CEO Confident Winn-Dixie Making Right Move

Discussion
Jun 22, 2005
George Anderson

By George Anderson


It’s not easy to find positives coming out of an announcement that a company is closing 326 stores, three distribution centers and cutting 22,000 jobs (500 at its headquarters), but Winn-Dixie president and CEO Peter Lynch has to do that very thing if the grocer is going to make its way out of Chapter 11 and be successful.


Speaking at a press conference, Mr. Lynch said the company had “made a very detailed announcement, and I am confident we are making the right decision.”


It wasn’t, admittedly, as if he had many other options when it came to closing stores. “We’ve done a deep dive in every store,” he said.


In a released statement from the company, Mr. Lynch was quoted as saying, “Creating a smaller, but more profitable store base will best position Winn-Dixie for long-term financial health and a successful future. We will be focusing our resources on markets where Winn-Dixie has a strong presence and there are compelling opportunities. This will allow us to build on our strengths and take advantage of the considerable potential we see to improve the shopping experience for our customers. Already, we have made significant strides. The steps announced today will help us to continue our progress as we strive to make Winn-Dixie a stronger company, better able to compete in the marketplace with a strong foundation for the future.”


As to be expected, some feel as though Winn-Dixie has made the right decision while others question if the company has gone far enough or if any changes it makes will be sufficient to help it compete against the likes of Wal-Mart and Publix.


Mark Hamstra of Supermarket News isn’t ready to say Winn-Dixie is on its way back but sees positives in yesterday’s announcement. “It looks like they are getting rid of their weakest performing stores. That should help reduce their overhead and bring them closer to profitability,” he said.


Count Burt P. Flickinger III, managing director of Strategic Resources Group, as among those who think Winn-Dixie did not go far enough.


“They really need to close over 500 stores,” he told The Associated Press. “Sadly, they cut too far at corporate headquarters and haven’t sufficiently cut the number of stores.”


“Their sales, merchandising and operations plan has gone from bad to worse. It’s going to kill the company between this Christmas and next Christmas,” Mr. Flickinger added.


Moderator’s Comment: What is your reaction to Winn-Dixie’s announcement?


Winn-Dixie said it was leaving the following marketing areas entirely:


Alexandria, Louisiana; Atlanta, Georgia; Augusta, Georgia; Charleston, South Carolina; Charlotte, North Carolina; Chattanooga, Tennessee; Columbia, South
Carolina; Columbus-Tupelo, Mississippi; Greensboro-High Point, North Carolina; Greenville-Spartanburg, South Carolina; Huntsville, Alabama; Jackson, Mississippi; Raleigh-Durham,
North Carolina; and Savannah, Georgia.

George Anderson – Moderator

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9 Comments on "CEO Confident Winn-Dixie Making Right Move"


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Warren Thayer
Guest
15 years 8 months ago

Sadly, despite these cuts, what is also needed is a sea change in terms of merchandising and operations. This is just buying time, but nothing else whatever, unless they can turn things around. I hope the many good people still at Winn-Dixie can find positions elsewhere, as I don’t see a bright future here at all.

Len Lewis
Guest
Len Lewis
15 years 8 months ago

I agree they haven’t cut deeply enough when it comes to store closings. But they really haven’t outlined what they’re going to do with the stores they have left. Of course, Peter Lynch is not going to tip his mit to the competition. But I’m wondering what the plan really is.

And those manufacturing plants… they seem more inclined to hold on to them and I’m wondering if they’re more of a drain on products than an advantage. Manufacturing can be very lucrative, especially if you’re producing a good line for your own stores and doing a good business with contract manufacturing for others. But you can end up with the tail wagging the dog as Kroger and A&P found out years ago. Maybe it’s time to let go.

Don Delzell
Guest
Don Delzell
15 years 8 months ago
Excellent analysis by David. Closing poorly performing stores is, as has been pointed out, an inevitable action taken during Chapter 11 proceedings. Reducing overhead is also inevitable, and the time pressures seldom allow it to be done with the thought, planning, and efficiencies outside observers would ideally like to see happen. Without a doubt, these are cosmetic balance sheet and income statement actions which will have short term consequences, some good, some bad, and have absolutely no impact on the long term health or viability of the chain. Winn-Dixie failed in its market because it failed to provide the customer with a compelling reason to shop its stores in comparison to those operated by the competition. In addition, it failed to structure an organization that could operate profitably given the niche it occupied. If these fundamental truths are not addressed, the death of the company is only a matter of time. Fact: Winn-Dixie cannot “out perform” Wal-Mart in supply chain excellence needed to support a low cost provider positioning. Fact: Winn-Dixie cannot invest the money… Read more »
Conway Bennett
Guest
Conway Bennett
15 years 8 months ago

The real issue is the perception of Winn-Dixie. If you were to take an informal survey, the people on the street have the perception that the stores are dirty and the quality is low. In reality, the stores are clean but not bright and airy to make it a bright and cheery shopping experience.

As for the quality issue, I have not been able to prove or disprove this as being a real issue but, if you talk about their competitors, people tend to feel they get more value for their dollar.

What needs to happen, if it’s not too late and too costly, is to work on a marketing plan that changes the image of Winn-Dixie.

David Livingston
Guest
15 years 8 months ago
I agree with Burt Flickinger that 326 stores is not going far enough. The average supermarket in the USA does about $7.64 per sq. ft. per week. The average Winn-Dixie is about $4.50. After Winn-Dixie closes 326 stores the remaining stores will average around $5.10. Perhaps with some sister store consolidation, it might go up to $5.25 per sq. ft. Still a far cry from the industry average of $7.64. All this does is get Winn-Dixie up to a break even level, which is where they were a couple of years ago. Publix and Wal-Mart are not standing still and waiting for Winn-Dixie to catch up. They are pouring the coals to fire all that much harder. Typically if you cannot maintain a sales per square foot performance of at least 70 to 75% of the market area average, you will not be around for long. Based on individual store performances analyzed, Winn-Dixie probably needs to close an additional 300 stores. After closing, they will still will have about 52% of their stores below $5… Read more »
Charlie Moro
Guest
Charlie Moro
15 years 8 months ago

At the end of the day, they are going to have to give their customers a reason to shop there verses Publix, Sweetbay, Wal-Mart and others… so far, in an area with double digit population growth, they have not…this will be the more important issue.

Ryan Mathews
Guest
15 years 8 months ago

First of all, what else was Peter Lynch supposed to say? If he isn’t bullish, he needs to be replaced. Secondly, cutting back stores was an unavoidable element in any restructuring plan. And with all due respect to those who think you need all those bodies at headquarters, they need a quick crash refresher course in the difference between EBITA and EBITAR and why it is important. Chapter 11 Land operates on its own rules, like them or not.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 8 months ago

What took W-D so long to get to this stage?

Now, they have to deal with a perceived image and “what does it stand for in the marketplace” issue that will be very challenging…especially against an exceptional Publix operation; and Food Lion’s revitalized stores to include the Sweet Bay concept.

W-D needs, not grocery people, but key new management with significant consumer understanding and marketing oriented expertise… who can balance the operation needs with major shopper and new initiatives!!! Good luck. Hmmmmmmmmm

Sarah W
Guest
Sarah W
15 years 3 months ago
My store was one of the 326 that closed. While I’m sad that Winn-Dixie exited the market, I think it was the best move for the company. The company has been mismanaged for so many years, and I seriously think it was the only way it could recover. The one comment I heard from all my customers was, “This store is always clean, and the staff is friendly. I’m so sad you’re closing.” It was good to hear from my regular customers, but most people that haven’t been into a Winn-Dixie in a while are stuck on the former impression left in their minds. The impressions of dirty, poorly stocked stores with rude employees stick in your mind, and once you’re turned off by a company for poor service, you usually don’t go back. Winn-Dixie let this go on for too long, and it became a standard practice companywide, it seems. The thing is, I was an Assistant Manager at a 40,000 sq ft Marketplace store that was barely making $170K a week, when there… Read more »
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