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Fairway Group Holdings Corp. (FWM)
F1Q 2014 Results Earnings Call
August 8, 2013 8:30 AM ET
Nicho Gutierrez - Manager, Finance & Investor Relations
Charles Santoro - Executive Chairman
Herb Ruetsch - Chief Executive Officer
Ed Arditte - Chief Financial Officer
John Heinbockel - Guggenheim
Edward Kelly - Credit Suisse
Erica Eiler - Oppenheimer
Mark Miller - William Blair
Robbie Ohmes - BAML
Scott Mushkin - Wolfe Research
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As a reminder, this call maybe recorded. I would now like to introduce your host for today’s conference, Nicho Gutierrez. You may begin.
Thank you. Good morning, ladies and gentlemen, and welcome to Fairways first fiscal quarter earnings conference call. With me today are Charles Santoro, Fairways’ Executive Chairman; Herb Ruetsch, our Chief Executive Officer; and Ed Arditte, our Chief Financial Officer.
By now everyone should have access to the first quarter earnings release, which went out early this morning. If you have not received the release, it is available on the Investor Relations portion of Fairways website at fairwaymarket.com. This call is being webcasted and a replay will be available on the company’s website as well.
Before we begin, we would like to remind everybody that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your question. These statements do not guarantees future performance and therefore undue reliance should not be placed upon them.
We refer all of you to the risk factors contained in Fairway’s annual report on Form 10-K filed with the Securities and Exchange Commission on June 6th. Fairway assumes no obligation to provide any forward-looking statements that maybe made in today’s release or call.
And with that, I would like to turn the call over to Charles Santoro, our executive Chairman.
Hello, everyone, and thank you, Nicho. Thanks for joining us today to update you on the company’s continued progress and financial results for our first fiscal quarter ended June 30, 2013, and our first quarter as a public company. Let me start by taking a few moments to update you on several positive developments at Fairway.
As most of you know on July 24th, we opened our Chelsea, Manhattan location, the 13th Fairway market and the fifth Fairway in Manhattan, and by the way the store opened in typical Fairway fashion with a host of shoppers lined up waiting for the store to commence business and a number of city and state dignitaries embracing Fairway’s addition to the neighborhood. It was a lot of fun for all of us and it was really good to see many of you on upon there.
Now, for those of you either live in the New York City area or have visited from time to time, you know that Chelsea is a young vibrant densely populated area and a very attractive location for Fairway.
But Chelsea location has approximately 70,000 square feet of retail space and it is therefore somewhat smaller than our other Manhattan stores. And while the smaller footprint of the Chelsea location will generate revenues in absolute dollar terms less than our other Manhattan locations.
We do expect that Chelsea’s productivity level will be very strong and on -- and fully on par with our other urban stores and well above our current company-wide sales average of approximately $1900 per square foot.
We also expect that gross margins will be very strong and in line with our other Manhattan locations as a result of high volumes per square foot, product mix and operating efficiencies. I should also note that the constructions build out cost at Chelsea came in at or below budget. We are very pleased about that.
Now, moving beyond Chelsea, we also remained intensely focused on our new store pipeline, including the full 2013 opening of our 14th Fairway location in Nanuet, New York, and we remained highly focused on the build out of our new production center in the (inaudible) Point area of [Nebrance] which we believe is on track to open later this year.
Importantly, on the real estate front we have a number of other exciting developments taking place in our pipeline of opportunities is expanding. And, I’m particularly pleased to announce that yesterday we signed a lease for a new Manhattan site located in the Hudson Yards neighborhood of Manhattan. So it is official. Fairway will be the anchor fruit tenant of this $12 billion Hudson Yards’ redevelopment project which will consists of approximately 6 million square feet of commercial space, more than 5,000 residential units, a luxury hotel, a direct connection to the Number 7 subway and 14 acres of new public space.
This development will undoubtedly also be a major New York destination which will serve as global headquarters to Coach and Time Warner among others and will drive in our view huge numbers of local residence, workers, visitors and tourist through this new development.
For those of you who have not yet read our press release regarding Hudson Yards, which went out earlier this morning, please let Nicho know, if you would like us to forward it directly to you.
But just a few more details in Hudson Yards, our Hudson Yards store, we expect will open mid-2015 calendar and will comprise approximately 45,000 square feet. It will be adjacent to New York City's famous High Line and occupy the base of the 52-storey South Tower which has nearly 2 million square feet of commercial space and this building will also be the new home to Coach, L'Oreal and SAP.
I should note that the development is one of the country’s largest privately funded real estate projects and it represents for Fairway an amazing endorsement of our food retailing model by the renowned and visionary developer, Steven Ross, related companies and their partners Oxford Properties Group. We appreciate the enormous amount of time they spent working with us to execute this lease and to design the space.