Fairway Group Holdings has filed for bankruptcy after a year in which its sales and profits have steadily declined, its share price has dropped 96 percent, and its image as an innovative food retailer has suffered mightily.
Bloomberg reports that Fairway, which has more than a dozen locations in New York, Connecticut and New Jersey, "has been struggling with growing competition from larger chains, including Whole Foods Market Inc., which have been drawing away shoppers looking for organic produce and unfiltered extra-virgin olive oil."
The story notes that "the company said its proposed restructuring plan would cut about $140 million in secured debt. All creditors but senior secured lenders would be paid in full, and union contracts would be honored. Senior lenders would get equity and $84 million of debt in the reorganized company. There will be no interruption to customer service at the company’s 15 stores, according to the statement."
Fairway began as a family-owned fruit stand on New York City's Upper West Side during the Great Depression, eventually and slowly expanding into becoming a full service grocery store with an emphasis on specialty foods. The founding Glickberg family sold a major stake in Fairway to Sterling Investment Partners in 2007, and Sterling expanded more quickly and brought the company public in 2013.
Bloomberg reports that Fairway, which has more than a dozen locations in New York, Connecticut and New Jersey, "has been struggling with growing competition from larger chains, including Whole Foods Market Inc., which have been drawing away shoppers looking for organic produce and unfiltered extra-virgin olive oil."
The story notes that "the company said its proposed restructuring plan would cut about $140 million in secured debt. All creditors but senior secured lenders would be paid in full, and union contracts would be honored. Senior lenders would get equity and $84 million of debt in the reorganized company. There will be no interruption to customer service at the company’s 15 stores, according to the statement."
Fairway began as a family-owned fruit stand on New York City's Upper West Side during the Great Depression, eventually and slowly expanding into becoming a full service grocery store with an emphasis on specialty foods. The founding Glickberg family sold a major stake in Fairway to Sterling Investment Partners in 2007, and Sterling expanded more quickly and brought the company public in 2013.
- KC's View:
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As the risk of over-simplifying what clearly is a bad situation, I think it is fair to argue that when Fairway became less about the marketing and merchandising of food, and more about maximizing wealth at the ownership and then shareholder level. And I would almost always argue that food stores do better in the long run when they focus on what is important to their customers, and let profitability emerge from that.
It just doesn't work in retail if you focus on Wall Street first and Main Street second. There may be some short term gains, but eventually the whole thing will fall apart.
