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Fairway Preps for an IPO

Grocer focused on expanding outside of NYC


Fairway, which operates 12 grocery stores in the Greater New York City metropolitan area, has announced the terms of its upcoming IPO. The company plans to issue 13.7 million shares at a range of $10 to $12, likely in the next couple of weeks.

Founded in the midst of the depression during the 1930s, Fairway is now a fast-growing grocery chain.

Each store has an extensive selection of natural and organic foods — and the prices are fairly reasonable, especially compared to Whole Foods (NASDAQ:WFM). The floor layouts are particularly engaging, arranged as a variety of specialty shops such as a seafood market, bakery and gourmet cheese purveyor.

According to the company’s S-1:

“Our stores provide a sensory experience, including aromas of fresh coffee roasts and freshly baked bread, an array of vibrant colors across our produce displays, cheese experts describing selections of our over 600 artisanal cheeses, samples of our approximately 135 varieties of olive oil and free tastings of our delicious prepared foods. Our stores feature whimsical and informative signs designed to educate customers about the quality, origin and characteristics of our products, and offer tips and suggestions on food preparation and pairings. We encourage a high level of interaction among our employees and customers, which results in a more informed, engaged and satisfied customer. We believe the distinctive Fairway food shopping experience drives loyalty, referrals and repeat business.”

Sounds pretty good, huh?

But it’s not easy to pull off. Fairway requires an extensive supply chain system, and a majority of its perishables are delivered directly to the stores, rather than stored in warehouses, helping to to improve freshness and lower inventory costs.

From 2010 to 2012, net sales increased by 38% to $554.9 and EBITDA increased by 49.8% to $35.8 million. Proceeds from the IPO will be a big help in continuing the growth.

Fairway plans to open two new stores in fiscal year 2014, and three to four stores per year after that. The company likely will move into New England and the District of Columbia.

The grocer did sustain damage from Superstorm Sandy, but it looks it had adequate insurance and has mostly recovered, so management is now free to focus on the IPO.

Fairway plans to list on the Nasdaq under the symbol of “FWM” and the lead underwriters include Credit Suisse (NYSE:CS), BofA Merrill Lynch (NYSE:BAC), Jefferies & Co. (NYSE:JEF) and William Blair.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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