Fairway Market, the supermarket chain that grew from a fruit-and-vegetable stand on the Upper West Side, has officially filed for Chapter 11 bankruptcy on Thursday morning. In the filing, the company stated, "As of November 2019, Fairway's unaudited consolidated financial statements reflect total revenues of approximately $643.3 million and a net loss of approximately $65.8 million for the previous twelve month period and assets totaling approximately $158.9 million and liabilities totaling approximately $288.7 million."
On Wednesday, the chain responded to a NY Post report claiming that stores would close when the company filed for Chapter 7 bankruptcy, saying, "Fairway has been engaged in a strategic process and expects to soon announce a value maximizing transaction that will provide for the ongoing operations of stores. Our lenders remain extremely supportive of our efforts. All 14 stores remain open for business, offering a complete range of high quality, specialty food products, and we look forward to seeing our customers and employees."
Fairway's statement on Thursday, clarifying their situation, read, "The Company has entered into a stalking horse asset purchase agreement with Village Super Market, Inc. to sell up to 5 New York City Fairway stores and its Distribution Center for approximately $70 million. In addition, the Company will execute a Court supervised sale process to continue to negotiate for the sale of its remaining store locations. An Ad Hoc Group of the Company's senior lenders are supportive of the sale process and have agreed to provide the Company with up to $25 million in debtor in possession financing."
Village Super Market is a New Jersey-based company that operates the ShopRite brand. According to the Wall Street Journal, other companies interested in Fairway include "Gristede’s Foods Inc., Albertsons Cos., German retailer Lidl, Amazon and the ShopRite chain." It's possible other companies may continue their interest in acquiring the chain or part of it.
The bankruptcy filing claims that Fairway's pre-bankruptcy sale process "has so far been successful, it has also confirmed to the Debtors that their businesses are not sustainable over the long term under the current cost structure. No bidder has been willing to assume Fairway's liabilities—in particular, the Company's substantial labor and pension obligations—in connection with a purchase of Fairway's store."
Inside the Red Hook Fairway market
Fairway has a total of 14 stores across New York, New Jersey, and Connecticut, with seven in New York City: the Upper West Side flagship, a huge Harlem location, as well as locations in the Upper East Side, Kips Bay, Chelsea, Georgetown, and a large store in Red Hook. The filing notes that they employ over 3,000 people, "approximately 83% of whom are represented by unions."
In 2007, 80% of Fairway was acquired by a private equity firm, Sterling Investment Partners, who hoped to grow the concept exponentially with hundreds of stores along the East Coast.
At the same time, corporations' battle for consumers has changed and intensified, with online grocery options, broader retail-format stores—like Target and Walmart—and now Amazon vying for dollars. Mickey Chadha, who follows the food retail industry for Moody's, said, "Everybody was competing on price and so bigger players with stronger balance sheets could withstand the pressure much longer than a smaller player like Fairway.... Amazon bought Whole Foods, started pricing more aggressively. Delivery was becoming a lot more prevalent and Fairway does not that cash to invest in that part of the business."
"We would like to extend gratitude to our employees, vendors, distributors and customers for their support, dedication and loyalty over the years,” said Abel Porter, Fairway CEO, said in a statement. "It has always been Fairway’s priority to ensure our patrons are provided with the most optimal grocery experience, with the freshest foods and best-quality products, and our employees feel appreciated. After careful consideration of all alternatives, we have concluded that a court-supervised sale process is the best way to meet our objectives of preserving as many jobs as possible, maximizing value for our stakeholders, and positioning Fairway for long-term success under new ownership."
Porter, a supermarket industry veteran, joined the company in 2017, after a 2016 Fairway Chapter 11 bankruptcy filing (Sterling sold its interest in Fairway to a part of the Blackstone group, which then sold it Brigade Capital Management and Goldman Sachs Group). In 2018, Porter told employees, while announcing investments into the company, "I am here to announce that Fairway has bounced back."
Additional reporting by Katherine Fung
