Progress on the new production facility remains on track and the Company recently expanded the executive team with the appointment of the Vice President of Quality Assurance & Compliance for the Production Center. The Company expects to begin phasing in select product lines in early calendar 2014, beginning with produce cross-docking and followed by select bakery and commissary products. The new facility will have the capacity to support approximately 30 stores in the NY metropolitan area.

Real Estate Pipeline Continues to Develop

During the second quarter, the Company announced three new signed leases. The Lake Grove store, expected to open in the spring of 2014, will be Fairway's third on Long Island and is located in a premier retail corridor of Suffolk County. The second store, which is expected to open in the fall 2014, will be the first Fairway in lower Manhattan and will be located in the neighborhood of TriBeCa. The 45,000 square foot store will be located in a heavily populated residential area which will serve customers in TriBeCa as well as Battery Park City. The third store will be located in the new Hudson Yards development in west midtown Manhattan and is expected to open in the spring of 2015.

Operating Results for the Second Quarter of Fiscal 2014

For the second quarter of fiscal 2014, net sales increased $22.7 million, or 14.1%, to $183.2 million from $160.5 million in the second quarter of fiscal 2013. Net sales growth in the quarter was driven primarily by new stores opened subsequent to July 1, 2012 which contributed approximately 94% of the total sales growth, with the balance coming from an increase in same store sales of 1.0%. Management estimates that same store sales were negatively impacted by approximately 100 basis points due to the holiday overlap of Labor Day and Rosh Hashanah as well as a one week delay in school openings this year. Same store sales growth in the quarter was driven by an increase in average transaction size which grew 1.6% partially offset by a decrease in comparable transactions of 0.6%.

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