Winn-Dixie's 'Offensive Remodels' Help Q3 Sales, but Hurt Profits

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Winn-Dixie's 'Offensive Remodels' Help Q3 Sales, but Hurt Profits

For Jacksonville, Fla.-based Winn-Dixie Stores, Inc., success has come with a price. As the regional retailer's store remodeling program helped boost identical store sales 2.2 percent for the third quarter of fiscal 2007, costs related to remodeling and other factors spurred a 15.7 percent drop in earnings.

The company said sales climbed 2.3 percent to $1.7 billion for the quarter ended April 2, while net income was $15.0 million, or $0.28 per diluted share.

Winn-Dixie saw adjusted EBITDA of $51.2 million compared to $46.0 million in the third quarter of 2007; year-to-date adjusted EBITDA was $92.2 million compared to $35.4 million in prior year period.

"We generated solid sales growth throughout the quarter while also improving gross margins," said Winn-Dixie chairman, c.e.o., and president Peter Lynch. "Our third quarter results also had the added benefit of the early Easter holiday. As we move forward, we will continue to monitor business conditions and manage our promotional spending appropriately as we seek to grow sales and increase customer loyalty over the long term."

Lynch said the company remains on track with its strategic initiatives. "Our store remodeling program is moving forward and continues to generate positive results. We are also making excellent progress building sales momentum by revitalizing our corporate brands with newly designed packaging already introduced this year for over 1,000 private label products," he said.

Sales for the 40 weeks ended April 2 were $5.6 billion, an increase of 1.2 percent, the retailer said. Identical store sales from continuing operations increased 1.0 percent compared to the same period in the prior fiscal year.

Net income for the 40 weeks was $18.3 million, or $0.34 per diluted share, as compared to net income of $280.0 million for the same period last year. Net income for the 40 weeks of fiscal 2007 was impacted by significant non-cash items, primarily reorganization gains of $334.4 million, which occurred in the second quarter of fiscal 2007.

Since the inception of its store remodeling program, Winn-Dixie has completed 54 store remodels.

The company said it continues to expect that its full fiscal year 2008 adjusted EBITDA will fall within its previously announced guidance range of $105-$125 million.

Winn-Dixie currently operates 520 retail grocery locations, including more than 400 in-store pharmacies in Florida, Alabama, Louisiana, Georgia, and Mississippi.