Local Winn-Dixie stores up for sale; could close within 12 months

From Staff Reports

   The two Winn-Dixie stores located in Elizabethton are affected by the corporation's announcement Friday involving 156 stores in numerous states.
   The stores will be put up for sale, and if not sold within 12 months they would be closed. The "first priority would be to sell" the stores, said Joanne Gage, Vice President of Advertising and Marketing for Winn-Dixie.
   The company expects that about 10 percent of its work force, or approximately 10,000 positions, will be affected by the rationalization plan within the next 12 months.
   Winn-Dixie will operate a streamlined core of 922 stores across 36 DMAs in Florida, Alabama, Louisiana, Georgia, and certain areas of North Carolina, South Carolina, Mississippi and Tennessee. The company will also continue to operate in the Bahamas. Within its 36-core DMAs, the Company plans to close 45 unprofitable and/or poorly located stores. The remaining 922 core stores recorded aggregate sales of $2.4 billion during the third quarter and have generated $8.1 billion in sales in the fiscal year to date. Identical store sales for this group decreased 6.0 percent and 6.4 percent for the quarter and year respectively.
   Winn-Dixie Stores, Inc. on Friday announced financial results for the third quarter of its 2004 fiscal year. The company also provided an update on its progress with previously announced strategic initiatives.
   Sales for the 12 weeks ended March 31 were $2.7 billion, a decrease of 5.5 percent from the same quarter last year. For the 40 weeks ended March 31, sales were $8.9 billion, down 5.8 percent from the same period last year.
   "While sales continued to decline, this quarter's break-even results are an improvement from last quarter, largely due to an increase in margins," said Frank Lazaran, President and Chief Executive Officer. "We also made meaningful progress with our strategic initiatives, most notably the completion of our comprehensive review of Winn-Dixie's markets to identify which are core and non-core to the company. We are making and implementing the tough decisions we believe are necessary to streamline the company and return it to consistent profitability."
   During the third quarter, the company continued to develop and execute the strategic initiatives announced in January 2004.
   On April 23, the company's board of directors approved an asset rationalization plan identifying Winn-Dixie's core and non-core retail designated market areas (DMAs) and other assets. As of March 31, the company operated 1,078 stores in 52 U.S. DMAs and the Bahamas.
   The company plans to exit 111 stores in 16 non-core DMAs in the Midwest, Virginia and certain areas of North Carolina and South Carolina. These DMAs are Bowling Green, Ky.; Cincinnati, Ohio; Evansville, Ind.; Greenwood-Greenville, Miss.; Greenville-New Bern, N.C.; Lexington, Ky.; Louisville, Ky.; Memphis; Myrtle Beach, S.C.; Nashville; Norfolk-Portsmouth-Newport, Va.; Paducah, Ky.; Richmond-Petersburg, Va.; Roanoke-Lynchburg, Va.; Tri-Cities Tennessee Valley, Tenn.; and Wilmington, N.C. The company will seek to sell stores as ongoing businesses and anticipates that stores that cannot be sold will be closed. The company expects to complete the exit from these non-core DMAs within the next 12 months. The company also plans to reduce the number of U.S. operating divisions from eight to seven by consolidating Raleigh division functions into the Charlotte operating division.
   In its effort to streamline all aspects of its business, the company reviewed its distribution network. As a result, the company plans to exit three distribution centers in Raleigh, N.C.; Louisville, Ky.; and Sarasota, Fla. The company expects to complete these exits within the next 12 months.
   The company has undertaken a comprehensive review of its manufacturing operations and determined that these operations are not fundamental to the company's core business of operating supermarkets. The company will immediately pursue the sale of its Dixie Packers, Crackin' Good Bakery/Snacks, and Montgomery Pizza manufacturing operations. Additionally, the company will consolidate its Greenville Ice Cream and Miami Dairy operations into its other dairies. The company will also continue to evaluate its remaining dairies and other manufacturing operations.
   The company will seek to minimize the impact on its associates by attempting to sell the operations it will exit and, where practicable, offering positions at other Winn-Dixie operations. "This was a difficult decision, but it is a necessary part of our strategic plan to restore Winn-Dixie to consistent profitability," said Lazaran. "We will make every effort to ensure a smooth and fair transition for affected associates."
   Winn-Dixie expects to generate a one-time cash increase within the next 12 months resulting from improvements in working capital and the sale of assets, net of severance and closing costs. In addition, as a result of its asset rationalization plan, the company expects annual pretax savings of approximately $60 million to $80 million. Over the next 12 months, the company also expects to incur aggregate pre-tax restructuring charges and losses on the disposal of discontinued operations of approximately $275 million to $400 million.
   The company's debt rating from both Moody's and Standard & Poor's was downgraded two months ago.