Is Winn-Dixie on the Block?
There are
those who believe, especially outside of Winn-Dixie’s headquarters in
Jacksonville, Florida, that the grocery chain cannot continue to take competition such
as Publix and Wal-Mart Stores head-on and survive.
Time will
tell if the naysayers are right. In the meantime, an article in Florida
Trend ponders what entity might be willing to come in and buy up
Winn-Dixie with its 520 stores in Alabama, Florida, Georgia, Louisiana
and Mississippi.
Peter Lynch,
president and CEO of Winn-Dixie, told the magazine, "My focus here at Winn-Dixie
is making a better company." Making Winn-Dixie better includes a capital
expenditure program that is funding a remodel of every one of the chain’s
stores.
"I think
that Winn-Dixie – and Sweetbay is another –
have a challenge," Barton Weitz, professor
and executive director of the Miller Center for Retailing Education and Research
at the University of Florida College of Business, told Florida Trend. "I
think the two big players are Wal-Mart Supercenters and Publix, which has
a great reputation. It’s hard for a supermarket chain to fall somewhere between
these two."
Mr. Lynch
isn’t ready to concede the need to sell. He points
to the recent closing of some Sweetbay stores
along with Bruno’s recent bankruptcy filing as bringing more shoppers to
Winn-Dixie. He also contends the chain picked up shoppers disaffected
by Publix’s acquisition of a large number of Albertsons in the Florida.
Discussion Question:
Is Winn-Dixie making the right moves to fix its reputation and establish itself to
compete for the long haul? Do you think the chain is a likely takeover
prospect? What companies would benefit most from acquiring Winn-Dixie?
What I have seen is Winn-Dixie has been making some improvements with remodels and sales are increasing. However, they are still one of the lowest sales per sq. ft. grocers in the country with Kmart-esque sales per sq. ft. levels.
Winn-Dixie is trying to make the right moves but I don’t think it will be enough to keep them alive over the long haul. They have lots of pretty stores but are out-classed by Publix and out-priced by Walmart. Sure its tough competing with Wal-Mart and Publix, two of the highest sales per sq. ft. grocers on the conventional landscape.
This leads me to ask, why would another grocery chain want to buy stores that have such a low sales per sq. ft. and declining market share? Typically when one chain buys another chain, sales drop about 15-20% as they go through the cultural learning curve. We know what happens when Kroger, Safeway, or Supervalu makes an acquisition–sales drop like a rock. That seems like a huge risk considering Winn-Dixie’s low-volume stores.
From what I see in Florida, Sweetbay and Albertsons are no better. Delhaize spent millions converting Kash & Karry to Sweetbay only to end up closing several stores and seeing ineffectual increases in others. Most companies operating at Winn-Dixie’s low sales per sq. ft. level would be filing for bankruptcy. There are three ineffectual grocer chains caught between Walmart and Publix and there is barely room for one. My guess is no one buys any of them and two of the three just go away over time.
As a brand, Winn-Dixie is damaged goods trapped between Publix and Walmart. Damaged goods and low sales per square foot are not in demand. The middle is crowded with me-too supermarkets: Sweetbay, Winn-Dixie and Alberstons. There is room for only one such ,edium today. The other two could try to sell stores/locations if anyone would want them. Instead the current General Motors model is an available outlet to Winn-Dixie if it thinks they can innovative a dynamic new middle ground business model for today’s marketplace.
Ditto.
It seems that a sale of the entire company is very unlikely, Winn-Dixie will go the way of Bruno’s and be sold piece by piece, they have to many locations that are below par and they will no choice but to just close them. I doubt any company would want to pick up that liability. Oh, Sweetbay looks to be suffering a slow death along with the remaining Albertsons.
If Winn-Dixie does not take a major step in the next 12 months, it will be over. If there was ever a time for them to make the adjustments and make a comeback, now would be the time. They’d be better off selling as I don’t see how they are anywhere close to competing with Publix.
“He points to the recent closing of some Sweetbay stores along with Bruno’s recent bankruptcy filing as bringing more shoppers to Winn-Dixie.”
Or an ominous sign of things to come in for his own company…clearly Mr. Lynch is an optimist.
WD used to be such a great Southern institution, with their ever-increasing share price posted in the HQ lobby. I was a WD consultant, and a Kmart consultant as well. Kmart used to display their share price in their lobby, too. Maybe that wasn’t such a great idea. Focusing on share price equates to maintaining the status quo, which also isn’t a great idea in retail. And so, we see two companies stuck in the 80s that are barely surviving today.
Have you ever had an overgrown rosebush? Those who have know that the best medicine is to cut it back to the healthy growth area. Given time, it will bloom again. In WD’s case, this may mean selling off their distribution centers and depending on wholesalers for supply. In that case, they need to decide if they are suppliers or retailers. Only continuing to be a retailer, at whatever cost, will preserve the WD name.
Winn-Dixie isn’t going to be sold easily because no retail chain is easily sold these days. Credit on easy terms for corporate acquisitions isn’t readily available. Easy credit is the key to a hot takeover market. Right now, the takeover market couldn’t be colder and business credit is tight as can be.