WINN-DIXIE SALES UP, LOSSES CONTINUE

JON SPRINGER

JACKSONVILLE, Fla. - Initiatives to improve in-store service and merchandising at Winn-Dixie Stores here resulted in higher sales, but competitive openings and a lack of investment in the store base contributed to a $30 million loss during the fiscal third quarter, the company said.

Winn-Dixie, operating under Chapter 11 bankruptcy protection, said sales for the 12-week quarter, which ended April 5, increased 3.4% to $1.8 billion compared with the same period in 2005. Identical-store sales increased 6.7%, boosted in part by reductions in competition around its Gulf Coast stores and also by higher sales per customer visit. Programs addressing service, shrink reduction and merchandising that were implemented about a year ago "gained momentum during the second and third quarters," the company said in a Securities and Exchange Commission filing.

The same-store sales increase was offset somewhat by fewer overall customer visits and also by the timing of the Easter holiday, the company added. And while Winn-Dixie acknowledged better success this year maintaining market share in the face of competitive openings, "we anticipate the competitor store openings may continue to affect our identical store sales negatively," the company said. "In addition, our total sales growth will continue to be negatively affected by our projected low level of company store openings and remodels."

Improved shrink management helped increase gross profit on sales to 26.5% from 26.3% in the prior period, the company said. Improvements in shrink performance increased profitability by more than 1% of sales, but some of those improvements were given back through pricing and promotional programs. In addition, vendors shifting from slotting fees to discounts based on sales volume decreased profits, since total volume fell as the result of store closures.

Higher employee costs and rising utility bills contributed to a slight increase of expenses compared with the prior year, Winn-Dixie said. The employee costs related to training and additional hours for service initiatives, and were offset some by a reduction in headquarters personnel. As a percent of sales, operating and administrative expenses were 27.6% for the quarter.

Fiscal year-to-date sales increased 1.6% to $5.8 billion, and identical-store sales increased 4.3%. The company reported net earnings from continuing operations of $82.6 million during the 40-week period, compared with a $283.1 million loss a year ago.

Winn-Dixie said its capital resources were sufficient to fund operations through December - at which time it anticipates its plan of reorganization will take effect. The company is expected to file the plan by June 29.