Winn-Dixie Sees Momentum in Q1

JON SPRINGER

JACKSONVILLE, Fla. — Winn-Dixie Stores' renewal doesn't come in a can, its chief executive officer said last week.

“Remodeling stores is not just about new paint and polished floors. That's something that Winn-Dixie did in the past,” Peter Lynch said last week in a conference call reviewing quarterly financial results and the retailer's turnaround progress. “Today, we are executing a multiyear initiative to completely revamp and modernize our stores.”

Store renovations — which Lynch said would attract new shoppers and facilitate more profitable sales — are the centerpiece of Winn-Dixie's turnaround strategy, which officially launched shortly after the retailer exited Chapter 11 bankruptcy protection a year ago and, according to analysts, showed marked progress during its fiscal first quarter, which ended Sept. 19. Excluding “defensive” remodels and those stores still in the grand-opening phase, remodeled locations have so far averaged 15% sales lifts, Lynch said.

Along with the increase in sales, remodeled stores are showing a 2% shift from non-perishable to perishable items, subsequently producing higher gross margins.

The remodel trends — along with a reduction in promotional spending — helped Winn-Dixie achieve better quarterly results than analysts had expected. The retailer reported a net loss of $790,000, or 1 cent per share, on sales of $1.6 billion, and EBITDA of $19.5 million. Karen Short, an analyst with Friedman Billings Ramsey, New York, had anticipated a loss of 10 cents per share and EBITDA of $13.4 million.

“We believe the results indicate the turnaround is on-track,” Short said in a research note last week.

Sales for the quarter increased by 0.7% compared with the same period last year, and comparable-store sales increased by 0.2%, the company said. Lynch said he felt declines in the Florida housing market and continued high fuel prices contributed to slowing sales. Competition for sales has heated up in the Tampa-St. Petersburg market, where Sweetbay and Albertsons have been aggressively battling, he added.

“We want to be optimistic and say that maybe [consumers] are moving from restaurants to meals at home. But it [the slow economy] has softened our sales,” Lynch said.

Better sales forecasting allowed Winn-Dixie to reduce its promotional spending during the quarter, Bennett Nussbaum, chief financial officer, said.

More effective promotional spending is another area the company has improved since its bankruptcy, he said.