WINN-DIXIE PROMOTIONS HURT EARNINGS

DAVID ORGEL

JACKSONVILLE, Fla. -- Winn-Dixie Stores' "aggressive" sales-building activities had a dramatically negative effect on first quarter earnings because of a failure to control costs, James Kufeldt, president, said at the company's annual meeting last week.

The retailer based here implemented a number of programs across its 14-state operating area last spring, including a marketing and advertising campaign for the core Marketplace format and promotional activities to attract more customers. But heavy investments in these programs have depressed earnings. That effect -- first seen in last year's fourth quarter -- was again evident in first quarter results unveiled at last week's meeting.

Net earnings from operations fell 69% in the first quarter ended September 16. For the period, "Our profit was dramatically affected by our sales effort," Kufeldt said. "We did, however, see profitability improve as we moved through the quarter.

The company has "moved the sales gauge" with these initiatives, Kufeldt said, noting a first quarter rise of 4.4%, which is double the sales increase of the prior year.

"We are pleased with our continued sales improvement, but are very disappointed with our poor profit performance. We invested heavily in promotional activities but did not adequately control our costs."

Kufeldt added that the company is encouraged by the improved profitability in the final four weeks of the quarter, "which we believe should continue."

Net earnings from operations in the quarter fell to $14.6 million, or 10 cents a share. Sales were $3.2 billion, which represented an advance of $134 million. Average store volume was ahead 5.3%.

Winn-Dixie's marketing and advertising campaign, called "While You're at the Marketplace," touts the virtues of the chain's one-stop shopping format which represents the bulk of its stores.

Mickey Clerc, vice president of public relations for Winn-Dixie, told SN the marketing and advertising campaign, called 'While You're at the Marketplace," is being conducted in multiple media throughout the chain.

He said that the company declines to predict a precise timetable for continued earnings improvement. Other "expensive programs" affecting earnings included a major training effort for associates designed to create "exceptional customer service," Kufeldt said.

Winn-Dixie has been moving to upgrade many aspects of its operations, including its distribution, manufacturing and technology, Kufeldt stressed. Among recent activities are the unveiling of new warehouses and a centralizing of accounting and financial functions.