Winn-Dixie Stores, Inc., Announces First Quarter Fiscal 2009 Earnings

Business Wire, Oct 27, 2008

Seventh Consecutive Quarter of Positive Identical Store Sales; First Year Remodel Stores Continue to Exceed Sales Target

JACKSONVILLE, Fla. -- Winn-Dixie Stores, Inc. (NASDAQ:WINN):

Highlights

* Adjusted EBITDA of $27.0 million, a 38.5% increase from the year-ago period

* Gross margin of 27.9%, an increase of approximately 40 basis points from the year-ago period

* Identical store sales increase of 3.0%

* On track to remodel 75 stores in fiscal 2009

* First-year store remodels exceeding 10% identical store sales lift

Winn-Dixie Stores, Inc. (NASDAQ:WINN), today reported its financial results for the first quarter of fiscal 2009, a 12-week period that ended on September 17, 2008.

Adjusted EBITDA was $27.0 million, an increase of $7.5 million from Adjusted EBITDA of $19.5 million in the first quarter of fiscal 2008. The Company believes first quarter Adjusted EBITDA included an estimated benefit of approximately $2.7 million due to the positive sales impact related to Hurricanes Gustav and Ike and Tropical Storm Fay that exceeded storm-related inventory losses and other costs.

The Company also reported a net loss of $2.3 million, or $0.04 per diluted share for the quarter, compared to a net loss of $0.8 million, or $0.01 per diluted share, in the first quarter of fiscal 2008. Gross margin was 27.9%, an increase of approximately 40 basis points compared to the year ago period, and identical store sales increased 3.0%.

Winn-Dixie Chairman, CEO, and President, Peter Lynch, said, "We are very pleased with our financial results for the quarter. We improved Adjusted EBITDA while also delivering solid sales growth. We also benefited from increased sales both before and after the storms that affected many of our communities in Louisiana, Florida, Georgia and along the Gulf Coast. Our Associates put forth a great team effort that enabled us to re-open stores quickly to better serve our customers."

Mr. Lynch continued, "Although the economic conditions remain challenging, we are continuing to provide our customers with better quality and value every time they visit their local Winn-Dixie. Over the longer-term, we are pursuing sustainable sales growth and building customer loyalty through initiatives such as our store remodel and corporate brands programs and our neighborhood merchandising and marketing strategy."

Fiscal 2009 First Quarter Results

Net sales in the first quarter were $1.7 billion, an increase of $55.0 million, or 3.4%, compared to the prior year period. Identical store sales increased 3.0%. Approximately 110 basis points of the improvement in identical store sales were due to increased sales as a result of Hurricanes Gustav and Ike and Tropical Storm Fay. The Company benefited from pre-storm purchases and also its ability to reopen stores before competitors. This benefit was partially offset by sales losses during temporary closures. Identical store sales were impacted negatively in the first quarter by approximately 100 basis points due to a higher percentage of generic pharmaceutical products sold versus branded products.

Gross profit on sales in the first quarter was $466.8 million, an increase of $20.4 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 27.9% in the first quarter, compared to 27.5% in the first quarter of fiscal 2008, an increase of 40 basis points. The improvement in gross margin was attributable primarily to product mix changes (60 basis points) and operational improvements that reduced inventory shrink (30 basis points). These improvements of 90 basis points were offset partially by an increase in the Company's LIFO charge (30 basis points), due primarily to continuing increases in food inflation, and other items (20 basis points).

Other operating and administrative expenses for the first quarter were $468.1 million, an increase of $19.5 million compared to the same period in the prior fiscal year. Several items contributed to the increase, including higher depreciation and amortization ($6.8 million) related primarily to the store remodeling program, higher compensation costs ($6.6 million) related primarily to retail payroll, higher utilities ($3.1 million) due to higher rates, hurricanes and tropical storm related expenses ($1.6 million) and non-cash share-based compensation expense ($0.7 million) due to additional grants.

Store Remodeling Program

Winn-Dixie continued to make progress with the store remodeling program it commenced in the second half of fiscal 2007. The goal of the program is to modernize Winn-Dixie stores by dramatically improving their appearance, heightening their focus on fresh and local, high-quality products and enhancing the overall shopping experience for customers. The Company plans to remodel roughly half the chain by the end of fiscal 2010 and substantially all of its stores by the end of fiscal 2013.

As of the end of the first quarter, the Company had completed 96 store remodels, 75 of which were still within their first year of operation. Of the 75 first-year store remodels, 59 are considered by the Company to be offensive in nature. For the first quarter of fiscal 2009, the Company's 59 offensive remodeled stores had an 11.6% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase. The sales increase in the first-year offensive remodels resulted from increases in transaction count and basket size of 3.3% and 8.0%, respectively.