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    Fairway Posts Mixed Q1 Results

    Gross margin up, but net loss wider, sales down

    Fairway Group Holdings Corp., the New York-based parent company of Fairway Market, reported net sales of $193.8 million for Q1 of fiscal 2016, compared with $198.3 million in Q1 of fiscal 2015. The company's adjusted EBITDA came in at $9.1 million, versus $11.1 million in the year-ago period, but gross margin was 31.5 percent, a 50-basis-point rise from last year's 31 percent.

    However, the company posted a net loss of $13.9 million in Q1, versus $9.7 million in the year-ago period. Fairway explained the wider net loss as the result of an increase in general and administrative expenses related to its Hudson Yards transaction (regarding a development on the West Side of Manhattan, where the company is planning a store), promotional activities, and income tax expense. The adjusted net loss was $3.9 million for Q1 2016 compared with $3.1 million last year.

    "I am pleased with our performance this quarter in a number of important operational areas, including our gross margin, which was driven by better-selling margins and improved shrink," said Jack Murphy, CEO of Fairway Market, which currently operates 15 stores in New York, New Jersey and Connecticut. "We also performed well on expenses, with progress in labor management and other expense categories. Importantly, we also strategically invested approximately $2.8 million to launch advertising, promotional and customer acquisition campaigns that we believe will eventually benefit our top line."

    Fairway Operating Results

    During Q1 2016, as Murphy pointed out, Fairway invested in increased promotional activity, particularly to develop its digital customer engagement strategy. Same-store sales declined 5.3 percent compared with the year-ago period, and customer transactions in comparable stores plunged 7.4 percent, although the average transaction size grew 2.3 percent from last year.

    Noted Murphy: "Our same-store sales performance in the quarter was impacted by a New York City-based competitive opening and an increase in promotional activity. Excluding these items, our same-store sales for the quarter were down approximately 2.3 percent. We are, however, seeing some positive developments in several of our suburban locations from our efforts."

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