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Fairway shares get a boost from growth predictions

NEW YORK (AP) -- Shares of Fairway Group Holdings Corp. rose Monday after a pair of analysts initiated coverage of the New York grocery store chain with top ratings.

THE SPARK: William Blair's Mark Miller rated Fairway at "Outperform," while Jefferies' Daniel Binder rated it a "Buy," both predicting substantial growth in the coming years.

THE BIG PICTURE: Fairway is well-known among New York shoppers for offering relatively low prices and cramming its shelves with a wide assortment of groceries. It began as a fruit and vegetable stand in 1933 and has since expanded to a dozen locations in the region, including stores in Connecticut and New Jersey.

Fairway, which went public in April, has said it will use the proceeds from its IPO to fund its continued expansion. It plans to open two new stores in 2014 and three or four stores a year after that.

Eventually, the company says, it could have more than 300 U.S. locations, which would put it on par with organic grocer Whole Foods, which has more than 300 stores in North America and the United Kingdom.

THE ANALYSIS: Miller noted that specialty food retailers have been growing at a faster rate than the overall U.S. grocery industry and picking up market share as conventional supermarkets focus on standardizing their offerings to compete on price.

Miller said that current specialty and conventional retailers can't match Fairway's variety of offerings, while it also benefits from very productive stores and competitive prices.

Meanwhile Binder, who set a $24 price target for the stock, said he likes the company, along with its management team, and thinks it has huge potential for store growth. And as the company expands, both its purchasing power with its suppliers and its ability to control costs will improve, he said.

THE SHARES: Up 68 cents, or 3.7 percent, to $18.98 in midday trading, after peaking at $19.24 earlier in the day. Since going public, the shares have traded between $16 and $19.45.