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UPDATE: Bank of America Downgrades Fairway Group Holdings Corp. to Underperform, Lowers PT as Challenges will Persist Through F15

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February 10, 2014 8:49 am
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In a report published Monday, Bank of America analyst Robert F. Ohmes downgraded the rating on Fairway Group Holdings Corp. (NASDAQ: FWM) from Neutral to Underperform, and lowered the price target from $20.00 to $6.00.

In the report, Bank of America noted, “FWM reported F3Q14 revenues of $205.7MM (+22.9% y/y), below our estimate of $209.8MM (+25.3%) with a comparable sales (ex-Red Hook) decline of -1.7%. Gross margin of 31.9% was below our 32.5%. Higher than expected investments in marketing, e-commerce and new store expenses led to 80 bps of total operating expense deleverage (33.8% of sales), 200bps below our forecast. Lower than expected sales and margins, combined with unexpected expense deleverage resulted in adjusted EBITDA of $12.7MM vs. our $14.7MM forecast. We’ve lowered our F15 sales estimate to $845MM (was $912MM), and our F15 EPS estimate to a loss per share of $(0.59), cut from our previous estimate of $(0.18).”

Fairway Group Holdings Corp. closed on Friday at $8.13.

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