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Peter Lynch, chairman, president and chief executive officer of Winn-Dixie Stores, Jacksonville, Fla., learned a valuable lesson at the end of the chain’s fiscal year in June 2008: Don’t over-promote in a down cycle.
For the fiscal year that ended last month, the chain anticipated a 40% improvement in adjusted operating cash flow — compared with a 57% increase in fiscal 2008 — plus stronger gross margins and same-store sales while maintaining “an appropriate balance” between sales and gross margins, Lynch said earlier this year.
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“This company is very much on track with its turnaround plan, and we’re feeling good about it,” he noted.
Winn-Dixie is moving forward aggressively on store remodels as it begins to implement store upgrades on a market-by-market basis after testing various initiatives across its entire footprint over the last couple of years — initiatives that resulted in weighted average sales increases of 10% at remodeled stores.
Gary Giblen, executive vice president of Axiom Capital Management, New York, said Winn-Dixie has been able “to pull back on the throttle and to succeed at striking a more desirable balance between promotions and sales.
“But with most of its stores in Florida, the situation remains challenging because Winn-Dixie is facing one of the worst economies in the nation, with a very depressed housing market, which is making its turnaround tougher.”
As it moves forward, Winn-Dixie is going after a different customer than the blue-collar workers it has traditionally targeted, Lynch said.
“We don’t want to be in the middle because we don’t think we can move forward from there. So the choice is to go up to where Publix is on service, quality and variety or go down to where Wal-Mart is on price.
“Our choice is to go up, with better service, freshness, selection, quality and cleanliness [to] broaden our base to encompass a wider mix of customers that we haven’t gone after in the past.”
— Elliot Zwiebach
