JACKSONVILLE, Fla. -- Pressure from product vendors, credit downgrades, poor holiday-season sales and a need to stem losses due to lease payments on dark stores sparked Winn-Dixie Stores to seek protection under Chapter 11 of the U.S. Bankruptcy Code, according to court documents filed last week by the retailer here.
In filings with the U.S. Bankruptcy Court in New York, Winn-Dixie said it had experienced a reduction in vendor and other credit of more than $130 million since announcing a loss of $400 million and same-store sales declines of 4.9% during its fiscal second quarter that ended Jan. 12. Rating agencies Moody's and Standard & Poor's each downgraded Winn-Dixie's credit following the earnings announcement on Feb. 10, and vendors subsequently demanded shorter payment terms. Some vendors, in anticipation of a Chapter 11 filing, had sought to have goods returned to them, Winn-Dixie noted.
Winn-Dixie said it over-ordered goods during October and November in anticipation of a strong holiday selling season that never materialized. That left the company with higher inventories and higher shrink than it expected, and it was forced to draw additional funds from its credit facility.
In addition, Winn-Dixie said it was losing nearly $5 million a month on rent payments to stores that were closed as a part of the asset rationalization plan announced last year. Winn-Dixie had closed 135 stores since last April, but as of Jan. 12 had sold or subleased fewer than half of them.