NEW YORK / Bloomberg
Fairway Group Holdings Corp., the New York gourmet grocery chain that once had ambitions of a nationwide expansion, is approaching default after years of red ink.
After gorging on debt to finance its growth plans, the company is now at risk of breaching its credit covenants when its fiscal quarter ends on April 3, according to a report by Moody’s Investors Service analyst Mickey Chadha. And even if Fairway gets a reprieve from its obligations, its capital structure remains unsustainable, Chadha wrote.
To bring its operations in line, analysts are advising the company to halt its plans to expand beyond its New York base. The chain has already pulled out of leases in lower Manhattan and the new Hudson Yards complex under construction on Manhattan’s Far West Side. Of its 15 stores, seven are in Manhattan, Brooklyn and Queens, with the rest outside the city in places such as Pelham Manor, New York, and Paramus, New Jersey.
The company hasn’t done enough to communicate its offerings to shoppers who may not be familiar with it, said Mike Paglia, director of retail insights at consulting firm Kantar Retail. Paglia believes Fairway should shutter some stores outside of New York. “They’re in a special class of retailers,” he said. “It’s really sad to see how things have unfolded.”
Fairway, which is known for its high-quality produce and private brands, in many ways is a victim of timing.