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   Winn-Dixie Stores Reports First Quarter Fiscal 2010 Results
by Eric Harris, Winn-Dixie Stores Inc.
Posted: Wednesday, November 11, 2009 at 12:10PM EST

JACKSONVILLE, Fla.--(Business Wire)--Winn-Dixie Stores, Inc. (NASDAQ: WINN), today reported its financial results for the first quarter of fiscal 2010, a 12-week period that ended on September 16, 2009.

Net sales in the first quarter were $1.6 billion, a decrease of $34.4 million, or 2.0%, compared to the same period in the prior fiscal year. Net sales this quarter were lower due to non-recurring storm-related sales and six store closures that occurred in fiscal 2009. Excluding those items, net sales decreased $6.3 million.

Identical store sales, which exclude stores that opened or closed during the quarter, decreased 1.5% for the first quarter compared to the same period in the prior fiscal year. Identical store sales were flat when adjusted for non-recurring storm-related sales in the prior year (100 basis points) and the continued mix shift from branded pharmaceuticals to generics (50 basis points).

The Company reported a net loss of $8.1 million, or $0.15 per diluted share, for the first quarter of fiscal 2010, which includes an impairment charge of $3.5 million, or $0.06 per diluted share related to six store locations. This net loss compares with a net loss of $2.3 million, or $0.04 per diluted share, for the first quarter of fiscal 2009.

Adjusted EBITDA was $22.8 million in the first quarter of fiscal 2010 compared to Adjusted EBITDA of $27.0 million in the same period last year. Adjusted EBITDA in the first quarter of fiscal 2009 included an estimated benefit of $2.7 million due to storm-related sales net of storm-related inventory losses and other costs.

Winn-Dixie Chairman, CEO, and President, Peter Lynch, said, "The economic climate continued to impede our growth during the quarter and caused our Adjusted EBITDA to fall below last year`s levels. Identical store sales declined due to the absence of storm-related sales that we experienced last year and a shift by consumers towards generic pharmaceuticals. These factors, coupled with deflationary trends in many of the items we sell, led to a decline in basket size for the chain."

Mr. Lynch continued, "However, we`re pleased that transaction count was flat in the current quarter, compared to the negative levels we experienced through most of the prior fiscal year. It is very encouraging that customers continue to shop at our stores to enjoy our fresh and local offerings even though the economy is limiting their grocery budgets."

Details of the First Quarter Results

Gross profit on sales in the first quarter was $465.2 million, a decrease of $1.5 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 28.3% in the first quarter compared to 27.9% in the first quarter of fiscal 2009, an increase of 40 basis points. The improvement in gross margin was attributable to lower warehouse and transportation costs, and a lower LIFO charge, partially offset by higher inventory shrink.

Other operating and administrative expenses for the first quarter were $469.1 million, an increase of $1.0 million compared to the same period in the prior fiscal year. The increase in other operating and administrative expenses was attributable primarily to retail payroll, which was partially offset by non-recurring storm-related expenses in the prior year.

Store Remodel Program

As of the end of the first quarter, the Company had completed 170 store remodels since the program began in 2007, 76 of which were still within their first year of operation. Of the 76 first-year store remodels, 57 are considered by the Company to be offensive remodels. For the first quarter of fiscal 2010, those 57 stores had a 7.1% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase. This sales increase was negatively impacted by an approximately 150 basis points due to non-recurring storm-related sales in the prior year.

Commenting on the store remodel program, Mr. Lynch added, "The increase in identical store sales at our first-year offensive remodels was driven primarily by increased customer transactions, which were up 7.1% compared to last year and clearly show that customers are responding by making more frequent trips to our stores. However, our average customer basket size per transaction was flat compared to last year. The factors that have negatively impacted the overall basket size for the chain have also been experienced in our remodeled stores."

Corporate Brands Program

For the first quarter of fiscal 2009, the Company`s penetration rate on the categories we measure improved to 22.6%, an increase of approximately 20 basis points compared to the same period in the prior fiscal year. Since the inception of the program, the Company has completed packaging and label redesigns for over 3,300 private label products.

Liquidity and Capital Resources

As of September 16, 2009, Winn-Dixie had approximately $669 million of liquidity, comprised of $512 million of borrowing availability under its credit agreement and $157 million of cash and cash equivalents, an increase of $6 million from year end. The Company noted that its liquidity is sufficient to continue funding its capital program, and it does not expect any borrowings under its credit facility for fiscal 2010.

Fiscal 2010 Guidance

The Company has revised its guidance for fiscal 2010 to reflect changes in the economic environment, changes in customer behavior and the expectation that the current level of food deflation will be replaced with a low level of food inflation later in fiscal 2010. The Company now expects full-year fiscal 2010 Adjusted EBITDA to be in the range of $140 to $160 million.

Mr. Lynch said, "We have revised our guidance to reflect the challenges in our business and the sales trends we are seeing. Although we are reducing our expectations for this fiscal year, we are confident that we have the right strategy in place to position us for sales growth over the long-term. We will continue to execute our strategic initiatives, control operating expenses and manage our operations in a disciplined manner."

Source: Winn-Dixie Stores Inc.


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