JACKSONVILLE, Fla. — Winn-Dixie Stores here said last week it is seeing an uptick in store traffic, with identical-store sales turning positive over the past six weeks — prompting cautious optimism from industry analysts.
Peter Lynch, the chain's chairman, president and chief executive officer, said the improvements are the result of the chain's fuelperks! program and the recovering economy.
Meredith Adler, managing director at Barclays Capital, New York, said more evidence is necessary before it becomes clear that Winn-Dixie is truly on the path to a turnaround.
A third-quarter decline in ID sales of only 0.5% “shows a stabilization of the business,” Adler noted, “and with fourth-quarter comparisons running positive, guidance that the entire quarter will be positive seems realistic.
“While Winn-Dixie has a long way to go before it will have polished its brand image, it is doing all the right things to build a solid foundation. The very weak Florida economy has obscured the progress, and there is no quick fix. But the company has demonstrated a noticeable ability to manage costs and cash flow, and it continues to have all the liquidity it needs to go down this long and challenging path.”
Scott Mushkin, an analyst with Jeffries & Co., New York, said he is pleased that IDs have turned positive, noting the company faces easy comparisons over the coming quarters, “and the benefits from cycling the oil spill, slightly better macroeconomics and the fuelperks! program should all help sales.”
“However, market-share losses, the rising cost environment and lower-than-average productivity metrics — such as sales per square foot that continue to lag competitors — keep us concerned, so the company is not out of the woods yet, and the rising cost environment is likely to continue to weigh on its consumers in the absence of a significant rebound of the economy.”
In a conference call to discuss financial results for the third quarter, which ended April 6, Lynch said the chain's fuelperks! program — in which shoppers get discounts on gas based on in-store purchases — is definitely helping to drive store traffic.
“We're seeing upside in the markets where we have the gas rewards program,” he said. “We believe fuelperks! is evolving our rewards card as a loyalty instrument by providing fuel discounts at local gas stations and increasing spending in our stores, which is incrementally driving our sales.”
Winn-Dixie has fuelperks! at 213 stores, or 44% of its store base, encompassing locations in New Orleans, Miami and here. Lynch said the company hopes to roll the program out to most of its remaining stores by mid-2012.
Net income for the 12-week third quarter rose 11.9% to $23.4 million, including a deferred tax benefit of $9.7 million that would have reduced net income to $13.8 million. Sales fell 0.2% to $1.6 billion, and identical-store sales decreased 0.5%, including a 1.7% decline in transaction count, offset by a 1.3% increase in basket size.
Lynch said identical-store sales are running positive — in the low single-digit range — in the fourth quarter.
For the year to date, Winn-Dixie had a net loss of $77.4 million, compared with net income of $14.9 million a year earlier, including a net loss of $42 million from discontinued operations.
Sales for the 40 weeks fell 0.7% to $5.3 billion, and ID sales dropped 1.1%.
