business news in context, analysis with attitude

We reported yesterday that bankrupt supermarket chain Winn-Dixie announced that it will close 326 stores, or 35 percent of its fleet, and eliminate 28 percent of its workforce, or 22,000 jobs. The company said it plans to completely shutter its operations in four states Tennessee, North Carolina, South Carolina, and Virginia, as well as pulling out of the Atlanta market. And, the company said, it will cut back on existing operations in Florida, Georgia, Alabama, Mississippi and Louisiana.

"We made a very detailed announcement, and I am confident we are making the right decision," said Peter Lynch, Winn-Dixie president/CEO, noting that “we've done a deep dive in every store.”

Our view: Done a deep dive? Or taking a dive, while extending the process long enough so that hundreds of executives get their retention bonuses totaling millions of dollars?

In one of the local media reports, analyst Burt Flickinger III, managing director of Strategic Resources Group, says that he believes that the company hasn’t gone far enough, and that it should have closed as many as 500 stores. And, he says, Winn-Dixie’s “sales, merchandising and operations plan has gone from bad to worse. It's going to kill the company between this Christmas and next Christmas.”

We think that’s the real shame. With all these cuts, the question is whether the company that remains has a clear-cut vision for 21st century food retailing that will differentiate it from the competition? That should be Winn-Dixie’s real focus, and would be the one thing that might convince people that the company actually has a future.

We would reference what Delhaize is doing in converting its entire Kash n’ Karry stores in Florida to Sweetbay Supermarkets, and demonstrating vividly to its customers and vendors that it has a vision and a plan.

Instead you have a company that seems poised to shift from being “The Meat People” to dead meat.

We got numerous letters in response to this story and commentary.

MNB user Timothy J. Murphy wrote:

Winn-Dixie has been terminally ill for at least the past ten years, perhaps longer - certainly long before Wal-Mart, Publix (and others) began forging the nails for their coffin.

If there is a poster-child for a “plain vanilla” retail operation, Winn-Dixie certainly fits the bill. They have offered little, if anything, compelling to the consumer.

For at least a generation, Winn-Dixie’s customer appeal (such as it is) has been largely centered around one factor: locational convenience. That may have been sufficient for survival in the past, but location (alone) is woefully inadequate in today’s Darwinian marketplace.

As Winn-Dixie agonizes through its death throes, the good news is that man former W-D locations will be transformed into a variety of more innovative, exciting, compelling, and profitable retail offerings. As the brutal wheel of retailing turns, death gives birth to new life.

But another MNB user disagreed:

How many stores did Safeway shed went they almost went bankrupt and weren't they $3 billion in debt?! (Maybe it was more than that). So you think they should just give up and shutter their doors? Well I suppose that is always a strategy too, however if you look at the stores they are closing, those must be areas they need to close and the people they are going to lose (an average of 67 per store) these must definitely be the dogs that they should get rid of. In fact, if you look at the effect that the closed stores will have on overall business you will likely see that these 40% (approx.) stores did less than 20% of the company's business. If you were retrenching, what would you do?

Sounds like you would flee to the Caribbean.

In respect to these executives that only wish to make their retainers, they better or they may not get that money. Who is left running Winn Dixie that ran it to the ground? They are gone, it was the best thing Winn Dixie did, albeit a little too late. They are going to have to hire good people to pull them out of the spiral that the previous administration has. Honestly Kevin, do they really need the frozen pizza plant and they will be able to operate leaner with fewer DCs to.

Don't get me wrong here. They have a long (emphasize "long") way to go, and they may not get there. But they are doing the things that they need to survive. A very aggressive push on perishables beginning with produce. Re-energizing the Meat department. (Yes, Kevin this is still a very meat and potatoes area), programs to correct poor customer service. I hope they are successful, at the least, it will be good study for business students.

First of all, we have to admit that feeing to the Caribbean sounds pretty good…

But that’s not what we said.

What we said is that shedding one-third of its stores isn’t enough. What is really important is what Winn-Dixie does with the other two-thirds.

Just having better fresh foods and more customer service isn’t enough.

They need a transcendent vision for 21st century retailing if they are going to survive. And we don’t see it. Not yet.

Another MNB user wrote:

We can all look back and become the Monday quarterbacks.

However, lets give them a "little" credit. They have made a decision and now the execution of all of the closures or sale of stores. People lose jobs, they will hope to be hired by those companies who gobble up the good locations and remodel stores. Then it comes time for the re org of WD. Retention bonuses --- no way, those folks are lucky to have a job. Bonuses? Yes but only when they have proved their ability to make a profit and start executing differentiated merchandising plans and becoming a company that AJ Davis many moons ago had dreamed about --- a company that took care of their associates and the customers who shopped in their stores.

They have a long way to go. Maybe Yucaipa will head south one of these days?????

MNB user Maurine Sticker wrote:

I'm a WD shopper. I wish I could remain optimistic by saying "It ain't over till the fat lady sings", however; it does appear vendors have a lot at risk with very little in return for that risk. More than that, I just feel sorry for WD. I would love to see them pull out of this.

Unfortunately, they are not showing signs that they've got what it takes to get there. In hindsight...that's why they are where they are now. I'm not convinced they have a vision. That's a shame. Where will I shop now?

MNB user David J. Livingston wrote:

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 per sq ft per week. That is a lot of low volume stores. Currently about 67% of their stores are below $5 a foot. They only have 30 stores in the entire chain, about 3% that are performing at or above the industry average.

Many of those are concentrated in the Miami metro area and Florida Keys.

And MNB user Marion Sturm wrote:

As a customer, shopping there for years, what it comes down to is their service, and the treatment of their customers. My mother has even stopped shopping there, tired of the price games, tired of an item being on sale and then showing regular price when checking out. The effort in taking back items after getting home to find incorrect pricing on the receipt, and the total lack of not caring at store level. It could have been an easy fix, but not even their consultants could figure out something so basic as the root of their problem.

It's all about service, and they have been fresh out of that for years!

Like we said.

Dead meat.
KC's View: