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Crain's New York Business reports that Fairway - the New York-based retailer than went public less than a year ago amid predictions that it could challenge Whole Foods around the country and eventually could operate as many as 300 stores nationwide - hit a rough patch last Friday when it reported a quarterly net loss of $31 million and said its quarterly same-store sales were down 1.7 percent. Those numbers sent its stock price down by almost 30 percent, and raised questions about its strategic direction.

And, as MNB reported last Friday, Herb Ruetsch retired as CEO of Fairway Markets after 15 years with the company. He has been CEO for two years. Fairway's president, William Sanford, now will serve as interim CEO. Crain's notes that "Sanford is a former operating partner at Sterling Investment Partners, the private equity firm that acquired a controlling stake in Fairway in 2007 from the founding Glickberg family."

The Crain's story notes that Fairway's management plans to cut $4 million in annual overhead as a way of reaching profitability, but also plans to continue opening stores and expanding its NY-area footprint. But, the story also points out that Fairway faces increased and improving competition - Whole Foods, for example, recently opened a store in Red Hook, Brooklyn, not far from a Fairway store.
KC's View:
Hubris.

There is a lot to like about the Fairway format, but almost from the beginning of Fairway's expansion efforts a few years ago, I couldn't help but feel that there was a degree of arrogance and hubris infecting company leadership. The folks there often seemed disrespectful and condescending about the competition, wildly impressed with their own brilliance, and highly focused on the big payday that would come with finding private equity investment and, eventually, an IPO. Growth seemed to be fueled by a desire to drive up the company's financial value, not by a desire to bring value to local neighborhoods.

Now, the company has as a CEO someone who appears to have little retail experience, is talking about cutting its way to profitability (never a good sign), and, one assumes, is thinking more about satisfying the NY market than expanding elsewhere in the country.

Maybe they can turn things around, but to do so, I'd suggest that they start enlisting really solid merchants and marketers who can keep the company focused on the right things. Like taking care of Main Street, not Wall Street. But I wonder how much patience the private equity group will have … and how many quarters it will take before they start thinking about shopping Fairway around.