The "New" Winn-Dixie Slashes Store Count, Shutters DCs

JACKSONVILLE, Fla. --Winn-Dixie's taken out the pruning shears, in a recovery strategy that will radically cut back the organization before rebuilding it.

As had been widely anticipated, the beleaguered chain, based here, yesterday disclosed a plan to reduce its total "footprint" to 587 stores from its current 913, a move that it said would enable it to focus on its strongest markets.

The closures will likely cost about 22,000 associates their jobs, amounting to 28 percent of the grocer's current work force. Besides the stores, Winn-Dixie is also shuttering three distribution centers and several manufacturing plants.

"Creating a smaller but more profitable store base will best position Winn-Dixie for long-term financial health and a successful future," said Winn-Dixie president and c.e.o. Peter Lynch, in a statement. "We will be focusing our resources on markets where Winn-Dixie has a strong presence and there are compelling opportunities. This will allow us to build on our strengths and take advantage of the considerable potential we see to improve the shopping experience for our customers."

During a press briefing later in the day, Lynch expressed the strategy somewhat more succinctly. "We’re shrinking this company to grow it," he said.

Once the footprint plan is implemented, the grocer's remaining stores will be located in 23 designated market areas (DMAs) in Florida, Alabama, Louisiana, Georgia, Mississippi, and the Bahamas. Of the 326 stores that the Winn-Dixie will sell or close, 233 stores are in DMAs the company is exiting completely, with the other 93 stores to close because they aren't meeting the retailer's financial requirements. Winn-Dixie's anticipated annual revenue after the new footprint has gone into effect will be roughly $7.5 billion, vs. about $10 billion currently.

In formulating its new store footprint, Winn-Dixie analyzed such factors as the market share, cash flow, profitability, real estate quality, and financial outlook of its stores. In the 14 DMAs from which it's withdrawing, which include Atlanta; Charleston, S.C.; Charlotte, N.C.; Chattanooga, Tenn.; Raleigh-Durham, N.C.; and Savannah, Ga., the company determined that it has either a difficult market position, delivered an unsatisfactory financial performance, and presented limited opportunities for profitable sales growth, or it has concluded that the stores in a particular DMA are too distant from its continuing distribution facilities to be run cost-effectively.

At the press conference yesterday, Lynch said Albertsons, Kroger, and small independent operators would all have a chance to bid on stores Winn-Dixie was selling.

These distribution centers slated to close are in Atlanta; Charlotte, N.C.; and Greenville, S.C. The company will additionally shut the portion of the Montgomery, Ala. DC that handles dry grocery, but the perishables portion of that facility will remain open. Winn-Dixie will expand the use of the Hammond, La. dry grocery facility to accommodate the dry groceries now handled at the Montgomery facility.

Among the plants that will close under the plan are Winn-Dixie's six dairy and culture plants, its Montgomery, Ala. pizza plant, and its Chek Beverage/Deep South Products plant in Fitzgerald, Ga., which produces Chek soda, shelf-stable juices, and condiments. If buyers are not found, the company will continue to operate the Chek Beverage plant and the Hammond, La. and Plant City, Fla. dairies. Winn-Dixie is also looking for a third party to produce at other location the items made at its Astor Products plant in Jacksonville, Fla. and the condiments at the Deep South plant. Once third parties are secured, those plants will be closed.

Winn-Dixie and its outside advisers are conducting an active marketing effort to identify potential buyers for the stores, distribution centers, and manufacturing plants that the grocer will no longer run. Stores that can’t be sold will be closed. The company expects to reveal the results of this marketing effort in the next several weeks.

"Our hope is to sell as many of our affected stores, plants and DCs as possible to new owners who will continue to operate them," said Lynch in the statement. "We are asking potential new owners to offer employment opportunities to our associates." Winn-Dixie will provide severance and other assistance to associates who aren't offered employment.

Where practicable, the grocer will try to offer affected employees jobs at other Winn-Dixie operations. Additionally, the company is reviewing its "top heavy" corporate organization and plans to reduce headquarters and support personnel by 37 percent, or about 500 jobs, Lynch noted at the press conference. An announcement regarding a corporate restructuring is expected to be made later this summer.

Lynch said in the statement: "We regret the impact these tough decisions will have on many of our associates, customers and local communities. We do not take these decisions lightly and would not be proceeding if these steps were not essential to restore Winn-Dixie’s financial health."

Among the changes the grocer's surviving stores can expect to see, Lynch noted at the press conference, were a "continued effort to improve," particularly in the areas of perishables, dry groceries, and customer service. According to Lynch, the company would institute "field specialists," who would visit two stores a day and instruct associates on how to handle and maintain in such categories as produce, to improve execution at store level. "These are things associates knew we needed to do," added Lynch.

He further said at the press conference that he believed that Winn-Dixie had the potential to beat Wal-Mart on several fronts -- a better perishables offering, superior customer service, and greater convenience for shoppers.

At the conference, Lynch noted that the new footprint was part of Winn-Dixie's process of stabilization, which will eventually lead to the company's emergence from Chapter 11 bankruptcy protection. He characterized the plan as "a major-league step" that was bringing Winn-Dixie "much closer" to financial solvency.
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