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NEW YORK - Several law firms representing Winn-Dixie shareholders are filing a class action lawsuit against the company, alleging that its top executives portrayed Winn-Dixie as a growing and competitive company when it was suffering from substantial undisclosed long-term business and financial problems.
The lawsuit claims that when Allen Rowland stepped down as c.e.o., Frank Lazaran ordered his senior management to conduct a "comprehensive review" of Winn-Dixie's "entire business model." This was unbeknownst to the investing public, according to the suit.
On Jan. 30, 2004, before the opening of trading, a Winn-Dixie press release announced what the lawsuit calls "disastrous" financial results for the company's second fiscal quarter ended Jan. 7, 2004. The company's sales were down over a quarter of a billion dollars from the prior year period, and it had sustained a loss of $79.5 million, or $0.57 per share.
Winn-Dixie said it would take a "series of major actions" to change the way the company does business, including brand positioning for its Winn-Dixie brand, $100 million in expense reduction by July 1, 2004, in-depth analysis of the company's core markets, market share, and competitive positioning, an "image makeover program," and an initiative to "reengineer" organizational effectiveness and accountability.
In addition, Winn-Dixie announced that it would recognize a $36.4 million charge to earnings for impairment to its long-lived assets, namely, its store locations, and would add $21.4 million to its reserves for self-insurance expense, which included additional reserves for workers' compensation claims. The company also cut its dividend indefinitely.
The market reacted swiftly to the news. Winn-Dixie's stock plunged from $9.09 to $6.56 per share on volume of 24.6 million shares.
The plaintiff seeks to recover damages on behalf of all those who purchased or otherwise acquired Winn-Dixie securities during the Class Period, Oct. 9, 2002 through Jan. 29, 2004.