JACKSONVILLE, Fla. — Winn-Dixie Stores here may take a closer look at its Save Rite format as it anticipates a slow economic recovery, Peter Lynch, chairman, president and chief executive officer, told investors last week.
“As we look into the [current] quarter and into next year, it's going to be a slow tick up,” he said. “We see it moving positively but slowly, and we don't see a rapid rebound.”
Lynch said the only place Winn-Dixie is seeing “a little bit of trade-up coming back” is in affluent areas or mature suburbs, but the remainder of the store base still seems to be subdued, with transactions and spending down.
“Affluent areas have gotten through the shock of last year, and they're getting back to more normalized times. But some other markets are still slow in the upturn,” he explained.
Lynch said the slow recovery may prompt Winn-Dixie to give more attention to its warehouse-style Save Rite format. “That might be an opportunity for some stores in less affluent, less mature areas in this challenging environment,” he noted.
Winn-Dixie operates approximately 12 Save Rites. Lynch said the company made some changes at one location, “and the returns were OK but not great.”
“We fine-tuned that in a second store we just reopened [in Jacksonville] about a month ago, and we're seeing much more positive results there,” he said. “So I think there's an opportunity with Save Rite going forward, but we still [need] a little bit more time to fine-tune the model.”
For the third quarter that ended March 31, net income rose 26% to $209 million and adjusted operating cash flow declined 13% to $50 million, while sales fell 2.3% to $1.7 billion and identical-store sales dropped 2.2%.
For the 40-week period, net income fell 50.9% to $14.9 million and adjusted EBITDA declined 13.9% to $103.3 million, while sales were down 2.6% to $5.5 billion and ID sales dropped 2.3%.
The company said its 51 offensive remodel stores, which are still within their first year of operation, had a weighted average sales increase of 6.3% for the quarter and 6% for the year-to-date, excluding the grand reopening phase.
“Financial results were in line with our expectations,” Lynch said. “Overall sales continued to be impacted negatively by the challenging economic environment and the continued mix shift from branded pharmaceuticals to generic brands.”
Sales improved during the third quarter “as deflation moved to inflation, and that helps us,” he said. “But we still see challenges in the fourth quarter because the environment has not gotten better.
“Florida still has a very, very high unemployment rate, and the housing market is still off, so until we start to see those things rebound, we're going to be challenged.”
Lynch said transaction counts were down 3.4% during the quarter as customers shopped the stores less frequently, although basket size improved 1.2%.
In response to a question, Lynch said the competitive environment in Florida has gotten “a little bit more challenging in terms of our ability to pass some costs along in promotional products such as meat and some dairy categories, so competition has probably ratcheted up.”
“It's not a pricing war, but retailers are trying to grab sales, and front-page items like meat are ones you've got to be careful on. But that's a short-term situation that has a little bit of a headwind right now.
“I think we're going to be much better prepared as we go into 2011. We're prepared for more tough times, but if the good times happen, there's nothing but upside because then the dollars will just flow to the bottom line.”
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