VANCOUVER — Health-food eatery chain Freshii Inc.’s stock shed about a third of its worth Tuesday after the company scaled back its aggressive expansion plans.
“Today’s announcement is extremely disappointing to me,” said founder and CEO Matthew Corrin during a conference call with investors Monday evening.
After markets closed Monday, Freshii (TSX:FRII) announced its growth has been slower than expected, resulting in some store closures and a reduced target for net openings this year.
The Toronto-based company’s shares fell $3.11 or about 35 per cent to $5.75 on Tuesday.
Freshii’s revised outlook anticipates between 90 and 95 net new store openings in its 2017 financial year, down from 150 to 160 locations.
The company also scaled back its longer-term expansion targets, saying it now plans to open between 730 and 760 stores by the end of its 2019 financial year, rather than the 810 to 840 stores previously anticipated.
Robert Carter, executive director of food service at NPD Group, amounted the news to “growing pains” as the relatively young chain adjusts to “such dramatic growth.”
In its 2017 financial year, roughly 60 fewer restaurants will be opened partly because Freshii and department store Target ended their relationship, the company said.
It closed 17 of its eateries located in Target stores in the third quarter, ending Sept. 24. One additional Freshii Target store will close by the end of this year.
Corrin attempted to reassure investors that the closures don’t signal an end to such partnerships in the future.
Freshii launched an extensive review of its Target partnership and learned it can make future relationships more successful by, for example, offering fewer menu items to reduce prep work and improve labour efficiency, he said.
The company remains excited about similar partnerships being a pillar of growth for Freshii in the future, Corrin said.
Carter pointed to an announcement earlier this month that a selection of the company’s food will be served on hundreds of Air Canada flights daily starting next month as an example of the many opportunities Freshii will have for strategic partnerships.
Freshii also said its expansion in the United Kingdom and several U.S. states has been slower than expected because its multi-unit franchisees have been more conservative in their real estate selection than anticipated.
The company also faced delays facilitating “a far greater number” of store openings this year than last, which led to further challenges. Freshii has hired additional people and engaged a global project management firm to help with the logistics.
Carter said the company is making the right moves to address these issues and once the stores are opened, Freshii will continue to experience growth.
“This is a brand that’s here for the long term,” he said of the fast-casual restaurant that serves salads, wraps, bowls, burritos and other meals to health-conscious consumers.
The company’s stock began trading publicly in January at $12 after a $125-million initial public offering of its stock.