JACKSONVILLE, Fla. -- Winn-Dixie Stores here said it expects to begin closing stores and eliminating personnel as early as this week as part of a major restructuring program.
The restructuring will result in the closing of 114 unprofitable stores and the elimination of 11,000 positions, mostly at store level, in an effort to improve overall efficiency and support for its retail stores, the company said.
The restructuring is also intended to improve the chain's competitive position and its ability to focus on future growth, the company added.
Reflecting the reasons for the restructuring, Winn-Dixie's financial results for the third quarter ended April 5 showed severe declines in earnings and flat sales -- "operating results [that] continue to be disappointing and totally unacceptable," said Al Rowland, president and chief executive officer.
The 114 stores that will be closed represent approximately 10% of Winn-Dixie's base of 1,189 stores. The company said it will not abandon any marketing areas but will sprinkle the closings across all divisions.
The elimination of 11,000 positions will occur mostly at store level and primarily at stores that will be closed, the spokesman said. "We hope to do it quickly, before the end of the fiscal year [June 28]," he said.
The company will try to find positions for some store-level employees at other operations, he added.
According to Winn-Dixie, the restructuring -- to be implemented over the next 12 months -- will also include the following:
Retrofitting approximately 600 stores by allocating shelf space based on product movement to improve efficiency and customer service, following a test at about 20 stores.
Reducing and realigning executive and division-level management -- moves that will result in the retirement of 10 longtime executives at the end of June. (See sidebar.)
Centralizing procurement, marketing and merchandising -- a process whose planning has been under way for a couple of months, with implementation expected next month.
Reducing from 11 to seven the number of division offices by shutting down offices in Tampa, Fla.; Atlanta; and Louisville, Ky., and combining their operations into offices in Orlando, Fla.; Montgomery, Ala.; and Charlotte, N.C., respectively. As previously reported, the chain's 74-store Texas-Oklahoma division, based in Fort Worth, Texas, will be sold to Kroger Co., Cincinnati, pending approval from the Federal Trade Commission.
Closing an older, landlocked warehouse in Tampa and transferring distribution from that location to facilities in Orlando and Sarasota, Fla.
Closing two locally based manufacturing facilities -- a detergent plant and a bag plant -- and outsourcing manufacture of those products.
According to Rowland, "These changes are absolutely necessary to provide Winn-Dixie with an effective infrastructure to train and support operations management teams."
He said the company anticipates the restructuring will enable it to reduce expenses by approximately $245 million on an after-tax basis in two years, about a year after completing the process.
"The savings created by this reorganization and operations improvement are very achievable," Rowland said. "We will be more efficient operators and will be better able to serve our customers' needs."
Securities analysts applauded the restructuring initiatives but indicated it's going to take time for the changes to take effect.
Meredith Adler, an analyst with Lehman Bros., New York, said the changes are long overdue. "But it's not going to be easy winning back customers that the company has lost," she observed. "And what Winn-Dixie is trying to do seems to pose immense risks to the organization because it's asking people to change so much, so quickly.
"The restructuring is an effort to change the corporate culture, and there's a lesson to be learned here about the way not to go about it. Over the last few years Winn-Dixie has upgraded and enlarged its stores, but it didn't change the senior management overseeing those stores, and consequently it made a lot of bad decisions because the people didn't understand what it takes to operate large stores, so the stores were very inefficient. And just adding service departments didn't mean the stores were service-oriented.
"The company is taking the right steps, but it's going to take a lot longer than a year or two to get things turned around, although the closing of the 114 stores and the personnel layoffs will result in some quick benefits to the balance sheet."
Debra Levin, an analyst with Morgan Stanley Dean Witter, New York, said the restructuring will be "costly and time-consuming, and the company is still under considerable competitive pressure," particularly from Wal-Mart Stores, Bentonville, Ark., with which Winn-Dixie competes at nearly 60% of its stores.
"Wal-Mart has been a particularly tough competitor for Winn-Dixie, a situation that will likely continue given a substantial pricing differential," Levin said.
She also said Winn-Dixie's operations will remain under pressure "because it will take some time to implement the restructuring program. But if the company executes its restructuring well, there should be benefits to sales."
Jonathan Ziegler, San Francisco-based managing director for Deutsche Banc Alex. Brown, New York, said the restructuring "indicates Winn-Dixie is starting to get its act together, though it won't be a next-quarter phenomenon -- it's going to take a couple of years. But the company has a fabulous asset base, and it looks like it's moving in the right direction."
Net income dropped 82.5% to $10.3 million for the 12-week third quarter and 89.2% to $13.5 million for the 40 weeks ended April 5, while sales fell 0.1% to $3.19 billion for the quarter and 0.2% to $10.6 billion for the year to date. Comparable-store sales declined 1.6% for the quarter and 1.8% for the 40 weeks.
The company said it will record an after-tax charge of $275 million to $336 million for the restructuring, with most of the charge being recorded in the fourth quarter of this year and the balance in fiscal 2001.
In other news, directors of Winn-Dixie have authorized the repurchase of up to 10 million shares of the company's outstanding common stock on either the open market or in private transactions. This is in addition to the five-million share repurchase program disclosed last October, the company noted.
