May 17, 2007
Winn-Dixie’s Winning Numbers
It is still a long way from its glory days, but the signs are positive for Winn-Dixie after the company posted a profit in its first full quarter of operating without the safety net of Chapter 11 bankruptcy protection.
Winn-Dixie reported a same-store sales increase of 1.6 percent. Peter Lynch, the grocer’s chairman, chief executive officer and president, said in a press release, “The improved results we achieved in the third quarter reflect early progress in our multi-year turnaround plan. We will continue to execute against our five key initiatives: rebuilding trust in our brand, investing capital in our stores, neighborhood marketing, associate training and development, and achieving profitable sales.”
The chain reported an increase of 3.6 percent in the average basket when measured on an identical store basis. The average basket increases helped offset a decrease in actual transactions at company stores.
“The decline in transaction count is a trend we are addressing through our store remodel program as we invite customers back to see how Winn-Dixie is getting better. In our newly remodeled stores, our opportunity is to attract new customers who have been shopping elsewhere and to retain our current loyal customers. For those customers shopping in stores that have not yet been remodeled, we are taking steps to ensure that they experience better quality, selection and service throughout the store.”
Mr. Lynch added, “We are encouraged by initial customer reaction to our first small group of remodeled stores, particularly the remodel that we recently completed in Macclenny, Florida, near our headquarters in Jacksonville. This store has served as a laboratory for some of our most innovative ideas for enhancing the customer shopping experience, including making improvements in the store’s configuration, product mix and placement. We look forward to applying the lessons learned in Macclenny at our other locations.”
While it is still early, The Florida Times-Union reported that Friedman, Billings, Ramsey analyst Karen Short said Winn-Dixie’s performance served to “tilt the risk reward analysis considerably – making the stock much more attractive on both a short and long-term basis.”
Discussion Questions: What do you take from Winn-Dixie’s reported numbers? Do you see the chain making the types of changes that will be needed to make it a strong competitor for the near and longer term?
BrainTrust
Recent Discussions
Discussion Questions
Poll
Winn-Dixie’s gross margin is rising, which could account for the store traffic reduction as well as the profitability. Way too much grocery volume is based on loss leaders. The comparison with Sears is apt: why bother with sales increases if the margins aren’t profitable?
Good news for Winn Dixie, but I would be interested to watch the manner in which they try to build back their customer base and how that investment in margin, advertising and/or capital expenditure affects the long term. But to build the transaction value of their current base is a good sign they are moving in the right direction.
I am pleased to hear the good news for Winn Dixie. I really hope that they make it and the increased transaction size is a very positive indication that they are on the right track. It seems to me that they have to carve out a reason for customers to pick them over Wal-Mart and Publix; not an easy task. It is one thing to improve or shore up numbers in their hometown of Jacksonville, but much harder where they do not have the strength or market share. Wal-Mart has the low price market and Publix does so many things right at the other end of the spectrum. There is room in between those two, but they need a niche other than location to drive traffic. They need to stand for something in the minds of consumers, whether it’s best meat or produce; cleanest stores or friendliest employees or something that makes them standout as an alternative to the others.
Peter Lynch is a savvy food retailer and appears to have a plan. Questions remain whether the five step plan can be implemented successfully. The competitive set in Florida and the South East has changed dramatically in the last few years. In 2001 Winn-Dixie had a market share of 15% or greater in 11 markets. In 2006 the company only had 3 markets with a 15% or greater market share. While Winn-Dixie struggled through bankruptcy, both Publix and Wal-Mart became stronger competitors in the Winn-Dixie market.
Most retailers were caught off guard by the Wal-Mart efficiency model and had to shape up their organizations. The ones who survived got stronger and can be formidable opponents. People want choice and they love the underdog. Who would have thought GM would get caught by Toyota? Have a plan of quality, value, and customer experience and execute the plan. We are all better retailers after the Wal-Mart challenge.
The only good news was the stock price shot up. Market share is still falling because sales are not keeping up with inflation and population growth. The 12% increase from the remodels is actually disappointing because they should be much higher, considering the low sales volumes of the stores. Remember, 12% of nothing isn’t much. I think this might be another Sears/Kmart thing where stock price and store performance are mutually exclusive. I would expect Winn-Dixie to continue to post profits from time to time, but in the long run I do see them hanging around. I’ve seen this before when small sales gains are overhyped while there is no mention of the falling market shares. If Winn-Dixie is successful at any location they will be specifically targeted by the competition, which still views them as an ineffectual competitor. If I’m Publix, I would rather locate a new store across from a $400k per week Winn-Dixie rather than an $800k per week grocery department of Wal-Mart. It’s easier to take $2 away from Winn-Dixie compared to taking $1 away from Wal-Mart.
I wish Peter Lynch and his entire team (especially in the stores) the best of luck.
That said, I’m not as sanguine as some of the commentators after looking at the press release.
Grosses are up, basket size is up, transaction (i.e. customer count) is down. Any cause and effect between the increased grosses and the decreased traffic count? I also concur with the observation that sales in the remodeled stores while up, seem to be up less than what could reasonably expected.
Seems to me the jury is still out (and will be for quite some time).
This is great to see a successful exit from Chapter 11 for WD. However, their true success will determine their ultimate destiny. This is based upon their ability to sustain a profitable set of continuing operations, for multiple quarters. When this happens, we will truly know if WD is reformed and will be able to sustain itself.
I am rooting for Winn Dixie to succeed because it would be a shame to leave so many consumers in the Florida market with only two Grocery Options: Publix and Wal-Mart. However, it’s difficult to be encouraged with a 1.6% growth in Same-Store sales, particularly in a fast growing market like Florida. I wonder if they truly understand the problems that put them in bankruptcy in the first place. I’m wracking my brain to think of any Food, Drug or Mass retailer that has successfully executed a turnaround in the past 10 years. The jury is still out on whether Kmart qualifies. It’s hard to believe they can sustain such sharp sales declines.
More Discussions
Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?OpenAI Names the Infrastructure Standard for Agentic Commerce
Will OpenAI or Google (or another entity) set the gold standard for agentic commerce?Is Five Below Poised For Even Greater Growth?
Five Below is hitting serious growth numbers. Can this trend continue?
Winn-Dixie’s gross margin is rising, which could account for the store traffic reduction as well as the profitability. Way too much grocery volume is based on loss leaders. The comparison with Sears is apt: why bother with sales increases if the margins aren’t profitable?
Good news for Winn Dixie, but I would be interested to watch the manner in which they try to build back their customer base and how that investment in margin, advertising and/or capital expenditure affects the long term. But to build the transaction value of their current base is a good sign they are moving in the right direction.
I am pleased to hear the good news for Winn Dixie. I really hope that they make it and the increased transaction size is a very positive indication that they are on the right track. It seems to me that they have to carve out a reason for customers to pick them over Wal-Mart and Publix; not an easy task. It is one thing to improve or shore up numbers in their hometown of Jacksonville, but much harder where they do not have the strength or market share. Wal-Mart has the low price market and Publix does so many things right at the other end of the spectrum. There is room in between those two, but they need a niche other than location to drive traffic. They need to stand for something in the minds of consumers, whether it’s best meat or produce; cleanest stores or friendliest employees or something that makes them standout as an alternative to the others.
Peter Lynch is a savvy food retailer and appears to have a plan. Questions remain whether the five step plan can be implemented successfully. The competitive set in Florida and the South East has changed dramatically in the last few years. In 2001 Winn-Dixie had a market share of 15% or greater in 11 markets. In 2006 the company only had 3 markets with a 15% or greater market share. While Winn-Dixie struggled through bankruptcy, both Publix and Wal-Mart became stronger competitors in the Winn-Dixie market.
Most retailers were caught off guard by the Wal-Mart efficiency model and had to shape up their organizations. The ones who survived got stronger and can be formidable opponents. People want choice and they love the underdog. Who would have thought GM would get caught by Toyota? Have a plan of quality, value, and customer experience and execute the plan. We are all better retailers after the Wal-Mart challenge.
The only good news was the stock price shot up. Market share is still falling because sales are not keeping up with inflation and population growth. The 12% increase from the remodels is actually disappointing because they should be much higher, considering the low sales volumes of the stores. Remember, 12% of nothing isn’t much. I think this might be another Sears/Kmart thing where stock price and store performance are mutually exclusive. I would expect Winn-Dixie to continue to post profits from time to time, but in the long run I do see them hanging around. I’ve seen this before when small sales gains are overhyped while there is no mention of the falling market shares. If Winn-Dixie is successful at any location they will be specifically targeted by the competition, which still views them as an ineffectual competitor. If I’m Publix, I would rather locate a new store across from a $400k per week Winn-Dixie rather than an $800k per week grocery department of Wal-Mart. It’s easier to take $2 away from Winn-Dixie compared to taking $1 away from Wal-Mart.
I wish Peter Lynch and his entire team (especially in the stores) the best of luck.
That said, I’m not as sanguine as some of the commentators after looking at the press release.
Grosses are up, basket size is up, transaction (i.e. customer count) is down. Any cause and effect between the increased grosses and the decreased traffic count? I also concur with the observation that sales in the remodeled stores while up, seem to be up less than what could reasonably expected.
Seems to me the jury is still out (and will be for quite some time).
This is great to see a successful exit from Chapter 11 for WD. However, their true success will determine their ultimate destiny. This is based upon their ability to sustain a profitable set of continuing operations, for multiple quarters. When this happens, we will truly know if WD is reformed and will be able to sustain itself.
I am rooting for Winn Dixie to succeed because it would be a shame to leave so many consumers in the Florida market with only two Grocery Options: Publix and Wal-Mart. However, it’s difficult to be encouraged with a 1.6% growth in Same-Store sales, particularly in a fast growing market like Florida. I wonder if they truly understand the problems that put them in bankruptcy in the first place. I’m wracking my brain to think of any Food, Drug or Mass retailer that has successfully executed a turnaround in the past 10 years. The jury is still out on whether Kmart qualifies. It’s hard to believe they can sustain such sharp sales declines.