By Steven Ralston, CFA
READ THE FULL IFMK RESEARCH REPORT
2018 Fiscal Year Results
On June 26, 2018, iFresh (IFMK) reported financial results for the fiscal year ending March 31, 2018. For the fiscal year, the company reported net sales increased 4.4% to $136.7 million from $130.1 million in fiscal 2017. Perishables constituted 64.8% of total annual retail sales.
Gross profit increased 4.0% to $29.0 from $27.9 million in the prior fiscal year. The gross margin contracted slightly (9 basis points) to 21.2% from 21.3%. Selling, general and administrative expenses increased 19.4%.
Interest expense grew 169% to $817,227, an increase of $513,333 from $303,894 in fiscal 2017, primarily due to increased borrowings from Key Bank (a loan and a delayed term loan under a letter of credit). Other income increased 22.6% to $1,668,496, which includes management and advertising fee income (of $563,000), rental income ($439,000) insurance claim proceeds ($335,000) and lottery sales and other income ($329,000).
iFresh reported a loss of $791,293 (or $0.06 per diluted share) versus a profit of $1,196,723 ($0.13 per diluted share) in fiscal 2017. Adjusted EBITDA decreased 66.6% (or $3.9 million) to $2.0 million from $5.9 million in the prior fiscal year.
The weighted average number of common shares outstanding increased 15.1% YOY to 11,141,840. At the end of the fiscal year, 14,220,548 shares were outstanding. Working capital moved to a deficit $2.66 million from a deficit of $1.47 million and the end of fiscal 2017 (March 30).
New Store Overview/Update
In July 2017, iFresh acquired the assets of Mia Supermarket in Orlando FL and iFresh Glen Cove in Garden City, NY located at 192 Glen Cove Road. In October, the company acquired New York Mart CT (a supermarket in Milford, CT) and New York Mart N. Miami.
All four supermarkets are currently under construction or under renovation. Management anticipates that all four will open during the last quarter of 2018.
View Exhibit I
Analyst Visit to Boston Store
From May through August, iFresh is celebrating the 30th Anniversary of the original opening of Ming’s Supermarket, which the company’s acquired in 2009. The celebration spans both locations in the Boston area: Ming’s Supermarket at 1102 Washington Street and Zen Market at 733 Hancock Street in Quincy. Not only is iFresh offering over 100 featured discounted products, but also the company plans run raffle drawings with tickets being earned by customers who make purchases up to $30. Prizes include a Mercedes-Benz ML350, iPhone X, iPad Mini, iFresh $500 gift card, iFresh $50 gift cards, a rice cooker and a water boiler.
In early June, I paid an unannounced visit to one of iFresh's stores in Boston, Ming's Supermarket. At the front entrance is the sign for 30 year Anniversary promotion. The store was well-organized and clean. The produce was in a well-lit area and very fresh. Foot traffic was brisk. On the façade, the store is branded as a New York Mart.
View Exhibit II
Due the character of the company’s enterprise, namely a small-capitalization company in the specialty food retail/distribution business with an expected growing sales profile, we expect iFresh to attain a second quartile P/S ratio versus the comparable companies listed above. On projected TTM sales (as the four new company-owned stores open during 2018), our share price target is $16.00, which is predicated on attaining a P/S multiple of 1.67.
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By Steven Ralston, CFA