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Winn-Dixie Stores, Inc. this week posted net sales for the second quarter of fiscal 2010, a 16-week period that ended on Jan. 6, 2010, of $2.2 billion, a decline of $74.5 million, or 3.3 percent, vs. the year-ago period. The grocer attributed the drop to non-recurring storm-related sales and six store closures in fiscal 2009.
Identical-store sales, which exclude stores that opened or closed during the quarter, fell 2.9 percent for the second quarter compared with last year. Winn-Dixie’s 52 offensive remodel stores, which are still within their first year of operation, had a 4.9 percent weighted average sales increase vs. the year-ago period, excluding the grand reopening phase. Identical-store sales in both remodeled and non-remodeled stores were negatively affected during the quarter by a challenging economic environment, deflationary pressures, non-recurring storm-related sales and a mix shift from branded pharmaceutical products to generics, according to the company.
Second-quarter net income was $2.1 million, or four cents per diluted share, compared with $16.1 million, or 30 cents per diluted share, in the second quarter of fiscal 2009. The decrease in net income was mainly because of a non-recurring gain on an insurance settlement of $22.4 million ($13.8 million net of tax, or 25 cents per diluted share) in fiscal 2009, the retailer said.
Gross profit on sales in the second quarter was $613.5 million, a decrease of $19.0 million from last year. As a percentage of net sales, gross margin was 28.2 percent, compared with 28.1 percent last year, primarily due to a lower LIFO charge, offset by an increase in inventory shrink and higher warehouse expenses.
“The challenging economic environment and deflationary pressures continue to impact sales for the entire supermarket industry,” noted Winn-Dixie chairman, CEO and president Peter Lynch. “Despite negative identical store sales, we are pleased with our overall operating execution during the quarter. In particular, we maintained our gross margin rate through effective management of our promotional activity and reduced our operating expenses.”
Lynch noted that despite cautious spending by consumers, Winn-Dixie was able to increase transactions by 4.1 percent in first-year offensive remodels over last year, which he called “a clear indication that customers are continuing to respond positively to the changes we are making.”
“Given the prevailing economic conditions, we will continue to be prudent with our capital spending and will selectively remodel a total of 60 stores in fiscal 2010 in locations where we believe we can generate the highest return on our investment,” Lynch added.
“While we expect the sales environment will remain challenging for some time, I can assure you that we’re not simply waiting for the economy to rebound,” Lynch said during an analysts’ conference call yesterday. “We are doing everything in our power to improve our results; we are closely monitoring shifts in consumer behavior, and adapting the marketing and merchandising at our remodels and across the chains to drive sales.” Examples he gave of this were the company’s recently implemented fuelperks! gasoline discount program in the Jacksonville, Fla., area, and the dollar-stretching “Make a Meal” initiative.
In keeping with the still bleak economic outlook, Lynch said during the call that the company was “taking steps to trim our capital spending by about $20 million as compared to our annual plan by doing fewer remodels and reducing certain other planned expenses. We believe this is appropriate given the environment and balances our desire to be prudent with our expenditures in the near term while still executing the strategic initiatives that will enable us to compete effectively when the economic conditions improve.”
Net sales for the 28 weeks ending Jan. 6 were $3.8 billion, a decrease of $108.8 million vs. the same period in the prior fiscal year. Net sales for the 28 weeks were adversely affected by about $50 million due to nonrecurring storm-related sales and six store closures in fiscal 2009.
Identical store sales fell 2.3 percent from the year-ago period. The company’s 52 offensive remodeled stores in their first year of operation had a 5.8 percent weighted average sales increase vs. last year.
Gross profit on sales was $1.1 billion, a decrease of $20.5 million compared with last year. As a percentage of net sales, gross margin was 28.3 percent, vs. 28.0 percent last year, which Winn-Dixie attributed mainly to a lower LIFO charge and lower transportation costs, offset by increases in inventory shrink.
The grocer posted a net loss of $6.0 million, or 11 cents per diluted share, vs. net income of $13.8 million, or $0.25 per diluted share, in the year-ago period, due primarily to a prior-year gain on the $22.4 million insurance settlement in fiscal 2009.
In re-affirming its guidance range of $140 to $160 million in adjusted EBITDA for fiscal 2010, Winn-Dixie said it expects the challenging economic environment to continue to affect its business for the rest of the fiscal year, and so anticipates being at the low end of the guidance range.
Jacksonville, Fla.-based Winn-Dixie operates 515 retail grocery locations, including over 400 in-store pharmacies, in Florida, Alabama, Louisiana, Georgia and Mississippi.