VANCOUVER _ Health-food eatery chain Freshii Inc.’s stock plummeted nearly 40 per cent 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 $3.20 or about 36 per cent to $5.66 by Tuesday afternoon.
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.
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.
Freshii’s expansion in the United Kingdom and several U.S. states has been slower than expected, the company also said, 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.
The company’s stock began trading publicly in January at $12 after a $125-million initial public offering of its stock.