Closure Costs |
The Company recognizes a charge and related reserve for future operating lease payments associated with retail stores that are no longer being utilized in its current operations. The reserve is calculated using the present value of the remaining noncancelable lease payments after the cease use date less an estimate of subtenant income. If subtenant income is expected to be higher than the current lease payments, no reserve is recorded. Lease payments included in the closed store reserve are expected to be paid over the remaining terms of the respective leases, which range from approximately one to four years. The Company's assumptions about subtenant income are based on its experience and knowledge of the area in which the closed property is located, guidance received from local brokers and agents, commercial market value analysts, and existing economic conditions. As part of its analysis, the Company may acquire third party fair value reports, which provide independent verification of the fair values of similar rental properties. Adjustments to the closed store reserve relate primarily to changes in subtenant income and other assumptions differing from original estimates, as well as reductions to the reserve resulting from periodic lease payments. Adjustments are recorded for changes in estimates in the period in which the change becomes known. |
Derivative Financial Instruments | ' |
Derivative Financial Instrument |
The Company utilized a derivative financial instrument to hedge its exposure to changes in interest rates on its long-term debt. A derivative financial instrument is commonly referred to as an interest rate swap (see Note 4). The Company does not use financial instruments or derivatives for any trading or other speculative purposes. |
The Company assessed, both at the inception of the hedge and on an ongoing basis, whether its interest rate swap used as a cash flow hedge was highly effective in offsetting the changes in the cash flows of the underlying long-term debt. The assessment of hedge effectiveness consisted of comparing the change in fair value of the Company's interest rate swap with the change in fair value of a hypothetical hedge instrument. Based on its assessment, the Company determined its interest rate swap was highly effective in hedging its exposure to fluctuations in interest rates. As such, changes in the fair value of the interest rate swap was recorded in accumulated other comprehensive income. There was no material hedge ineffectiveness. |
Revenue Recognition | ' |
Revenue Recognition |
Revenue is recognized at the point of sale, net of coupons and discounts. Sales taxes are not included in revenue. As of January 26, 2014, the Company operated 151 stores in 26 states. |
Gift Cards | ' |
Gift Cards |
A wholly owned subsidiary of the Company sells its gift cards to its customers. There are no administrative fees on unused gift cards and the gift cards do not have an expiration date. Gift card sales are recorded as a liability to unearned gift card revenue when sold and are recognized as revenue when either the gift card is redeemed or the likelihood of the gift card being redeemed is remote (“gift card breakage”). The Company's gift card breakage rate is based upon historical redemption patterns and it recognizes breakage revenue utilizing the redemption recognition method. |
During the year ended January 29, 2012, the Company determined it had sufficient historical transaction data to estimate breakage for gift cards sold in its stores. Based upon its analysis of that data, the Company recognized approximately $1,600 of gift card breakage revenue, which included a cumulative adjustment of approximately $1,400 for the initial recognition of breakage related to unredeemed gift cards. Gift card breakage recognized for the years ended January 26, 2014 and January 27, 2013 was not material. Any future revisions to the estimated breakage rate may result in changes in the amount of breakage revenue recognized in future periods. |
Cost of Goods Sold | ' |
Cost of Goods Sold |
Cost of goods sold consists of the cost of inventory sold during the period, including the direct costs of purchased merchandise, distribution and supply chain costs, buying costs, a LIFO adjustment, supplies and store occupancy costs. Store occupancy costs include rent, common area maintenance, real estate taxes, personal property taxes, insurance, licenses and utilities related to the stores used in the Company's operations. Rebates and discounts from vendors are recorded as the related purchases are made and are recognized as a reduction to cost of goods sold as the related inventory is sold. |
Selling, General and Administrative Expenses | ' |
Selling, General, and Administrative Expenses |
Selling, general and administrative expenses include certain retail store and corporate costs, including compensation (both cash and share-based), pre-opening expenses, advertising and other direct store and corporate administrative costs. Pre-opening expenses are costs associated with the opening of new stores including travel, recruiting, relocating and training personnel and other miscellaneous costs. Pre-opening costs and costs incurred for producing and communicating advertising are expensed when incurred. Advertising costs totaled $4,263, $3,826, and $2,652 for the years ended January 26, 2014, January 27, 2013, and January 29, 2012, respectively. |
Leases | ' |
Leases |
For leases classified as operating leases, the lease agreements generally include rent holidays and rent escalation provisions and may include contingent rent provisions for percentage of sales in excess of specified levels. The Company recognizes rent holidays, including the time period during which the Company has control of the property prior to the opening of the store, as well as escalating rent provisions, as deferred rent expense and amortizes these balances on a straight-line basis over the term of the lease. For lease agreements that require the payment of contingent rents based on a percentage of sales above stipulated minimums, the Company begins accruing an estimate for contingent rent expense when it is determined that it is probable the specified levels of sales in excess of the stipulated minimums will be reached during the year. Reimbursement from a landlord for tenant improvements is classified as an incentive and included within "Deferred rent and lease incentives" on the Consolidated Balance Sheets. The deferred rent credit is amortized as rent expense on a straight-line basis over the term of the lease. |
For leases that are classified as capital leases, the property is recorded as a capital lease asset, which is included with “Buildings,” and a corresponding amount is recorded as a capital lease obligation in “Capital and financing lease obligations” in the Consolidated Balance Sheets at an amount equal to the lesser of the net present value of minimum lease payments to be made over the lease term or the fair value of the property being leased. The Company allocates each lease payment between a reduction of the lease obligation and interest expense using the effective interest method. |
With certain leases, the Company is involved with the construction of the building and the Company is considered the owner of the building for accounting purposes. The Company capitalizes the amount of total project costs incurred during the construction period as "Construction in progress." At the completion of the construction project, the Company evaluates whether the transfer to the landlord meets the requirements for sale-leaseback accounting treatment. A sale and leaseback of the asset is deemed to occur when construction of the asset is complete and the lease term begins and the relevant sale-leaseback accounting criteria are met. Any gain or loss from the transaction is deferred and amortized as rent expense on a straight-line basis over the term of the lease. If the lease does not pass the criteria for sale-leaseback accounting, it records a financing lease asset, which is included with “Buildings” and a corresponding financing obligation in “Capital and financing lease obligations” in its Consolidated Balance Sheets. The Company allocates each lease payment between a reduction of the lease obligation and interest expense using the effective interest method. |
2. Summary of Significant Accounting Policies (continued) |
During the year ended January 27, 2013, the Company entered into a sale-leaseback transaction involving one of its store locations. The store is being leased from the buyer-lessor over an initial lease term of 15 years and is classified as an operating lease. The Company determined it retained the lease rights to the property and preserved the benefits and risks incident to ownership, and thus the $1,258 gain which resulted from the net $6,604 transaction proceeds was deferred and will be amortized as a reduction to rent expense over the 15 year initial lease term. |
Share-based Compensation - 2010 Omnibus Incentive Compensation Plan | ' |
Share-based Compensation - 2010 Omnibus Incentive Compensation Plan |
The Company grants options to purchase common stock under The Fresh Market, Inc. 2010 Omnibus Incentive Compensation Plan (“Plan”), which was adopted and approved by the Board of Directors and the Company's stockholders in 2010 and reapproved by the Company's stockholders in 2012. The Plan provides for the grant of options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units (“RSUs”), performance compensation awards, cash incentive awards, deferred share units and other equity-based and equity-related awards. |
In accordance with ASC 718, Compensation-Stock Compensation, the fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. This model requires the input of certain assumptions, including the expected life of the share-based award, stock price volatility, dividend yield and interest rate. Because there is limited history for the Company's common stock, the expected life and volatility assumptions are based on historical data from similar entities, which comprise the Company's "peer group." The Company's assessment of its peer group includes considerations such as the subject companies' plan characteristics and principal populations as well as industry, stage of life cycle, size and financial leverage. Since the Company's IPO, it has not declared dividends and it does not plan to pay any dividends in the future. The risk-free rate for periods in the contractual life of the option is based on the U.S. Treasury constant maturities in effect at the time of the grant. |
The fair value of RSUs and RSAs is based on the fair market value of the Company's common stock on the date of grant. The RSU awards are based on a four year graded vesting schedule over the requisite service period and the Company recognizes compensation expense on a straight line basis for RSUs net of estimated forfeitures. RSAs issued to independent directors vest pursuant to the Plan at the earlier of one year or the next annual meeting of the stockholders. The Company recognizes compensation expense for RSAs on a straight line basis net of estimated forfeitures over the vesting period. |
Executive RSAs are comprised of two types: RSAs that are subject to three-year cliff-based vesting, and RSAs that vest in annual 25% increments over a four-year period beginning on the grant date. Upon vesting, the risk of forfeiture and restrictions on transferability lapse. The Company recognizes the related compensation expense on a straight-line basis, net of estimated forfeitures, over the required service period. The fair value of the executive RSAs is equal to the closing price of the Company’s common stock on the date of grant. |
The Company recognizes the estimated fair value of performance-based awards as share-based compensation expense over the performance period based upon its determination of whether it is probable that the performance targets will be achieved. The Company assesses the probability of achieving the performance targets at each reporting period. Cumulative adjustments, if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions. The fair value of the performance-based awards is based on the fair market value of the Company's common stock on the date of grant. |
Income Taxes | ' |
Income Taxes |
The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in income in the period that includes the enactment date. |
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2. Summary of Significant Accounting Policies (continued) |
The Company applies the provisions of the authoritative guidance on accounting for uncertainty in income taxes that was issued by the Financial Accounting Standards Board, or FASB. Pursuant to this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance also addresses other items related to uncertainty in income taxes including derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. |
The Company applies the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("ASC 740"), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. |