Market Overview

Fairway Investors Run For The Exit As Organizational Changes Reduce Visibility

Fairway Group (NASDAQ: FWM) shares plummeted amid organizational realignment and earnings. Five analyst downgraded shortly following three press releases on February 6.

On Thursday, Fairway Group reported third quarter results and the company's restructuring. Fairway announced third quarter GAAP EPS of $0.74, which may not compare with the estimates of $0.04. Revenue came in at $205.70 million versus the estimated $207.75 million. Third quarter net sales increased 22.9 percent and adjusted EBITDA increased from $12.4 million to $12.8 million.

In the company's press release, Executive Chairman Charles Santoro focused on Fairway's strengthened leadership and promotions to enhance operations.

Santoro commented, “During the quarter, we grew our revenues and market share, made progress on a number of long-term margin initiatives and enhanced the visibility of our real estate pipeline. While our business faced a number of headwinds during the quarter including a tougher comparison over last year, the compressed holiday shopping season and a generally softer retail backdrop, we remain excited about our long-term growth prospects.”

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CEO Herbert Ruetsch announced that he will retire after working with the company for 15 years. William Sanford, President of Fairway Group will assume the role as the interim CEO.

In a third press release on Thursday, the company announced that General Robert Magnus has been appointed to Fairway's Board of Directors.General Magnus worked for the United States Marine Corps for 39 years He served as Deputy Commandment for Programs in Resources from 2001 to 2005 and held the position of the 30th Assistant Commandment of the Marine Corps prior to retirement. General Robert Magnus will join Stephen L. Key and Farid Suleman as independent directors on the Fairway Group Holdings Board of Directors.

Despite management's optimism on long-term initiatives and restructuring, shares of Fairway hit a new 52-week low of $8.26.

Credit Suisse, BMO Capital, BB&T, Guggenheim Securities, and Oppenheimer all downgraded Fairway Group. Credit Suisse analyst Edward Kelly commented on the combination weak third quarter results, the exit of CEO Herb Ruetsch, and increased competitive pressure. Reduced visibility and concerns over the consistency of earning shortfalls outweigh long-term potential.

Shares of Fairway closed at $11.43 on Thursday and have fallen as low as $8.08, down 41.46%.

Latest Ratings for FWM

DateFirmActionFromTo
Nov 2014Credit SuisseMaintainsUnderperform
Nov 2014Credit SuisseMaintainsUnderperform
Aug 2014William BlairDowngradesOutperformMarket Perform

View More Analyst Ratings for FWM
View the Latest Analyst Ratings

Posted-In: BB&T BMO CapitalAnalyst Color Earnings News Downgrades Management Analyst Ratings

 

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