April Seen As Launch Date For Fairway Market’s IPO

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Fairway Market is expected to launch its long awaited IPO next month, according to published reports. The New York based retailer had originally filed plans for the initial public offering with the SEC  last year and had been expected to launch the IPO in September 2012. Those plans were postponed after several of its stores, particularly its Red Hook unit in Brooklyn, were hit by Superstorm Sandy a month later. The Red Hook store recently reopened after undergoing a complete renovation. Fairway wrote off $2.1 million of merchandising and $4.1 million of property and equipment after the storm.

Fairway, which is controlled by Westport, CT private equity firm Sterling Investment Partners, filed its registration under a new option made available last year with the passage of the federal JOBS act. The new provision allows companies to keep their financial data confidential until 21 days before they begin their road show to recruit other investors. The new option was designed for smaller companies to bypass the huge expense and much of the bureaucratic process associated with conventional IPOs. Only companies with sales under $1 billion can take advantage of the provision.

The Fairway story is one of the best in the retail business. Despite operating some of the most unique (and high-volume) stores in the country, the retailer, under the ownership of the Glickberg family (which founded Fairway in 1930), found it difficult to finance future growth. So, six years ago Sterling stepped in, paying $150 million for controlling equity and seed money to build new stores. Today Fairway operates 12 stores doing huge volumes and has added units in New Jersey and Connecticut. Fairway opened its fifth Manhattan store in December and plans to open another Manhattan store in the Chelsea neighborhood this summer, along with a unit in Nanuet, NY in the fall.

In March, Fairway posted a net loss of $56.1 million while sales were up 19.3 percent through the first three quarters of its fiscal year.

The information in Fairways’ SEC filing updated the retailer’s S-1 document for the IPO and included financial information through the end of Fairway’s fiscal third quarter on December 30, 2012

Sales through the first three quarters totaled $482.5 million, with $43 million in new sales coming as the result of three new stores and $35 million in new sales from the nine stores open in both periods. Gross profit as a percent of sales was 32.7 percent, down from 33.3 percent in the same period last year. Adjusted EBITDA of $33.8 million improved 35.9 percent, but comparable-store sales decreased by 4.6 percent, which Fairway said reflects customers shifting to shop at more convenient locations as additional outlets open.

The net loss reflects opening costs as well as higher shrink and reduced productivity associated with new stores as well as refinancing and pre-offering costs, Fairway said.

The retailer has said its long-term plans call for three to four new stores a year and has cited studies indicating it could triple its presence in the greater New York market, build as many as 90 stores between New England and Washington, DC, and support 300 stores nationwide.

An IPO would reward Sterling’s confidence and patience in its supermarket investment, and allow the Glickberg family (which still owns a significant piece) to continue to further develop a fourth generation (Dan Glickberg, 29, currently serves as a VP and his father Howie is vice chairman).