We like Ike? Winn-Dixie's rebounding

30

October

Wake up and good morning. While most eyes on the Florida supermarket business have focused on recent moves by Publix (absorbing Albertson stores), SweetBay redesigns and, of course, the arrival of the new player Aldi, Winn-Dixie Stores has been creeping back from oblivion. The Jacksonville-based company reported first quarter earnings substantially above analyst expectations, ringing up sales of $1.7-billion, resulting in a loss of 4 cents for the quarter. The consensus of analyst estimates forecasted revenues of $1.65-billion and a net loss of 14 cents.

Let's dissect the Oct. 28 earnings conference call, offered here in its entirety,  between Winn-Dixie CEO Peter Lynch and his fellow execs and analysts. Here's Lynch responding to the question: How competitive is it out there?

"In our markets Wal-Mart and Publix are two big ones in Florida and then we get some other various competitors throughout. Aldi has opened up a number of their stores. I’ve been in them; I think they’ve done a very good job with them. The hits that we’ve got are exactly what we anticipated. In fact in many it’s a little bit less. It’s too early to call on those, those have been up and running since maybe about a month right now.

"Again, they’re going after really a different consumer then we’ve been going after. Our strategy is more towards service and quality and they’re going after the consumer that’s looking to just basically at price... More importantly you’ve got to be focusing on what’s Publix doing and some of our other competitors...

"I think everybody’s trying to do what they can to get the consumers into the stores. There’s no price wars, nothing crazy going on down here. It’s just us being able to react to our customers on a week in and week out basis and I think we’ve done a very, very good job doing that."

Lynch also pointed to some unexpected allies in improving Winn-Dixie's performance: Hurricanes Gustav and Ike and tropical storm Fay, which hit several of the communities the grocery chain serves in Florida, Louisiana, Georgia and along the Gulf Coast. Lynch explains:

"The storms affected us in two ways. First, we benefited from the storm-related purchases by our customers in advance of the storm and, second, we quickly reopened our stores in areas impacted by the storms before some of our competitors which also had a positive impact on sales."

And finally, a few quick hits from Lynch on some interesting trends:

1. Remodeling: The company plans to remodel roughly half its base of stores by the end of fiscal 2010 and remodel substantially all of our stores by fiscal 2013.

2. Private labels: The company has completed over 1,900 packaging and label redesigns. "We are on track with our plan to have substantially all of the company’s line of private label products which consist of approximately 3,000 items on the shelf with redesigned packaging by the end of calendar 2009," Lynch says.

3. Cost conscious customers: Consumers are definitely moving from restaurants to the supermarkets, Lynch says. "We see the people doing more cooking at home. We’re starting to sell more butter than we’ve ever sold before, and more frozen food dinners which is an example of people coming home, getting something quick to eat." Also, bagged potatoes is way up. Sliced bread and cheese are up, suggesting more people probably make sandwiches at home for taking to work.

All signs, perhaps, of the continuing consumer migration away from restaurants and back to food stores and, from there, a migration to value with the rise of private label sales.

-- Robert Trigaux, Times Business Columnist

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[Last modified: Tuesday, June 1, 2010 12:22pm]

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