WINN-DIXIE: PROFITS UP, UNPROFITABLE SALES DOWN

DAVID GHITELMAN

JACKSONVILLE, Fla. -- Winn-Dixie Stores here said last week eliminating unprofitable departments and items enabled the company to boost profits despite flat overall sales and declining same and comparable-store sales in the quarter and 28 weeks ended Jan. 9.

Sales for the 16-week second quarter were $4 billion and year-to-date sales were $6.9 billion, both up less than 1% from the comparable periods last year.

Same-store sales declined 4.5% for the quarter and 4.9% year-to-date, while comparable sales fell 4.3% and 4.6%, respectively.

However, net income rose 245.1% to $42.1 million for the quarter and 198.6% to $64.5 million for the year, although these large increases are due to restructuring costs incurred last year. Excluding nonrecurring costs, net income increased 16.2% for the quarter and 24.1% for the year.

Rick McCook, Winn-Dixie's senior vice president and chief financial officer, told analysts during a conference call following the release of the results, that "identical and comp sales were impacted by the elimination of unprofitable departments and items."

He added that the company expects same-store sales to decline again next quarter and to be flat in the fourth quarter.

Al Rowland, Winn-Dixie's president and chief executive officer, told analysts that the company has completed the work of eliminating unprofitable sales. He added that the company has been using the selling space of eliminated departments to expand its general merchandise offerings.

Rowland noted that Winn-Dixie moved to a central procurement system about a year ago. "Our gross-profit improvement is primarily a result of reducing our cost of goods," he said.

In addition, Rowland said the company had settled with most of the landlords who had sued Winn-Dixie for nonpayment of rent on closed stores and is in negotiations with the others.

He said the company had maintained that the landlords "were not fulfilling their obligations to mitigate our damages."

In seperate news, Winn-Dixie said last week it has begun converting some of its Atlanta stores into warehouse formats under the SaveRite banner. Plans call for the conversion of a total of nine stores.