JACKSONVILLE, Fla. — Winn-Dixie Stores said inflation and store remodels boosted sales in the second quarter, partially offsetting the pressure from competitive activity.
The company also said it was seeing benefits from a more strategic promotional strategy, although it flipped to a loss for the quarter, vs. a profit in the year-ago period.
“In the first quarter of fiscal 2011 we ramped up our promotional activity in order to drive greater sales growth, which negatively impacted our gross margin. In the second quarter, however, we are pleased that we were able to keep our promotional spend roughly in line with the second quarter of last year while still improving our identical-store sales trend,” said Peter Lynch, chairman, president and chief executive officer, in a conference call with analysts last week.
Identical-store sales were down 0.3% for the 16-week period, which ended Jan. 12, and overall sales were flat compared with the year-ago period at about $2.1 billion. The loss for the quarter totaled $24 million, vs. net income of $2.1 million in the year-ago period. The most recent quarter included a loss from discontinued operations of $1.7 million.
The company said ID sales, which were also negatively impacted by a shift to more generic drugs, improved by 250 basis points compared with the first quarter of fiscal 2011, and 470 basis points compared to the fourth quarter of fiscal 2010. The recent quarter included a reduction of 1.3% in transaction count and 1% gain in basket size.
Although he said he was concerned about cost-inflation pressures, Scott Mushkin, an analyst with Jefferies & Co., said it appears Winn-Dixie has made better investments in price to drive sales.
“Indeed, while gross margin fell approximately 50 basis points year over year and 26 basis points more than our estimate, we view the increased sales and gross profit dollars as successful promotional activity in the quarter,” he said.
