Fairway tempers store growth plan

Fairway Markets is treating its growing pains with more powerful medicine, taken less frequently.

Officials of parent Fairway Group Holdings in a conference call Thursday said the company would open just one or two projects per year in coming years, with an eye toward sites that can draw considerable customer attention and regional draw. One such project will be on the way in fiscal 2016 in the New York borough of Staten Island, where officials announced a newly built Fairway would anchor a planned redevelopment of the Staten Island Mall. That project draws some 12 million visitors a year, Edward Arditte, Fairway’s CFO and co-president, said.

“That’s the type of thing we want to be able to do,” Arditte told analysts. “And I would tell you that just about everything in our pipeline is of that type of characteristic. Those are the things we’re focused on.”

Fairway has built its prospects on growth but has encountered issues including cannibalization when its new stores open, and a portfolio of widely varying fortunes. It recently opened a store on Lake Grove, N.Y., and expects to open a new store in Manhattan’s Tribeca neighborhood early next year.

A store in Manhattan’s Hudson Yards and the Staten Island location are the only announced projects for respective fiscal years 2016 and 2017 at this point, although officials said they expected a second store in 2017 and could add one to the 2016 schedule if an opportunity arose.

Analyst Kelly Bania of BMO Capital, who had anticipated Fairway’s growth pace would be more in the range of two to three new stores a year, termed the new pace “cautious” and portends a slower outlook for growth, she said in a research note published Friday.

“Fairway’s differentiated store format, which offers a combination of organic, prepared, specialty and conventional foods, supports an outlook for significant long-term new store growth,” Bania said. However, she considered less visibility and predictability into new store openings as an “executional hurdle” for the retailer.

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The Lake Grove store, which opened on Long Island’s Suffolk County earlier this summer, is the chain’s “best new store,” Bill Sanford, Fairway’s interim CEO, said. That store is piloting design and productivity elements that officials intend to roll into additional units in coming months.

Officials made their remarks during a conference call reviewing first-quarter financial results.

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