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Winn-Dixie slips toward Chapter 11


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Mon Feb 14, 5:00 AM ET

by Brenon Daly

Slumping supermarket chain Winn-Dixie Stores Inc. may be headed to bankruptcy as the old-line grocer continues to burn cash in its fight against new rivals.

"It's doomed," said Bill Brandt, head of restructuring firm Development Specialists Inc. "Its stores look like hell, and its competitive strategy looks worse."

On Thursday, Winn-Dixie reported it lost $400 million in its second quarter, which ended Jan. 12. Sales at stores open more than a year declined nearly 5%, the company added.

In its core Florida market, Jacksonville, Fla.-based Winn-Dixie has been hammered by rival chains Publix Super Markets Inc., which generally has cleaner and more inviting stores, and the upscale Harris Teeter Inc., which offers gourmet foods and premium deli and seafood counters. Wal-Mart Stores Inc., already the largest U.S. grocery retailer, also has a strong presence in the state.

Winn-Dixie's share of the local grocery market declined 1.1% from 2002-2003, according to CIBC World Markets. That was the most significant erosion among the major chains the investment bank surveyed.

A spokesman for the supermarket did not return calls.

Brandt said an acquisition of Winn-Dixie is unlikely because "it's a tired, old brand with secondary stores." It wouldn't make sense for Harris Teeter, a fast-growing subsidiary of Ruddick Corp., a Charlotte N.C. holding company, to "pay up to correct the mistakes" at Winn-Dixie, he said.

The product of a mid-1950s merger, Winn-Dixie has more than 1,000 stores in 12 states, primarily in the southeastern U.S. "Winn-Dixie is trying to sell to people in the Old South, but the Old South has changed," Brandt said.

Speculation around Winn-Dixie sliding into Chapter 11 comes as Pathmark Stores Inc.

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I live in a region that's losing its Winn-Dixies. We still have one in town, scheduled for closure, that was upgraded signifigantly when they moved a few years ago. Nice as it was, it was doomed from the start.

The store it replaced was a pretty typical '60s-era Winn-Dixie that had gotten run-down and dilapadated. Apparently that was its appeal. This sounds strange, but a lot of people in town who shopped out there thought they were getting a better deal at the dilapidated store, and at the same time the old store scared off new customers.

When they upgraded to Winn-Dixie Marketplace at the new store, the old-timers thought the store was too fancy, and there weren't enough new customers (siphoned by upgraded Kroger and Food Lion stores, plus Wal-Mart) to make the place viable. When the sales dropped, they cut hours and services and alienated even more customers. So now, waiting for closure, is a fancy ruin that pleases nobody.

I guess that's W-D's problem: they don't resonate any more with the bargain shoppers or the upscale people. The former have been sucked in by Wal-Mart and Food Lion, and the latter have been captured by Kroger, Publix and Harris-Teeter. The middle is fading fast, and so is Winn-Dixie.

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Customer tips for Winn-Dixie

Two months into the job, the president and chief executive officer of Winn-Dixie Stores Inc. said last week that he wanted to make immediate changes to improve the Jacksonville-based chain's profitability.

Peter Lynch, former president and CEO of Albertson's Inc., took the job in December, becoming the fourth president in six years at the 80-year-old company.

Winn-Dixie lost almost $400 million in the second quarter, and Lynch told analysts during a conference call that he "took a deep dive into our financial and operational structure."

"Over the past two months I visited over 50 Winn-Dixie stores throughout every region of the chain," he said.

"I walked the aisles. I met with store directors and associates and talked with our customers. I also visited our competitors, looking closely at their locations, merchandising and customer service."

Lynch said the immediate tactics are "not rocket science" and "they do not take a lot of capital to fix, and they can be implemented quickly." He wants to enhance perishables; improve merchandising; strengthen relationships with vendors; and motivate associates to drive sales.

I wasn't one of the customers Lynch spoke with, but I've known Winn-Dixie, one of the city's three Fortune 500 companies and the largest at No. 162, for 27 years. The chain operates more than 900 stores in the Southeast and the Bahamas. Some of its more than 30 area stores are the only supermarkets in their neighborhoods.

I shopped this week at four Winn-Dixies, including the Ponte Vedra Beach store that Lynch considers the model for the region. Keeping in mind that the Ponte Vedra store really did shine, some of the immediate tactics among area stores could include:

Clean the stores, especially the meat cases. The Ponte Vedra store appeared to be quite clean, while some of the others needed sweeping in the produce area and cleaning in the food bins. The meat cases I saw could use attention, and one needed a strong scrubbing. A fly got into a self-serve pastry case.

Maintain the shelves. Some shelves were low on stock or in disarray. A carton of yogurt sat at a cash register, a bag of carrots was abandoned with the ChapStick and a display of canned nuts included an open container of cashews. Some of the drink cartons were sticky.

Brighten and lighten the stores. The Ponte Vedra store was well lit and colorful, and the others seemed drab by comparison. They could use freshening up or more strategic lighting or splashier displays.

Clean and maintain the carts and baskets.

Maintain freshness in the deli and take-out. No need to keep that last spoonful of drying mashed potatoes.

Reward the helpful associates and add more. Every associate I met this week was friendly. I forgot my customer reward card and a manager scanned his for me. Another manager helped me with the self check-out. An efficient deli clerk gave me a generous sample. Produce clerks were attentive. Still, more associates could be used to maintain the stores. Such friendliness wasn't always the case in years past.

Don't forget the parking lots. First impressions start at the entrance. Landlords should keep those parking lots clean, and more protected cart corrals would be appreciated.

While all grocery chains could benefit from the same advice, Winn-Dixie is the home-town company -- and Lynch wants to "invite the customers back."

karen.mathisjacksonville.com, (904) 359-4305

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A follow up to the article above ^

Readers give their tips for Winn-Dixie


Times-Union senior business writer

Our "customer tips for Winn-Dixie" appeared Wednesday, and almost 40 readers quickly weighed in.

We offered seven: Clean the stores; maintain the shelves; brighten the stores; fix and clean carts; keep the deli fresh; hire and reward helpful associates; and keep the parking lot clean.

Collectively, readers called or e-mailed with dozens more tips based on their experiences with almost 20 area Winn-Dixies.

Two months ago, the Jacksonville-based chain hired president Peter Lynch to improve sales among its more than 900 stores. Winn-Dixie Stores Inc. lost almost $400 million in the second quarter.

Lynch, the fourth president in six years, said he wants to make changes quickly and expects a sales improvement by the fourth quarter. He wants to "invite the customers back."

Three investment stock analysts were skeptical and reported they believed the chain might file for bankruptcy reorganization.

None of the readers said he or she wanted to see the chain go out of business. "I hope not," said 79-year-old Patricia Trojanoski, "but the way they're going ..."

Many readers said top management, starting with Lynch, needs to resolve the issues in the name of customer service. They said store managers should have more autonomy to make store-level decisions. A Ponte Vedra man said when he requested some common items, he was told "we'll discuss it with management ... and nothing happens."

"Let them run their store," another man said of store managers. "Every grocery store is different and cannot be run from the front office."

Readers wanted responsive management, whether it concerned messy bathrooms or different merchandise. Some wanted more, friendlier and more knowledgable employees.

Some readers acknowledged their neighborhood stores were clean and friendly. One reader offered kudos to the former manager at St. Augustine Road and University Boulevard and another called to praise the woman who tends the produce department at Atlantic Boulevard and Penman Road.

At least a third of the readers said that they had shopped at Winn-Dixie but now do so only if they have to. Here's more advice from readers:

Keep prices competitive. They said some Winn-Dixie prices were higher than at other stores -- including at other Winn-Dixies. One shopper said the sales prices on the shelves didn't ring up at the register.

Staff more cash registers. "No matter when I shop, this store has only one or two registers staffed and lines with at least six people each," said an Arlington customer.

Adjust inventory to neighborhood needs. Also, carry enough of the advertised specials. Reconsider store layouts and drop some of the hard goods, like tables, to focus more on food.

Reconsider the customer reward card. "I and numerous others object to having to carry a special card in order to take advantage of their sales," e-mailed a reader.

Focus on cleanliness. Some noted unclean bathrooms, odors, messy entrances, low lighting and rusty or defective carts.

Improve prepared and fresh foods. This included produce, meats, the deli and the bakery.

In addition, two readers suggested a name change, saying that "Dixie" evokes the old South.

A landlord said he works hard to keep the parking lot clean for Winn-Dixie. "This is our hometown company and I certainly want to see it win its customers back, also," he said.

karen.mathisjacksonville.com, (904) 359-4305

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The color scheme is kinda dull in the store too, but then that's not as a big a deal as the store smelling like meat and having only 2 checkouts open...

Anyone remember their slogan ("America's Supermarket") and their jingle?

Winn-Dixie, low prices

That's our promise, that's our way

America's Supermarket

Winn-Dixie, every day ♪♪

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No, I don't remember it. But where did you get those nifty music notes?

Anyways, it's official:

Winn-Dixie files for Chapter 11


The Times-Union

Winn-Dixie Stores Inc., Jacksonville's biggest company and a Southern icon for a half-century, filed for Chapter 11 bankruptcy protection Monday night to allow the company to continue operating its stores while it restructures the business.

A Chapter 11 filing gives a company protection from creditors so it can remain in business while it reorganizes its finances. Winn-Dixie's 920 supermarkets across the Southeast will open as usual today.

"It is business as usual. All of the stores are open. All of the associates are back to work," President and Chief Executive Officer Peter Lynch said Monday in an interview at the company's Jacksonville headquarters.

Lynch, who has a reputation in the supermarket industry as a turnaround expert, was brought in to Winn-Dixie in December to try to upgrade the stores after several years of falling sales. He expected to have more time, but the company came under pressure in the past two weeks after issuing its financial report for the quarter ended Jan. 12.

Winn-Dixie reported a $399.7 million loss in the quarter and said that its liquidity -- the amount of cash available to fund daily operations -- dropped sharply, sparking fears among suppliers and other creditors that the company was running out of cash. That put the company in danger of being cut off from suppliers, making it difficult to put products on the store shelves.

"As days went on, it became apparent that this was going to take us in a different direction," Lynch said.

"The board of directors has determined that it is in the best interests of the company to file for protection under Chapter 11 of the bankruptcy code," said Winn-Dixie Chairman H. Jay Skelton.

For now, Winn-Dixie isn't planning any additional store closings after getting rid of 156 stores in the past 10 months. But that may change as it goes through the reorganization.

"We're taking a look at size," he said. "The company will probably not be the size it is today."

Lynch said it will be 30 to 45 days before any decisions are made.

Winn-Dixie officials said they expect the company's stock could be delisted from the New York Stock Exchange today but they expect it to resume trading in the over-the-counter market.

Skelton said the company has an agreement with a group of lenders to increase its credit line from $600 million to $800 million.

"The additional $200 million in liquidity makes a big difference," he said.

The Chapter 11 filing will help the company in other ways. The bankruptcy code gives "priority status" to vendors so they can continue to make deliveries with the confidence that they will get their money, said Dennis Simon, managing principal of X Roads Solutions Group, a California-based consulting firm that specializes in corporate restructurings. That will ensure the vendors will continue to deliver goods to Winn-Dixie stores.

"The law gives them more assurance of being paid after the bankruptcy filing," said Simon, whose firm was hired by Winn-Dixie after the quarterly report.

Rather than filing for Chapter 11 protection in Jacksonville, Winn-Dixie filed in the U.S. Bankruptcy Court for the Southern District of New York. Skelton said representatives of many of its creditors are located in New York, and filing in that court will make the process go more smoothly for everyone.

"This is a cooperative effort. We don't want to get into an adversarial position with our creditors," he said.

Although Winn-Dixie's problems accelerated after the quarterly report was issued on Feb. 10, the company has been dealing with a drop in business for several years since total sales peaked at $14.1 billion in fiscal 1999. Sales for the fiscal year ended June 30, 2004, were $10.6 billion.

Analysts have said Winn-Dixie has suffered from competition from new entrants in its Southeastern markets, such as Wal-Mart, and from longtime competitors such as Publix Super Markets Inc., which is considered by many to be running better stores.

Lynch said he is aware of customer complaints and has plans to improve operations of the stores. One initiative will be to introduce a customer service department, which Lynch said Winn-Dixie has not had in the past.

He also said better training for Winn-Dixie's 80,000 workers should improve operations.

Winn-Dixie officials said all employees will continue in their jobs at the same pay with the same benefits, including retirement plans.

"The 401(k) is totally protected. Nothing happens to that plan," Lynch said.

The company will inform employees about the impact of the Chapter 11 filing when they report for work today and will be holding a meeting with workers to explain the situation.

Winn-Dixie's stock has fallen from a high of $59.38 in 1998 to $1.47 at the close of trading Friday, a level the stock has not seen since the 1950s. But company officials said the stock drop will not hurt the 401(k) plan, because less than 10 percent of the plan's assets are in Winn-Dixie stock.

"This is not an Enron, where company stock is loaded up in the 401(k) plan," Simon said.

Monday was a stock market holiday, but the future of Winn-Dixie's stock will be up in the air when the market reopens at 9:30 a.m. today. The stock has been listed on the New York Stock Exchange since 1952, becoming the first Florida industrial company listed there, according to Winn-Dixie's Web site. But Simon said in most instances when a company files for bankruptcy protection, the New York Exchange has delisted it.

"I think it's a high probability the stock is delisted," he said.

Trading in the stock will likely be suspended when the market opens today but Simon said it will probably resume trading in the so-called "pink sheets," or the over-the-counter market, where low-priced stocks are traded.

Winn-Dixie's largest shareholder is the Davis family, which founded the company in 1925 and owns 51.7 million shares, or 36 percent of the common stock. The Davis family holdings were worth about $3.5 billion when the stock peaked in 1998 but the value of its stake in Winn-Dixie has been reduced to about $75 million.

No member of the family works in senior management at Winn-Dixie. But Skelton, who represents the Davis family as president of D.D.I. Inc., the family's investment company, said the Davises are not going to abandon Winn-Dixie.

"We are very committed to Winn-Dixie," he said. "We are very committed to management, to Peter Lynch. We have all the confidence in the world in Peter's leadership and ability."

Skelton also said the drop in value of the Davis family's Winn-Dixie stock will not affect the progress of Nocatee, the massive real estate development under way on Davis property in Duval and St. Johns counties. He said the family's investment portfolio is still sound.

"Over the years, we have diversified and we still have a nice portfolio," he said.

The Davis family and Winn-Dixie have been active in community projects over the years. Lynch said he will be looking at the company's community projects and expects Winn-Dixie to continue to be active.

"Our involvement in the community is very, very important," he said.

Winn-Dixie's high stock price in 1998 was fueled by takeover speculation, and rumors that another large supermarket chain would buy Winn-Dixie have persisted for years. Lynch said yesterday there is no buyout of the company in the works.

"Since Dec. 10 [when Lynch joined the company], there have been no negotiations with any other chain," he said.

In a Chapter 11 reorganization, any major changes in Winn-Dixie's operations will have to be approved by its creditors and by the bankruptcy judge. Although he did not give a lot of details Monday about the company's plans to improve operations by providing better customer service and getting rid of unprofitable stores and facilities, Lynch expressed a lot of confidence in the company's ability to emerge out of bankruptcy as a profitable company.

"I am very optimistic," he said.

mark.baschjacksonville.com, (904) 359-4308

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It seems like all the brands I grew up with and saw in the landscape have disappeared, for better or for worse.... Zayre (later Ames), Service Merchandise, Montgomery Ward, JByrons, Burdines (absorbed by Macy's this year), X-TRA, a bunch of banks, etc... Corporate Darwinism, perhaps.


Looking at this picture brings several things to mind, including: I can't believe that people thought this architectural design was cool. :silly:

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^Which Winn-Dixie is that? It reminds me of the old abondoned store on Lone Star in Old Arlington, lol. That one is really nasty, but I think a small church bought it and renovated the interior.

lol, and I totally agree with your "corporate Darwinism" theory. There used to be so many different companies competing out there...

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There may be a little light at the end of the tunnel, but I don't think it does anything except to extend inevitability for this grocery chain in this area.

"Winn-Dixie Stores Inc., which filed for Chapter 11 bankruptcy Monday, has secured an $800 million debtor-in-possession financing facility from Charlotte-based Wachovia Corp."

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I hope Winn-Dixie emerges a healthier company once it is no longer under protection. I think a major retrenchment period is in order and have a feeling the most loyal segment of its customer base is in Jacksonville. I haven't thought of Winn-Dixie as being a value-added company nor one that is innovative. Even "sticking to the basics" such as having products stocked where the shelves indicate (if there are even any products), efficiency and customer service have slipped from their daily operations. I think it's neglect that's found its way down from the source: upper-level management.

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I agree that it was neglect and I would particularly blame the 2d and 3d generations of the Davis family. The grandfathers obviously worked very hard and built a retail empire and the later generations were content to rest on the accomplishments of their forebears. They just didnt pay attention to the family business and it went to pot. It really is a shame for them (and the city) since they have collectively lost BILLIONS of $$. Easy come, easy go, I guess...

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