What is in this article?:
- Fairway Sees Big Potential in Expansion
- Directors, Senior Executives
“We believe that our distinctive merchandising strategy has enabled us to build a trusted connection with our customers, who value the quality and fair prices of our food, our merchandising teams’ expertise and our one-stop-shopping convenience.”
NEW YORK — Fairway Market is going public behind a strategy to triple the number of stores it operates in the New York metro area and eventually, expand its brand of productive, fresh-focused stores throughout the East Coast.
Fairway, which currently operates 11 stores in and around New York, said it could build at a rate of three to four new stores a year and cited demographic research indicating the Northeast between New England and Washington, D.C., could support 90 Fairway stores. The company said it could open as many as 300 stores nationwide.
In a registration statement filed with the Securities and Exchange Commission last week in preparation for its initial public offering, Fairway detailed eye-popping sales figures, as well as ongoing losses and comparable-store sales declines associated with its rapid expansion and sales cannibalization as new stores open.
For the fiscal year that ended April 1, Fairway generated sales of $554.9 million and a loss of $8.3 million. Those results cover nine stores; it has since opened two additional locations. Through the first quarter of the current fiscal year, which ended July 1, Fairway lost $3.9 million on sales of $154.7 million. Its stores in the fiscal year and first quarter experienced comparable-sales declines of 7% as a result of new stores providing shoppers with more convenient options than existing stores, Fairway said.
As a “destination store” Fairway said it focused less on comparable-store results than other retailers, saying its focus was on increasing net sales and gross profits. Its efforts on margins will continue around price optimization, shrink reduction, labor productivity and increasing leverage from scale. It said it expected to post net losses through 2014.
Its stores during the fiscal year ended in April were averaging $1.47 million in sales per week, and averaging sales of $1,859 per selling square foot, making them among the most productive boxes in the industry. Gross profit margin during the year was 33.5%.
Fairway described its business as a unique format combining the appeal of specialty food stores like Trader Joe’s and The Fresh Market; organic/natural retailers such as Whole Foods; and conventional supermarkets like ShopRite and Stop & Shop. Perishables and prepared foods account for nearly 65% of sales at Fairway, compared to the more typical one-quarter to one-third of a supermarket’s sales, Fairway said. Specialty items accounted for 7.2% of Fairway’s fiscal 2012 sales while conventional grocery products accounted for 28.2%.
Its positioning allows it to benefit from trends toward healthy eating; increased shopper emphasis on their in-store experience; and growing interest in private-label offerings. The company said its Fairway-branded items, including olive oils, spices and prepared foods, account for around 7.5% of sales and generally are the top-selling items in their category.
Fairway said it aimed to keep its pricing below that of specialty and organic retailers for fresh, natural/organic and specialty items, while remaining competitive with conventional supermarkets on grocery items. A new price optimization initiative launched late last year has led to higher margin rates by analyzing how demand varies based upon price points and other data, Fairway said.
Read more: Fairway Sets Another N.J. Opening
“We believe that our distinctive merchandising strategy has enabled us to build a trusted connection with our customers, who value the quality and fair prices of our food, our merchandising teams’ expertise and our one-stop-shopping convenience,” Fairway said.
Fairway plans a Manhattan store will open in November and a store in Nanuet, N.Y., in 2013. The company has asked New York City’s Industrial Development Agency for $3.7 million in tax benefits toward a new central bakery and commissary in the Bronx, which would allow the chain to transfer such functions away from stores. A public hearing on the matter is scheduled for this week. If approved the new facility could be open by next spring.