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Why Fairway Group Holdings (FWM) Stock Is Declining On Tuesday

NEW YORK (TheStreet) -- Shares of Fairway Group Holdings Corp. (FWM) are lower by -4.38% to $6.12 in late-morning trading as the specialty grocery stores sector reacts poorly to The Fresh Market's (TFM) ratings downgrade today to "sell" from "neutral" at Goldman Sachs (GS).

Goldman cut its rating on The Fresh Market because the company is facing increasing competition and cost inflation.

The firm also reduced its price target on the stock to $27 from $36.

Must Read: Warren Buffett's 25 Favorite Stocks


Other stocks reacting negatively to the downgrade include Whole Foods Market Inc. (WFM), down -1.78% to $38.07, Weis Markets Inc. (WMK), lower by -1.10% to $44.90, and Roundy's Inc. (RNDY) down -1.94% to $5.06.

Separately, TheStreet Ratings team rates FAIRWAY GROUP HOLDINGS as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate FAIRWAY GROUP HOLDINGS (FWM) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, generally high debt management risk and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry. The net income has significantly decreased by 32.2% when compared to the same quarter one year ago, falling from -$6.69 million to -$8.84 million.
  • The gross profit margin for FAIRWAY GROUP HOLDINGS is currently lower than what is desirable, coming in at 32.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.41% trails that of the industry average.
  • The debt-to-equity ratio is very high at 22.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, FWM's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
  • FAIRWAY GROUP HOLDINGS's earnings per share declined by 31.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FAIRWAY GROUP HOLDINGS reported poor results of -$1.93 versus -$1.43 in the prior year. This year, the market expects an improvement in earnings (-$0.36 versus -$1.93).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 74.71%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 31.25% compared to the year-earlier quarter.
  • You can view the full analysis from the report here: FWM Ratings Report
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