JACKSONVILLE, Fla. -- Winn-Dixie Stores here said the company had better-than-expected comparable-store sales in the third quarter ended April 3, and that comps will remain positive in the fourth quarter and then keep rising between 1% and 2% in fiscal 2003.
The company credited the rising comps to the introduction of a loyalty program at 450 Florida-area stores and the conversion of 28 conventional supermarkets in the Atlanta area to the limited-assortment SaveRight format.
During a conference call with investment analysts following the release of the results, Richard McCook, Winn-Dixie chief financial officer, said, "We had anticipated our identical-store sales to remain negative this quarter. However, we are pleased to report our initiatives paid off, and our comparable-store sales were up 0.2%, and our identical-store sales were at positive 0.1%.
"As we begin to cycle the impact of the elimination of unprofitable sales departments and other sales items from the retrofits, we will realize improved trends in sales."
Although he declined to give precise figures about the impact of the conversions and loyalty program, Al Rowland, Winn-Dixie president and chief executive officer, said during the conference call, "We've been pleased with sales and profitability with our SaveRight conversions. We anticipate they'll continue to produce good financial results for us."
Responding to a question about the loyalty program, Rowland said, "We feel like we had a very successful rollout. We feel it's something that's going to help us a lot going forward."
McCook said he would not disclose where or when additional conversions or loyalty rollouts might occur. He did say that the cost of the 28 conversions was $3.1 million, and the cost of the loyalty rollout was $8.2 million. He added that the company does not expect additional charges from the Florida loyalty program rollout.
Winn-Dixie said the cost of the two programs was largely offset by a $12.8 million gain ($7.8 million after taxes) from the sale of Deep South Products, Gainesville, Ga., a cheese and margarine manufacturing facility, to Schreiber Foods, Green Bay, Wis.
McCook noted that the company expects positive comps in the fourth quarter despite an anticipated 1% loss in sales from Easter shifting from last year's fourth quarter to this year's third quarter.
Other topics discussed in the conference call included:
Winn-Dixie's exposure to units operated by Wal-Mart Stores, Bentonville, Ark.
Rowland said, "We probably do compete with more Wal-Marts than anybody as a percentage of our total stores. But we've taken the initial hit. Wal-Mart announced on a go-forward basis that 70% of its new stores will go into areas where we don't operate."
Asked about the possibility of increased competition with Wal-Mart's Neighborhood Market format, Rowland said, "We have one Neighborhood Market operating against us in Texas. We've seen no impact from the store. It probably wasn't close enough to us to have any impact."
He added, "We have heard rumors -- we don't know any specifics -- that Wal-Mart has been active in the Orlando and Tampa real estate markets" scouting for potential Neighborhood Market sites.
The refusal of the U.S. Supreme Court to hear Winn-Dixie's appeal in a tax case.
McCook said the company was continuing to negotiate its payment with the Internal Revenue Service. In a footnote to its third-quarter results, the company said it has set aside $54.8 million to pay the back taxes and interest and does not expect additional financial impact from the case.
How the company expects to grow customer traffic.
Rowland said, "Our opportunity in my opinion is in running the best store in each neighborhood. The levels at which we're penetrating each neighborhood give us a huge opportunity to increase our percentage of customers who live closest to our stores.
"Sales for the 12-week third quarter rose 1% to $3.05 billion, comp-store sales increased 0.2%, net income grew 314% to $44.3 million, and earnings per share were 31 cents, compared with 8 cents in the previous third quarter.
In the first 40 weeks, sales rose 0.5% to $9.96 billion, comp-store sales declined 3.3%, net income increased 236.8% to $108.8 million, and earnings per share were 77 cents, compared with 23 cents in the previous year's first 40 weeks.