Fairway Group Holdings (Fairway Market) continues to ramp up its expansion effort since it became a publicly-traded firm in April. The Manhattan-based retailer, which said six weeks ago that it would build a 45,000 square foot store in the new “Hudson Yards” development on West 28th Street and 12th Avenue in Manhattan, announced earlier this month that it would build two additional new stores – in the Tribeca section of Manhattan and in Lake Grove, NY. Moreover, Fairway cut the ribbon on its 14th unit on October 10 in Nanuet, NY.
Fairway’s Tribeca store will be 52,242 square foot in size. The two-story edifice is located at 255 Greenwich Street (at Murray Street), and is expected to open in fall 2014. It will be the first Fairway location in Lower Manhattan and will be located less than one block from a high-volume Whole Foods, one of Fairway’s main competitors.
“Tribeca is a great and growing family neighborhood and home to great amenities, from restaurants to schools and colleges, and a world-renowned film festival. And because it is in Lower Manhattan, which is also home to Battery Park City, the Freedom Tower, and the Financial District, the location is ideal for those who live and work there,” said Charles Santoro, executive chairman of the growing regional chain.
The Lake Grove store will be Fairway’s first unit in Suffolk County. The 53,000 square foot supermarket will be located at 4000 Middle Country Road and is expected to open in the spring of 2014.
“We look forward to providing customers a fabulous food shopping experience with fresh, natural, organic and conventional foods at terrific prices,” said Herb Ruetsch, Fairway Market’s CEO. “We are also proud to be creating approximately 400 jobs at this location, and eager to make an impact in the Lake Grove and surrounding communities by being both a great food market and an active contributor to the surrounding communities.”
The new 65,000 square foot Nanuet store will be located at 75 West Route 59 and will serve as anchor tenant of The Shops at Nanuet, a new 50-shop open-air center.
“We’re excited to make our newest home at this premier shopping destination in Nanuet and are also very pleased to be creating more than 300 new jobs in the area,” said Santoro. “Our growth prospects remain very strong and our geographic provides us with a significant runway for continued expansion in our own backyard.”
In August, Fairway announced plans to open a 45,875 square foot store on the site of one of largest mixed use developments in the country, which was formerly known as the West Side (Rail) Yard. The new Hudson Yards store could open as early as 2015 and will occupy the ground floor retail space in the SouthTower, adjacent to a spur of the High Line elevated park.
“Hudson Yards is the next great New York neighborhood and we’re excited to be an integral part of the development of this world-class location, and to be an amenity and food destination for the huge numbers of workers, residents, neighbors and tourists who will visit Hudson Yards,” said Santoro at the time. “We continue to believe our growth prospects are outstanding in and around the tri-state New York, New Jersey and Connecticut metro area.”
A month earlier, Fairway opened its first store in the Chelsea section of Manhattan (a 24,000 square foot unit) and is also building a new 240,000 square foot production facility in the Bronx.
Ruetsch earlier assessed the progress of the new depot, which could begin operating early next year. “ Phase I is really produce cross-docking, its core bakery operations that would include bagels, baguettes, bread, things like that, and core commissary operations which are basically the food that you see spread through our deli showcases at our prepared food and hot bar mixes,” Reutsch explained to the financial analysts in August. “That’s Phase I and that’s really our first focus that will be completed. I would say in the eight to nine months area we’ll have all those areas under our belt and in the facility and running. And that’s when we’ll start to see the margin benefit which will result from labor savings in our store operations and also from controls – inventory control, production control thereby yielding shrink benefits. Phase II is really things like quality production, cheese packaging, dry fruit and nut packaging. Those types of items are very, very strong paybacks, as we’ve wanted this as a company. We’re going to accelerate that as quickly as possible at Phase II and there are some Phase III operations and we’re going to move as quickly as possible.”
With significant shareholder capital at hand following its April IPO, Fairway has been actively seeking new locations to offer customers its unique perishables-driven blend of urban chic product mix and merchandising.
Approximately 15.7 million shares of common stock were issued at the initial public offering. The high-volume merchant received approximately $158.8 million in net proceeds after the underwriting discount and expenses related to the IPO.
Fairway said it used the net proceeds to pay approximately $76.8 million of preferred dividends, $9.2 million to terminate a management agreement with Sterling Investment Partners (the private equity firm that acquired control of Fairway in 2007) and approximately $8.1 million to pay contractual bonuses. The remaining approximately $64.7 million is intended for new store growth and general corporate purposes. The retailer also charged $18.1 million of IPO related expenses to operating results in the first quarter of the current fiscal year.
In its first financial posting as a publicly-traded firm in August, Fairway posted a $27.9 million loss in its first quarter, compared with a $3.9 million loss a year ago. However, overall sales increased 21 percent to $187 million in the period ended June 30 and comparable store revenue was up 1.4 percent. Additionally, customer transactions were up 0.8 percent and basket size grew 0.5 percent.
The company noted that its wider loss could be attributed to transaction expenses and fees related to the IPO, a change in the income tax provision and an increase in non-cash equity compensation. The adjusted net loss in the quarter was $2.4 million, compared to the adjusted net loss of $3.8 million in the first quarter of the prior year.
Fairway ended the quarter with approximately $91 million of liquidity, which included approximately $70 million of cash and cash equivalents and approximately $21 million in borrowing capacity under its senior credit facility.
