Storms Boost Winn-Dixie Sales

JACKSONVILLE, Fla. — Winn-Dixie Stores here said last week the two hurricanes and one tropical storm that hit the Gulf Coast during the summer helped boost sales and operating cash flow for its fiscal first quarter, which ended Sept. 17.

Despite a loss of $2.3 million for the 12-week period, EBITDA rose 38.5% to $27 million, while sales increased 3.4% to $1.7 billion, and identical-store sales were up 3%.

Winn-Dixie said it experienced increased sales from pre-storm purchases in advance of Hurricanes Gustav and Ike and Tropical Storm Fay, as well as from the chain's ability to reopen ahead of its competitors, though those benefits were partially offset by losses during temporary store closures.

The weather-related factors also contributed 110 basis points to the improvement in identical-store sales, the company said, though a higher percentage of generic sales in the chain's pharmacies had a negative impact of approximately 100 basis points.

During a conference call with analysts last week, Peter Lynch, Winn-Dixie chairman, president and chief executive officer, said ID sales for the quarter were driven by an increase in basket size of 5.7%, which was offset by a decline in transaction count of 2.5%.

“We had stores closed for a number of days, and you don't recoup those footsteps,” he explained. “But when customers come back after a storm, they come in once rather than twice, and they buy more products. So it has a negative impact on traffic, but a very positive impact on basket.”

Although Winn-Dixie remodeled only one store during the quarter — because of weather-related delays that caused “a bit of a bump,” Lynch said — the company is on track to complete 75 remodels this year.

Karen Short, a New York-based analyst for FBR Capital Markets, Arlington, Va., said in a report last week that the 59 offensive remodels — out of 96 total that Winn-Dixie has completed over the past year-plus — continue to outperform the company's target of 10%, with weighted-average sales lifts of 11.6%, including a 3.3% increase in transaction counts and an 8% increase in basket size.

Lynch said Winn-Dixie has seen private-label penetration climb 150 basis points to 22% since the fourth quarter.

The chain is also experiencing big sales increases in several basic categories, he said.

“We're starting to sell more butter than we've ever sold before, and more frozen dinners, and bagged potatoes are way up for us,” he said. “Sliced cheese and bread are on the upside, which is an indication people may be taking more sandwiches to work. We're also seeing increases in shortenings and oils for cooking.”

Asked whether Winn-Dixie anticipates any difficulties accessing financing because of problems in the debt markets, Bennett Nussbaum, senior vice president and chief financial officer, said, “We've been monitoring our liquidity, and our availability position and our revolver are solid.