SUPERMARKET REVITALIZATION EFFORTS CAST LONG SHADOWS

David Merrefield

There's one observation that can be made about supermarket retailing without too much fear of contradiction: When things start to move, they move in a big way.

Look at what's happening at the loss-making and bankrupt Winn-Dixie Stores. By almost any standard, that company's bid to return to profitability is little short of astonishing in its scope. As you'll see on the front page of this week's SN, Winn-Dixie is closing 326 of its 913 stores, leaving it with 587. Plans also call for the closure of three of its 10 distribution centers as well as several manufacturing plants.

Roughly, Winn-Dixie plans to sell or shutter all its stores in the Carolinas, Tennessee and Virginia. It will retain many stores in the lower portion of Georgia, the lower two-thirds of Alabama and a portion of Louisiana and Mississippi, closing units in other areas of those states. It will retain most in its home state, Florida.

This represents a huge truncation of a company that once operated as far north as Indiana. All this comes atop several previous iterations of store closures. As recently as April, Winn-Dixie said it would close 156 stores and eliminate 10,000 jobs.

As to job reductions, the most recent facility closures come at the price of 22,000 jobs lost, for a net announced job loss of 33,000 in a few weeks' time. At the end of the latest cutting spree, Winn-Dixie expects to produce top-line revenues of about $7.5 billion against about $10 billion at the current time.

Let's express the effect of the most recent announcement in percentage terms: 28% of its workforce will be cut; 35% of its stores will be closed, and revenue will drop by 25%. Notice that the proportion of the job and store cuts exceeds that of the revenue decline, suggesting what dogs the stores being loosed must be.

Now for another telling measure: According to the U.S. Department of Labor, the entire U.S. economy added 78,000 jobs in May. That means that if the net 33,000 jobs Winn-Dixie has cut lately, or will cut, had all occurred in May, and no ongoing operators surfaced, the entire nation's job-growth production would have been trimmed by 42%.

The tale of what happened at Winn-Dixie to cause this horrendous decline in fortune is beyond the scope of this space, but suffice it to say it's probably one of the all-time largest bankruptcies that can be laid at the feet of something other than treasury looting or fiscal malfeasance.

In Winn-Dixie's instance, failure came over the course of a protracted period, during which management didn't understand, or didn't care to address, implications of changing competitive dynamics. We'll see if the current rationalization plan is close to sufficient. No doubt, further cuts are on their way, including at its headquarters.

Regrettably, Winn-Dixie is far from alone when it comes to supermarket store and job attenuation. There's more, such as at A&P. In May, A&P acknowledged that it would reduce from a company of 650 stores to one of 353. The company is seeking buyers for its operations in Canada and the Midwest. Moreover, Safeway is offering buyouts to thousands of workers in Northern California, with other regions sure to follow.