Winn-Dixie Posts Flat Q2 Net Sales

For the second quarter of fiscal 2011, a 16-week period that ended Jan. 12, Winn-Dixie Stores, Inc. has posted net sales of $2.1 billion, which were essentially flat compared with the year-ago period. Identical-store sales, excluding stores that opened or closed during the quarter, dipped 0.3 percent from last year, which the Jacksonville, Fla.-based grocer attributed to competitive activity and the continued mix shift from branded pharmaceutical to generic products, although these factors were partly offset by inflationary price increases in selected categories and a rise in sales in remodeled stores.

Winn-Dixie’s ID sales trend improved by 250 basis points vs. the first quarter of fiscal 2011, and 470 basis points compared with the fourth quarter of fiscal 2010. The company experienced continued improvement in both transaction count and basket size due to strategic adjustments to promotional activity in selected categories, in addition to new merchandising and marketing initiatives.

Adjusted EBITDA was $27.4 million in the second quarter, a decrease of $5.1 million vs. same period last year, but an increase of $34.3 million compared with the first quarter of fiscal 2011.

“We delivered significant improvements in both identical-store sales and adjusted EBITDA compared to last quarter, due largely to the strategic adjustments we made to our promotional activity and the implementation of sustainable merchandising and marketing initiatives tailored to meet the shopping needs of our guests,” noted Winn-Dixie chairman, CEO and president Peter Lynch. “As we move through the year, we will continue to manage inflation in key categories as efficiently as possible, while being mindful of consumers who are particularly cost-conscious in this environment. While the economic environment in our key markets remains challenging, we are confident that we can continue to offer our guests better quality, service and value for their shopping dollars.”

The company reported a net loss of $24.0 million, or 43 cents per diluted share, vs. net income of $2.1 million or 4 cents per diluted share last year. This includes a net loss of $1.7 million, or 3 cents per diluted share, for discontinued operations, as compared with a net loss from discontinued operations of $2.2 million or 4 cents per diluted share, in the year-ago period.

Gross profit on sales in the second quarter was $581.0 million, a decline of $9.9 million compared with last year. As a percentage of net sales, gross margin was 27.7 percent in the second quarter, vs. 28.2 percent in the year-ago period, a decrease of 50 basis points. Winn-Dixie attributed the decline in gross margin to a higher LIFO charge and an increase in other costs, including inventory shrink and warehouse and transportation costs, over last year.

Net sales for the 28 weeks were $3.6 billion, a decline of $33.0 million, compared with the year-ago period. ID sales for the 28 weeks dropped 1.4 percent from last year, which the company said was because of a decrease in transaction count of 1.7 percent, partly offset by an increase in basket size of 0.3 percent.
Gross profit on sales was $1.0 billion, a decrease of $34.4 million from last year. As a percentage of net sales, gross margin for the 28 weeks was 27.6 percent, vs. 28.3 percent in the year-ago period, a drop of 70 basis points. Winn-Dixie attributed this decline mainly to the negative impact of pricing and promotional programs, and a higher LIFO charge and an increase in other costs, among them inventory shrink and warehouse and transportation costs.

Adjusted EBITDA for the 28 weeks was $20.5 million compared with $57.2 million in the prior year period.

Winn-Dixie posted a net loss of $100.8 million, or $1.82 per diluted share, vs. a net loss of $6.0 million or 11 cents per diluted share, for the same period last year. This includes a net loss of $41.9 million or 76 cents per diluted share, for discontinued operations, compared with a net loss from discontinued operations of $4.6 million, or 9 cents per diluted share, last year.

The company now expects capital expenditures for fiscal 2011 to be about $132 million, a $26 million decrease from its prior expectations. Around $63 million will go to the store remodeling program, with $69 million earmarked for retail store improvements and maintenance, IT systems, new store development, warehousing and transportation. Winn-Dixie now plans to five traditional store remodels and two “transformational” remodels in fiscal 2011. The remaining 15 transformational stores that were originally slated for fiscal 2011 are expected to be completed in the first half of fiscal 2012.

“Our transformational stores continue to exceed our expectations, but we feel it is appropriate to take a bit more time to refine, construct and launch the next set of these stores,” explained Lynch. “This will enable us to be judicious with our resources while making sure we are creating the best possible shopping environment for our guests when we open the stores.”

Winn-Dixie operates 484 retail grocery locations, including 379 in-store pharmacies, in Florida, Alabama, Louisiana, Georgia and Mississippi.