Winn-Dixie Cites Halo Effect

JON SPRINGER

JACKSONVILLE, Fla. — An ambitious plan of renovating stores will help Winn-Dixie Stores here “leapfrog” its competition, officials said last week.

The retailer credited remodeled stores, strong promotions and an effort to pass along higher costs for a 3.3% gain in identical-store gains during the fiscal first quarter, which ended Sept. 21. The company posted a net loss of $24.1 million on sales of $1.6 billion during the 12-week period. The company lost $76.8 million in the same period last year.

Peter Lynch, Winn-Dixie's chairman and chief executive officer, in a conference call last week said that “transformational remodels” — stores that have received a $5 million makeover to upgrade their fresh departments — have the effect of raising Winn-Dixie's profile marketwide in the five locations so far completed. The company has 17 such remodels on tap for the fiscal year, and Lynch said as many as 60% of the company's 283 stores could eventually see such upgrades. Lynch said the company would be inclined to relocate the others.

“I think we've been able to leapfrog a lot of our competitors with these stores,” Lynch said, noting that they are generating sales of between $400 and $500 per square foot vs. around $300 in Winn-Dixie's typical stores.

Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., told SN he felt remodeled stores were a better investment than building new units, which could cost more than twice as much.

“It's not too shabby that for less than the cost of a new store, getting a store up to industry productivity averages is pretty good,” he said. “But if you can also get the surrounding stores through a halo effect to be seen more positively, and get a little more traffic, that's a further leveraging of your capital investment.”

Lynch said the renovated stores have more expansive fresh departments than conventional competitors, and include specialty wine stewards, and chefs — “far more advanced than just carving roast beef or brisket.”

Elsewhere, Lynch said Winn-Dixie is having some success with bundled meal packages including a What's For Dinner case providing prepared meals to go, and a Make-A-Meal promotion providing all the ingredients for a home-prepared meal at a special price.