Winn-Dixie Posts Solid Q2 Profits

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Winn-Dixie Posts Solid Q2 Profits

Sharper merchandising and marketing strategies and a more balanced promotional game plan helped Winn-Dixie Stores Inc. tab better-than-expected profits for its fiscal second quarter ended Jan. 7.

The grocer earned $16 million, or 30 cents per share vs. $4 million, or 8 cents per share in the same period last year. Excluding a 25-cent per share gain from resolving an insurance claim related to hurricanes during its fiscal 2006 year and other one-time gains, the Jacksonville, Fla.-based chain said it would have lost 5 cents per share in the latest period.

With flat (0.2 percent) same-store sales, Winn Dixie's adjusted EBITDA in the second quarter was $35.5 million, an increase of $14 million vs. $21.6 million in the second quarter of fiscal 2008. The retailer also posted a 28 percent gross margin gain, which represents an increase of approximately 140 basis points vs. the year-ago period.

“We are very pleased with our financial progress this quarter, especially the improvements in gross margin and adjusted EBITDA, which reflect the continued merchandising and marketing strategies we are using to drive more profitable sales,” said Peter Lynch, Winn-Dixie's chairman, president and CEO.

Lynch said the company's gross margin had declined sequentially in the second quarter as a result of heavy holiday promotions. “Our management team has worked hard to refine our promotional activity in order to deliver margins more in line with the rest of the year. This quarter we built upon the progress made last year and successfully eliminated the sequential decline in our gross margin through a combination of product sales mix, less overall investment in promotional activity and additional focus on our corporate brands.”

Noting that consumers are clearly remaining cautious with their spending, which is having impacts on Winn Dixie's quarterly same-store sales and basket sizes, Lynch said, “Our top priority remains offering our customers better quality, service and value for their shopping dollars. As economic conditions develop, we will remain flexible in our approach as we seek to maintain an appropriate balance between sales and gross margin.”

Among the highlights of the chain's progress during the second quarter of fiscal 2009: Other operating and administrative expenses included higher payroll and payroll-related expenses of $13.5 million related primarily to retail payroll, higher depreciation and amortization of $4.6 million related primarily to the store remodeling program, and higher utilities of $3.9 million, caused by higher rates.

As of Jan. 7, Winn-Dixie had approximately $632 million of liquidity, comprising $487 million of borrowing availability under its credit agreement and $145 million of cash and cash equivalents. It also reaffirmed its expectation for earnings of $110 million to $125 million before interest, taxes, debt and amortization for fiscal 2009.

Shares of Winn-Dixie surged $1.97/17 percent to $13.37, having closed the regular session down 38 cents, at $11.40.

In other Winn-Dixie news, to ease consumers' worries about this upcoming Valentine's Day, Winn-Dixie is providing all of their romantic needs -- from floral bouquets to boxes of chocolate -- in one location.

The grocery chain is selling a variety of goods in its stores in the run-up to Valentine's Day. Not only are they making the selection side of it easy, Winn-Dixie is opening up a special "Valentine Express Lane" devoted exclusively to people buying Valentine's Day items.

"We want to help customers celebrate Valentine's Day by having a variety of quality Valentine gifts and services to choose from that fit their needs, budget and schedule," said Robin Lake Miller, director of communications for Winn-Dixie. "In addition to being a one-stop destination for this special day, we are also offering a designated Valentine's Day express checkout as well as on-site flower-wrapping services for our shoppers."

The flower-wrapping stations are open from 8 a.m. to 10 p.m. Feb. 12, 13 and 14, and the express lane is open Feb. 12 from 10 a.m. to 9 p.m., Feb. 13 from 10 a.m. to 10 p.m. and Feb. 14 from 8 a.m. to 8 p.m.

The grocer is also aiming to make affordability a key component of Valentine's Day. To that end, it's offering five varieties of rose bouquets with a vase and gift bag, starting at $19.99; 30 balloon styles, candy, chocolates, and a wide selection of gift cards from retailers like Blockbuster, Ticketmaster and SONY BMG Digital Music Albums.