Winn-Dixie Limps Past '05 with Huge Losses, Katrina Scars

JACKSONVILLE, Fla.--With past mistakes still resonating and its current regimen for recovery in its early, raw stages, Winn-Dixie here had a rough year, financially and operationally, according to the bankrupt chain's annual 10K filing with the SEC yesterday.

By virtually every fiscal measure, Winn-Dixie took it on the chin, as detailed in the filing. The chain reported net sales for the 52 weeks ended June 19, 2005 of $9.9 billion, down by $700 million, or 6.7 percent, compared with the 53 weeks of its fiscal 2004. Average store sales, accounting for all continuing retail operations based on the number of weeks open during the fiscal year, were down 4.4 percent. Identical stores sales decreased 5 percent, and comparable store sales, which include replacement units, dipped 4.9 percent.

Gouged for factors such as high shrink in perishables as well as reductions in slotting allowances, Winn-Dixie's gross profit on sales plunged $275.9 million, while as a percentage of sales, gross margin was 25.6 percent, compared to 26.4 percent for fiscal 2004.

Net losses from continuing operations amounted to $691.3 million, or $.91 per share, compared to losses of $50.8 million, or 36 cents, in the year before. Hurricane losses exacerbated the situation in fiscal 2005, the chain said.

Winn-Dixie went on in the filing to detail the steps toward reorganization and recovery it took in the course of the year. For instance, it Of its plan to sell 156 stores, three DCs, and six manufacturing plants, by the end of 2005 it had completed all those actions save for the disposal of one store and one plant.

Recapping Katrina's impact, Winn-Dixie said it lost inventory or incurred physical damages at 110 of its 125 units in the New Orleans region. By October 20, 112 of the 125 were up and running. The short-term rebound in the ravaged region was notable. Said Winn-Dixie, "Sales levels in the New Orleans region since Hurricane Katrina have been the same as or better than that experienced prior to the hurricane." It added, however, that there was no telling if such sales levels would be sustained.

The chain also recounted the early steps it had taken in FY 2005 toward recovery, from its radical trimming back of stores and other facilities to its merchandising improvements, so far focusing on sharpening its produce and meat departments and retraining store personnel. But not surprisingly, Winn-Dixie also made it clear that, in the face of the hole it had dug itself into thanks to past policies, as well as the continuing competitive challenges it faces, it has a long hard road ahead before its corporate financials and store performance numbers begin to look substantially better than in this latest accounting.
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