Jack Murphy, Fairway Market’s new CEO, said plans are under way that will re-establish the Manhattan-based grocer as a stronger retail entity. He noted that a new marketing/advertising campaign set to launch in March would help put the “swagger” back into the company.
Murphy made his remarks at the 17th annual ICR XChange conference in Orlando, FL on January 14. Also attending the conference from Fairway were: Dorothy Carlow, chief merchandising officer, who followed Murphy from their last posts at Ashville, NC-based organic grocer Earth Fare; Ed Arditte, co-president and CFO; and Nico Gutierrez, director of finance and investor relations.
In assessing his business to the financial analysts who attended the three-day meeting, Murphy, who joined Fairway on October 1, painted a picture of a business that remains strong despite some financial and growth-oriented challenges.
He noted that with sales of $1,600 per square foot, Fairway’s top-line revenue is among the best in the food retail; that its overall brand equity remains excellent; and Fairway has the ability to optimize its current footprint. Murphy also praised the “passionate and experienced” team members at the 15 store merchant.
Fairway’s sales over the past 12 months were $798.2 million and its adjusted EBITDA margin was a healthy 5.4 percent. Approximately 64 percent of sales are derived from perishables.
However, declining identical store sales, negative earnings and a rapidly falling stock price have taken the luster off an iconic supermarket operator, especially since it launched its public offering in April 2013.
In describing the Fairway brand, Dorothy Carlow said: “Big, bold and a little bit rebellious, Fairway market is an exuberant experience that celebrates eating and eating big. Delivering the best fresh and handmade foods, Fairway also offers more. Indulgent, delicious and scandalously good, “taste first” is and always has been Fairway’s charge. For every man, woman and child, Fairway is a food treasure hunt at every turn. Notoriously New York, we live to eat big at Fairway.”
She termed Fairway “the only specialty-plus” market, adding that its serves three distinct marketing segments: specialty/fresh/convenience; conventional/discount; and natural/organic.
In a chart titled “Hybrid Format Aligned with Consumer Trends,” Murphy noted that Fairway’s “one stop shop with a value proposition gave it clear advantages over competitors Whole Foods, The Fresh Market, Trader Joe’s and many conventional operators.” He predicted future market share gains would come primarily at the expense of the “conventional” sector.
Murphy then announced a plan to change the direction and focus of the company over the next 120 days. Key elements include improving same store sales (increasing customer transactions and shifting product mix); enhancing price optimization and productivity of promotions (“right” price, highlight EDLP and better utilize temporary price reductions); improving supply chain management (review all contracts and improve in-stock conditions); analyzing and reducing shrink (improve ordering tools and process discipline); and creating better labor efficiencies (optimize scheduling and leverage labor dollars).
“We plan, we measure and we improve,” Murphy stated. “The big word is measure…you have to make sure you’re using data (properly). The retailer who doesn’t use the technology and data available to them today is not going to survive in this highly competitive world.”
In assessing future growth opportunities, both Murphy and Carlow proclaimed that Fairway will continue to focus on the New York Metro market that could ultimately yield more than 30 stores while leveraging current infrastructure. Carlow explained that Fairway has taken a pause in new store growth through the end of this year. Current priorities are on recovery and improving collective focus.
Beginning next month and continuing until the end of 2015, Fairway will concentrate on re-energizing its brand by utilizing traditional and social media to create brand awareness and differentiation.
When Fairway does re-engage in its expansion strategy it will utilize demographics (daytime/nighttime population densities, income thresholds, education and age); consumer psychology (accessibility of location, parking spaces and co-tenancy); and customer segmentation (leverage existing third-party resources, identify Fairway’s brand critical lifestyle segments, and target trade areas with disproportionate concentration of brand critical segments). Murphy affirmed that the newer stores will be smaller with reduced capital cost on a per square foot basis while also cutting pre-opening expenses. No stores are targeted for closing.
He added that there is potential for an additional 15-20 Fairway units in the New York Metro area.
Fairway is expected to announce third quarter earning early next month. Its cash position remains virtually unchanged from last quarter – it has approximately $35 million of cash on hand.
In closing, Murphy highlighted Fairway’s core values:
*Be Courageous – Commit with heart and mind. Move toward better. Change course when necessary.
* Be Positive – Have fun. Create great opportunities and expect great things to happen.
* Own It – Act with urgency. Take responsibility.
* Serve Others – Make someone’s day. Give credit. Reward people for taking risks and producing better outcomes.
* Lead – Be real. Inspire creativity. Innovate to create a better future.