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Fairway Group Holdings Corp. Reports Third Quarter Results

Stocks in this article: FWM

NEW YORK, Feb. 6, 2014 (GLOBE NEWSWIRE) -- Fairway Group Holdings Corp. ("Fairway") (Nasdaq:FWM), the parent company of Fairway Market, today announced financial results for its fiscal 2014 third quarter ended December 29, 2013.

  • Net sales increased 22.9% in the third quarter to $205.7 million
  • Gross margin and merchandise margin improve
  • Adjusted EBITDA increased from $12.4 million to $12.8 million
  • Customer transactions increased by 27.4% and excluding Red Hook increased by 23.6% over the prior year
  • Lease terms improved for flagship location on 74 th and Broadway
  • Company initiated organizational realignment designed to enhance productivity and streamline operations
  • Private label continues to grow as a percentage of sales

Charles Santoro, Executive Chairman said, "During the quarter, we grew our revenues and market share, made progress on a number of long-term margin initiatives and enhanced the visibility of our real estate pipeline. While our business faced a number of headwinds during the quarter including a tougher comparison over last year, the compressed holiday shopping season and a generally softer retail backdrop, we remain excited about our long-term growth prospects. We have also strengthened our senior leadership structure, and announced several important promotions to enhance operations and productivity initiatives as Fairway evolves to the next level of growth and scale. Fairway's differentiated food retail platform remains well positioned to capture incremental market share as we continue to expand our store base and capitalize on the shifting consumer focus towards healthy living and value."

Operating Results for the Third Quarter of Fiscal 2014

For the third quarter of fiscal 2014, net sales increased $38.4 million, or 22.9%, to $205.7 million from $167.3 million in the third quarter of fiscal 2013. Net sales growth in the quarter was driven primarily by the new stores opened subsequent to September 29, 2012 and the net sales from the Red Hook, Brooklyn location ("Red Hook"), which was closed for the last nine weeks of the third quarter in the prior year. On a pro-forma basis to include the lost sales from the Red Hook store, net sales increased 14.3% in the quarter.

Pro forma Net Sales and Adjusted EBITDA Margin 1
(Dollars in millions) Thirteen Weeks Ended Thirteen Weeks Ended
  December 30, 2012 December 29, 2013
  Actual Pro forma Actual Pro forma
Net Sales $167.3 $180.0 $205.7 $205.7
 % growth 10.0% 18.4% 22.9% 14.3%
Central Services $9.5 $9.5 $9.4 $9.4
% margin 5.7% 5.3% 4.6% 4.6%
Adjusted EBITDA  $12.4 $12.4 $12.8 $12.8
 % margin 7.4% 6.9% 6.2% 6.2%
(1)  The pro-forma adjustments are made to account for the temporary closing of the Company's Red Hook, Brooklyn store due to Hurricane Sandy and therefore make more meaningful comparisons between periods. The Red Hook, Brooklyn store was closed beginning October 29, 2012 and re-opened on March 1, 2013.  Pro forma net sales for the quarter ended December 30, 2012 reflect a pro forma adjustment of $12.7 million based on the Red Hook location's net sales during the same 9 week period in the prior fiscal year. The actual adjusted EBITDA includes business interruption insurance proceeds of $2.5 million for the third quarter. As a result, no pro-forma adjustment is needed for adjusted EBITDA.

Same store sales, excluding our Red Hook store, decreased 1.7% in the quarter. The decrease in same store sales was largely due to the compressed holiday shopping period and the effect of Hurricane Sandy, which benefited sales in the third quarter of fiscal 2013 as a result of pre- and post-storm stock-up and absorbed market share from competitors who were not fully operational subsequent to the storm.

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