Overview

The Fresh Market Inc., is a high-growth specialty retailer focused on creating an extraordinary food shopping experience for its customers. Since opening our first store in 1982, we have offered high-quality food products, with an emphasis on fresh, premium perishables and an uncompromising commitment to customer service. We seek to provide an attractive, convenient shopping environment while offering our customers a compelling price-value combination. As of October 28, 2012, we operated 127 stores in 25 states, primarily in the Southeast, Midwest, Mid-Atlantic, and Northeast United States. We also added our first store in California during the third quarter of fiscal 2012.

We believe several key differentiating elements of our business have enabled us to execute our strategy consistently and profitably across our expanding store base. We believe the differentiated shopping experience we provide has helped us to expand our business primarily through favorable word-of-mouth publicity. Within our smaller-box format, we focus on higher-margin food categories and strive to deliver a more personal level of service and a more enjoyable shopping experience. Further, our smaller-box format is adaptable to different retail sites and configurations and has facilitated our successful growth.
Additionally, we believe our disciplined, comprehensive approach to planning and merchandising and the support we provide our stores allow us to deliver a consistent shopping experience and financial performance across our growing store base.

How We Assess the Performance of Our Business

In assessing our performance, we consider a variety of performance and financial measures. The key measures that we assess to evaluate the performance of our business are set forth below:

Sales

Our sales comprise gross sales net of coupons, commissions and discounts. Sales include sales from all of our stores.

The food retail industry and our sales are affected by general economic conditions and seasonality, as well as the other factors, discussed below, that affect our comparable store sales. Consumer purchases of specialty food products are particularly sensitive to a number of factors that influence the levels of consumer spending, including economic and financial conditions, the level of disposable consumer income, changes in tax rates, consumer debt, interest rates and consumer confidence. In addition, our business is seasonal and, as a result, our average weekly sales fluctuate during the year and are usually highest in the fourth quarter when customers make holiday purchases.

Comparable Store Sales

Our practice is to include sales from a store in comparable store sales beginning on the first day of the sixteenth full month following the store's opening. We believe that comparability is achieved approximately fifteen months after opening. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. There may be variations in the way that our competitors calculate comparable or "same store" sales. As a result, data in this Form 10-Q regarding our comparable store sales may not be comparable to similar data made available by our competitors.

Various factors may affect comparable store sales, including:
• overall economic and financial trends and conditions, including general price levels in the economy;

• consumer confidence, preferences and buying trends;

• our competition, including competitor store openings or closings near our stores;

• our competitors expanding their offerings of premium/perishable products;

• the pricing of our products, including the effects of inflation or deflation;

• the number of customer transactions at our stores;

• our ability to provide an assortment of distinctive, high-quality product offerings to generate new and repeat visits to our stores;

• the level of customer service that we provide in our stores;

• our in-store merchandising-related activities;

• our ability to source products efficiently;

• our opening of new stores in the vicinity of our existing stores; and

• the number of stores we open, remodel or relocate in any period.

As we continue to pursue our growth strategy, we expect that a significant percentage of our sales growth will continue to come from new stores not included in comparable store sales. Accordingly, comparable store sales is only one measure we use to assess our performance.

Gross Profit

Gross profit is equal to our sales minus our cost of goods sold. Gross margin rate measures gross profit as a percentage of our sales. Cost of goods sold is directly correlated with sales and includes the direct costs of purchased merchandise, distribution and supply chain costs, buying costs, store supplies and store occupancy costs. Store occupancy costs include rent, common area maintenance, real estate taxes, personal property taxes, insurance, licenses and utilities. The components of our cost of goods sold may not be identical to those of our competitors. As a result, data in this Form 10-Q regarding our gross profit and gross margin rate may not be comparable to similar data made available by our competitors.

Gross margin rate enhancements are driven by:

• economies of scale resulting from expanding our store base;

• leverage achieved from increased comparable store sales;

• reduced shrink as a percentage of sales; and

• productivity gains through process and program improvements.

Changes in the mix of products sold and promotional activities may also impact our gross margin rate.

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, and other corporate administrative costs. Pre-opening expenses are costs associated with the opening of new stores, including costs associated with recruiting, relocating and training personnel and other miscellaneous costs. Pre-opening costs are expensed as incurred.

Labor and corporate administrative costs generally decrease as a percentage of sales as a result of an increase in our sales. Accordingly, selling, general and administrative expenses as a percentage of sales are usually higher in lower-volume quarters and lower in higher-volume quarters. Store-level labor costs are the largest component of our selling, general and

administrative expenses. The components of our selling, general and administrative expenses may not be identical to those of our competitors. As a result, data in this Form 10-Q regarding our selling, general and administrative expenses may not be comparable to similar data made available by our competitors. We expect that our selling, general and administrative expenses will increase in future periods due to our continuing store growth and increased corporate general and administrative expenses to support that growth.

Income from Operations

Income from operations consists of gross profit minus selling, general and administrative expenses, store closure and exit costs and depreciation.

Taxes

We 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 amount 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 of a change in income tax rates is recognized in our financial statements in the period that includes the enactment date.

Results of Operations

The following tables summarize key components of our results of operations for
the periods indicated, both in dollars and as a percentage of sales.

                            For the Thirteen Weeks Ended                          For the Thirty-Nine Weeks Ended
                       October 28,                October 30,                 October 28,                October 30,
                          2012                       2011                        2012                        2011

                                         (dollars in thousands, except share and per share amounts)

Statement of
Income Data:
Sales           $    321,494      100.0 %   $    263,260      100.0 %   $    959,275      100.0 %   $    787,263     100.0 %
Cost of goods
sold                 215,137       66.9 %        179,066       68.0 %        633,485       66.0 %        528,530      67.1 %
Gross profit         106,357       33.1 %         84,194       32.0 %        325,790       34.0 %        258,733      32.9 %
Selling,
general and
administrative
expenses              76,590       23.8 %         60,281       22.9 %        221,087       23.0 %        178,086      22.6 %
Store closure
and exit costs           131        0.0 %             99        0.0 %            856        0.1 %            338       0.0 %
Depreciation          11,749        3.7 %          9,309        3.5 %         33,164        3.5 %         26,681       3.4 %
Income from
operations            17,887        5.6 %         14,505        5.5 %         70,683        7.4 %         53,628       6.8 %
Interest
expense                  526        0.2 %            481        0.2 %          1,109        0.1 %          1,450       0.2 %
Income before
provision for
income taxes          17,361        5.4 %         14,024        5.3 %         69,574        7.3 %         52,178       6.6 %
Tax provision          6,472        2.0 %          4,874        1.9 %         26,086        2.7 %         19,041       2.4 %
Net income      $     10,889        3.4 %   $      9,150        3.5 %   $     43,488        4.5 %   $     33,137       4.2 %

Net income per
share
Basic and
diluted         $       0.23                $       0.19                $       0.90                $       0.69
Shares used in
computation of
net income per
share,
Basic             48,068,869                  47,996,697                  48,057,451                  47,993,688
Diluted           48,323,150                  48,127,549                  48,280,923                  48,124,656

Percentage totals in the above table may not equal the sum of the components due to rounding.

                                     For the Thirteen Weeks Ended           For the Thirty-Nine Weeks Ended
                                   October 28,          October 30,        October 28,           October 30,
                                       2012                2011               2012                  2011

Other Operating Data:
Number of stores at end of
period                                    127                   107               127                     107
Comparable store sales growth
(1)                                       5.6 %                 5.5 %             7.3 %                   4.7 %
Gross square footage at end of
period (in thousands)                   2,677                 2,261             2,677                   2,261
Average comparable store size
(gross square feet) (2)                21,182                21,250            21,205                  21,258
Comparable store sales per gross
square foot during period (2)    $        123         $         117     $         384         $           361

(1) Our practice is to include sales from a store in comparable store sales beginning on the first day of the sixteenth full month following the store's opening. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. There may be variations in the way that our competitors calculate comparable or "same store" sales. As a result, data in this Form 10-Q regarding our comparable store sales may not be comparable to similar data made available by our competitors.

(2) Average comparable store size and comparable store sales per gross square foot are calculated using the gross square footage and sales for stores included within our comparable store base for each month during the given period.

Public Offering of Common Stock by Certain Selling Stockholders On June 12, 2012, the Company, certain stockholders of the Company who owned shares of our common stock prior to our initial public offering (the "selling stockholders") and an underwriter entered into an Underwriting Agreement pursuant to which the selling stockholders offered and sold 11,538,112 shares of our 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. We did not receive proceeds from the sale of these shares, and we expensed approximately $0.5 million of costs associated with the offering during the thirty-nine weeks ended October 28, 2012. This amount is included in the "Selling, general and administrative expenses" line item on the Consolidated Statements of Comprehensive Income.

Items Impacting Comparability
Thirty-nine weeks ended October 28, 2012 Items impacting comparability between the thirty-nine weeks ended October 28, 2012 and the thirty-nine weeks ended October 30, 2011 include the following:

• Approximately $0.5 million, or $0.01 per share on a diluted basis, during the thirty-nine weeks ended October 28, 2012, in issuance costs incurred in conjunction with our public offering of common stock, which closed on June 18, 2012. As agreed upon by and among us and certain stockholders, we were obligated to bear the expenses and fees, except for underwriting discounts and commissions. We received no proceeds in connection with the public offering, and all fees and expenses incurred during the thirty-nine weeks ended October 28, 2012 were expensed and included in the "Selling, general and administrative expenses" line item on the Consolidated Statements of Comprehensive Income.

• Approximately $1.1 million, or $0.02 per share on a diluted basis, for the thirty-nine weeks ended October 30, 2011, in issuance costs incurred in conjunction with our public offering of common stock, which closed on May 3, 2011. As agreed upon by and among us and certain stockholders, we were obligated to bear the expenses and fees, except for underwriting discounts and commissions. We received no proceeds in connection with the public offering, and all fees and expenses incurred during the thirty-nine weeks ended October 30, 2011 were expensed and included in the "Selling, general and administrative expenses" line item on the Consolidated Statements of Comprehensive Income.

• We resolved two legal matters during the thirty-nine weeks ended October 28, 2012. The net amount of the settlement payments made and received related to these matters is included in the "Selling, general and administrative expenses" line item on the Consolidated Statements of Comprehensive Income and totaled approximately $0.4 million, or $0.01 per share on a diluted basis. Legal fees and related expenses in connection with these matters have been expensed as incurred during the thirty-nine weeks ended October 28, 2012.

Period to Period Comparisons

Thirteen Weeks Ended October 28, 2012 Compared to the Thirteen Weeks Ended October 30, 2011

Sales

Sales increased 22.1%, or $58.2 million, to $321.5 million for the thirteen weeks ended October 28, 2012, resulting from a $14.0 million increase in comparable store sales and a $44.2 million increase in non-comparable store sales. There were 104 comparable stores and 23 non-comparable stores open at October 28, 2012.

Comparable store sales increased 5.6% for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011, driven by a 3.3% increase in the number of transactions and a 2.3% increase in the average transaction size at our comparable stores. Average customer transaction size for comparable stores increased to $30.66 for the thirteen weeks ended October 28, 2012, compared to $29.99 for the thirteen weeks ended October 30, 2011.

Gross Profit

Gross profit increased 26.3%, or $22.2 million, to $106.4 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. The amount of the increase in gross profit attributable to increased sales was $18.6 million and the amount attributable to increased gross margin rate was $3.6 million. Gross margin rate increased 110 basis points to 33.1% for the thirteen weeks ended October 28, 2012, from 32.0% for the thirteen weeks ended October 30, 2011. The increase in our gross margin rate was attributable to an increase in merchandise margin rate, primarily as a result of improved supply chain expense and a reduction in merchandise shrink expense. We also had an improvement in occupancy costs as a percentage of sales as we incurred less deferred rent expense for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. For the thirteen weeks ended October 28, 2012, estimated LIFO expense was approximately $0.5 million lower, which contributed to the improved gross margin for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 27.1%, or $16.3 million, to $76.6 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. As a percentage of sales, selling, general and administrative expenses increased by 90 basis points to 23.8% for the thirteen weeks ended October 28, 2012, compared to 22.9% for the thirteen weeks ended October 30, 2011. The increase in selling, general and administrative expenses was primarily attributable to an increase in the number of stores in operation during the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011, which led to higher overall store-level compensation expenses and other costs to operate our stores. With more stores in operation during the thirteen weeks ended October 28, 2012, store-level compensation expenses increased $10.4 million, other store operating expenses, which includes pre-opening store expenses, increased $3.2 million and corporate administrative expenses increased $2.7 million, compared to the thirteen weeks ended October 30, 2011.

The increase in the selling, general and administrative expense as a percentage of sales was primarily attributable to increased store-level compensation and pre-opening expenses, as a result of six new store openings for the thirteen weeks ended October 28, 2012, compared to one new store opening for the thirteen weeks ended October 30, 2011. The increase in new store openings added 60 basis points of selling, general and administrative expense as a percentage of sales for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. The increase was also partially attributable to higher corporate expenses, driven by approximately $0.8 million of incremental expenses mostly attributable to our share-based compensation programs and by our investment in personnel and expenses associated with their hiring to support our growth. These additional expenses increased selling, general and administrative expenses as a percentage of sales by approximately 30 basis points for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011.

Income from Operations

Income from operations increased 23.3%, or $3.4 million, to $17.9 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. Income from operations as a percentage of sales for the thirteen weeks ended October 28, 2012 increased 10 basis points to 5.6% from 5.5% for the thirteen weeks ended October 30, 2011, which included approximately a 20 basis point decrease in income from operations due to incremental costs primarily related to share-based compensation programs. Depreciation increased 26.2%, or $2.4 million, to $11.7 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011, principally due to store unit growth.

Interest Expense

Interest expense increased 9.4% to $0.5 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011.

Income Tax Expense

Income taxes for the thirteen weeks ended October 28, 2012 resulted in an effective tax rate of approximately 37.3%, compared to approximately 34.8% for the thirteen weeks ended October 30, 2011. The increase in the effective tax rate was primarily the result of a refinement to our initial charitable food contribution estimate for fiscal year 2011, which resulted in a reduction of the income tax expense for the thirteen weeks ended October 30, 2011.

Net Income

As a result of the foregoing, net income increased 19.0%, or $1.7 million, to $10.9 million for the thirteen weeks ended October 28, 2012, compared to the thirteen weeks ended October 30, 2011. Net income as a percentage of sales for the thirteen weeks ended October 28, 2012 decreased to 3.4% from 3.5% for the thirteen weeks ended October 30, 2011.

Thirty-Nine Weeks Ended October 28, 2012 Compared to the Thirty-Nine Weeks Ended October 30, 2011

Sales

Sales increased 21.8%, or $172.0 million, to $959.3 million for the thirty-nine weeks ended October 28, 2012, which resulted from a $55.5 million increase in comparable store sales and a $116.5 million increase in non-comparable store sales. There were 104 comparable stores and 23 non-comparable stores open at October 28, 2012.

Comparable store sales increased 7.3% for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011, due to a 4.8% increase in the number of transactions and a 2.5% increase in the average transaction size at our comparable stores. Average customer transaction size for comparable stores increased to $30.98 for the thirty-nine weeks ended October 28, 2012, compared to $30.26 for the thirty-nine weeks ended October 30, 2011.

Gross Profit

Gross profit increased 25.9%, or $67.1 million, to $325.8 million for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011. The amount of the increase in gross profit attributable to increased sales was $56.6 million and the amount of the increase in gross profit attributable to increased gross margin rate was $10.5 million. Gross margin rate increased 110 basis points to 34.0% for the thirty-nine weeks ended October 28, 2012, from 32.9% for the thirty-nine weeks ended October 30, 2011. The increase in our gross margin rate was mostly attributable to increased merchandise margin, primarily as a result of improved supply chain expense as well as an improvement in occupancy costs as a percentage of sales, offset by an increase in supplies expense as a percentage of sales. For the thirty-nine weeks ended October 28, 2012, estimated LIFO expense showed a favorable improvement of $0.5 million, compared to the thirty-nine weeks ended October 30, 2011.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 24.1%, or $43.0 million, to $221.1 million for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011. As a percentage of sales, selling, general and administrative expenses for the thirty-nine weeks ended October 28, 2012 increased by 40 basis points to 23.0% from 22.6% for the thirty-nine weeks ended October 30, 2011. The increase in selling, general and administrative expenses was

primarily attributable to an increase in the number of stores in operation during the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011, which led to higher overall store-level compensation expenses and other costs to operate our stores. With more stores in operation during the thirty-nine weeks ended October 28, 2012, store-level compensation expenses increased $27.7 million, other store operating expenses, which includes pre-opening store expenses, increased $7.5 million and corporate administrative expenses increased $8.4 million, compared to the thirty-nine weeks ended October 30, 2011.

The increase in selling, general and administrative expenses as a percentage of sales was attributable to higher corporate expenses, due to approximately $2.1 million of incremental expenses mostly ascribed to our share-based compensation programs, as well as $0.4 million related to legal settlements. The effect of these costs adversely impacted selling, general and administrative expenses as a percentage of sales by approximately 20 basis points during the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011. Higher store pre-opening and store-level compensation expenses also contributed to the increase in selling, general and administrative expenses as a percentage of sales, which was partially offset by a year-over-year decrease in issuance costs incurred in connection with our public offerings of common stock.

Income from Operations

Income from operations increased 31.8%, or $17.1 million, to $70.7 million for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011. Income from operations as a percentage of sales for the thirty-nine weeks ended October 28, 2012 increased 60 basis points to 7.4% from 6.8% for the thirty-nine weeks ended October 30, 2011. The increase in operating margin for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011, was due to the growth in gross margin rate ,which was partially offset by an increase in selling, general and administrative expenses. Depreciation expense increased 24.3% or $6.5 million, to $33.2 million for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011, which was principally attributable to store unit growth over that time.

Interest Expense

Interest expense decreased 23.5%, or $0.3 million, to $1.1 million for the thirty-nine weeks ended October 28, 2012, compared to the thirty-nine weeks ended October 30, 2011, primarily due to reduced weighted-average borrowings under our revolving credit facility.

Income Tax Expense

Income taxes for the thirty-nine weeks ended October 28, 2012 resulted in an effective tax rate of approximately 37.5%, compared to approximately 36.5% for the thirty-nine weeks ended October 30, 2011.

Net Income

As a result of the foregoing, net income increased 31.2%, or $10.4 million, to $43.5 million for the thirty-nine weeks ended October 28, 2012, compared to the . . .