Winn-Dixie reports fiscal-year losses, continues remodeling

JACKSONVILLE, Fla. Winn-Dixie on Monday reported fiscal-year net sales for the 53 weeks ended June 30 were $7.2 billion, a 1.6% decrease as compared with the 52 weeks of fiscal 2009.

"We were able to meet our financial guidance for the fiscal year through effective management of our promotional activity and by continuing to exercise discipline with respect to our overall expenses," stated Peter Lynch, chairman, CEO and president of Winn-Dixie. "However, the economic and competitive environment remained very difficult in the fourth quarter, and our decision to maintain gross margin rate negatively impacted our identical-store sales significantly."

Since the inception of the company's remodeling program in the second half of fiscal 2007, Winn-Dixie has completed 230 store remodels as of the end of fiscal 2010, which have upgraded and enhanced approximately half of its continuing operating stores based on the company's "fresh and local" strategy. Winn-Dixie believes the remodel program is central to improving its brand image, transaction count, sales and profitability. 

Winn-Dixie’s 159 offensive remodels have generated a weighted average sales increase of 7% on a cumulative basis, including an increase in transaction count of 3% and an increase in basket size of 3.9%. The company's 41 defensive stores have generated a weighted average sales decrease of 5.6% on a cumulative basis. Based on historical data, Winn-Dixie estimated that its 41 defensive remodels were negatively impacted by 10.2% on a weighted average basis due to competitive openings. 

In fiscal 2011, Winn-Dixie plans to complete a total of 22 store remodels, including 17 stores that will include features from two new stores the company opened during fiscal 2010 in Covington, La., and Margate, Fla. These two new stores are larger and more costly to build than the company's traditional remodels, and they offer expanded and upscale fresh departments — including quality produce, deli, meat and seafood — as well as other important attributes to attract new customers.

"Our transformational Covington and Margate stores have generated great excitement and have provided key insights that we are incorporating into our fiscal 2011 and future remodel plans," Lynch said. "We believe the improvements and added features of these stores have substantially enhanced our ability to attract new customers. In fiscal 2011, we will use the Covington and Margate format for the majority of our remodels because we believe they offer the potential to achieve higher returns than our previous remodels and will significantly improve our brand image."

On a comparable 52-week basis, identical-store sales from continuing operations, which exclude stores that opened or closed during the year, decreased by 2.9% for fiscal 2010, compared with fiscal 2009. This decrease was the result of a decline in transaction count and basket size of 2.3% and 0.6%, respectively.

Gross profit for the 53 weeks of fiscal 2010 as a percentage of net sales was 28.5%, which was unchanged from fiscal 2009. 

As of June 30, Winn-Dixie had approximately $649.7 million of liquidity, comprised of $497.4 million of borrowing availability under its credit agreement and $152.3 million of cash and cash equivalents. Capital expenditures for fiscal 2010 were approximately $189.1 million.