Fairway Group Holdings Corp. (FWM)

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Fairway Group Holdings (FWM)

Q3 2014 Earnings Call

February 06, 2014 4:30 pm ET


Nicholas Gutierrez

Charles W. Santoro - Executive Chairman

William E. Sanford - President

Edward C. Arditte - Chief Financial Officer and Executive Vice President


John Heinbockel - Guggenheim Securities, LLC, Research Division

Brian W. Nagel - Oppenheimer & Co. Inc., Research Division

Mark R. Miller - William Blair & Company L.L.C., Research Division

Mark Wiltamuth - Jefferies LLC, Research Division

Judah Frommer

Kelly A. Bania - BMO Capital Markets U.S.



Good day, ladies and gentlemen, and welcome to the Fairway Group Holdings Third Quarter Fiscal 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the call over to your host for today, Mr. Nico Gutierrez, Manager of Finance and Investor Relations. Sir, you may begin.

Nicholas Gutierrez

Thank you. Good morning, ladies and gentlemen, and welcome to Fairway's third fiscal quarter earnings conference call. With me today are Charles Santoro, Fairway's Executive Chairman; Ed Arditte, Co-President and Chief Financial Officer; and Bill Sanford, Interim Chief Executive Officer.

By now, everyone should have had access to the third quarter earnings release, which went out this afternoon, as well as the second press release announcement, search and organizational changes. Both of these releases are available on the Investor Relations portion of Fairway's website at www.fairwaymarket.com. This call is being webcasted, and the replay will be available on the company's website as well.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements and the management may make additional forward-looking statements in response to your questions. These statements do not guarantee 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 6, 2013. Fairway assumes no obligation to revise any forward-looking statements that may be made in today's release or call.

And with that, I would like to turn the call over to Charles Santoro, our Executive Chairman.

Charles W. Santoro

Thank you, Nico, and thank you, all, for joining us today. We have a full agenda, so let's get started by addressing management changes and the initiatives that were in our press release issued earlier today.

I am very pleased to announce that Bill Sanford, Fairway's President since April 2012, is assuming the role of Fairway's Interim Chief Executive Officer, replacing Herb Ruetsch, who for personal and family reasons, is retiring after 15 years at Fairway, and the last 2 years as our CEO.

All of us at Fairway would like to take a moment to thank Herb for his years of dedication, loyalty and countless weekends, holidays and late nights of hard work and commitment. I know that Herb's family will enjoy having him back and Herb's legacy, in our mind, will always be his invaluable role in helping transform Fairway from a small family business into an iconic, growing specialty food retail powerhouse, serving some 20 million customer visits annually in the tri-state area. Herb will remain an important part of Fairway going forward as a special advisor to the company, continuing to provide insight into what Herb loves the most, merchandising and our customer experience.

Bill Sanford, our Interim CEO, brings continuity, strong leadership and organization skills, and has also played a very important role in Fairway's wealth[ph] , development and success over the last 5 years of his involvement at Fairway, including in his previous roles as Chief Financial Officer and most recently, as President. Bill brings his wealth of former senior-level public company experience and deep knowledge of logistics, distribution and consumer analytics.

I'm also very pleased to announce that Kevin McDonnell, our Chief Operating Officer; and Ed Arditte, our Chief Financial Officer; will each assume the position of Co-Presidents, while retaining their current Chief Operating Officer and Chief Financial Officer roles. Kevin and Ed work very closely together and these promotions are designed to bolster and enhance operations and productivity initiatives as Fairway moves to its next level of growth and scale. This is also timely as fairway prepares to roll out its production center and important new store openings later this calendar year.

We will continue a CEO -- we will commence a CEO search shortly and will consider qualified individuals, both within and outside of Fairway, who we believe possess leadership, merchandising and organizational skills to meet our long-term goals and opportunities.

Our senior leadership team is extremely strong and is supported by a very deep group of operators and merchants, and we believe that these changes support our organizational growth and enhance our ability to execute some very demanding goals. And Bill and Ed will later touch on some important operations and organization initiatives currently underway.

Turning to our business and financial update. Fairway continued to make progress during this past quarter on a number of key areas of our business, including the development of our real estate pipeline, continued growth of our private label category, margin expansion initiatives and continued focus on enhancing business processes.

We also continued to expand our market share with the opening of our 14th store located in Nanuet, New York, and have grown our customer account by approximately 27% over the prior year's third quarter. So we are very excited about our long-term prospects and opportunities.

During the third quarter, Fairway achieved record revenues, $206 million, a 23% increase over last year's reported sales, increased our merchandising margins by approximately 50 basis points and increased our gross margins 10 basis points to 31.9%.

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