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Winn-Dixie cuts 11,000 jobs
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April 20, 2000: 4:04 p.m. ET
Grocer to take charge of up to $550M, shut 114 stores, improve efficiency
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NEW YORK (CNNfn) - Grocery retailer Winn-Dixie Stores announced Thursday that it plans to cut 11,000 jobs as part of a program to restructure its business and cut costs.
The Jacksonville, Fla.-based company, which fell far short of its third-quarter expectations, plans to save about $400 million a year by closing 114 unprofitable stores, one warehouse facility and two manufacturing facilities. Several top executives have also been replaced.
In addition, Winn-Dixie said it had authorized the repurchase of up to 10 million shares of its common stock, adding to the previous five-million-share repurchase program it announced last October.
"The board's action is a reaffirmation of our long-term strategy of using excess cash flow to repurchase our common stock when market conditions warrant such action," Winn-Dixie's CEO Al Rowland said.
 Winn-Dixie (WIN: Research, Estimates), which employs 132,000, will take a pre-tax charge from the reorganization of between $450 million and $550 million, or $1.87 to $2.29 per share after taxes. About $400 million of that charge will be recorded in the fourth quarter of fiscal 2000, ending June 30, with the balance coming in fiscal 2001.
In addition to the layoffs and store closings, Winn-Dixie plans to retrofit 600 stores to improve efficiency and to close a detergent and bag manufacturing facility.
"These changes are absolutely necessary to provide Winn-Dixie with an effective infrastructure to train and support operations management teams," Rowland said.
"The savings created by this reorganization and operations improvements are very achievable, we will be more efficient operators," he added.
Third-quarter profit sinks
Before announcing the layoffs and restructuring Thursday, the company reported third-quarter results that fell far short of Wall Street expectations.
Winn Dixie reported net earnings for the quarter ended April 5 of $10.3 million, or 7 cents a share, down from the $58.8 million, or 40 cents a share it posted in the year-earlier quarter.
Analysts polled by earnings tracker First Call/Thomson Financial had projected third-quarter earnings of 22 cents a share.
Sales for the quarter slipped 0.1 percent to $3.2 billion. Same store sales decreased to $10.6 billion, a 0.2 percent drop from the same period a year ago.
Winn-Dixie, the 75-year-old company that operates 1,200 stores primarily in the southern United States and the Bahamas, has been struggling in recent years to keep up with changes in the marketplace, enlarging many of its stores to the "super center" format. The company has also built several new stores called Marketplace that provide pharmacies, banks, gas stations, photo labs and food courts.
But the combination of poor management combined with competition from Wal-Mart (WMT: Research, Estimates), which has added grocery stores to many of its stores, and others such as Publix, Piggly Wiggly, Kroger (KR: Research, Estimates) and Harris-Teeter, has cut deeply into the store's profitability, analysts said.
Last year, the company hired Rowland, an industry veteran who was formerly the president of Smith's Food & Drug, as Winn-Dixie's new president and CEO.
"This is long, long overdue. A lot of these changes are things I think they really should have done a very long time ago," Meredith Adler, an analyst for Lehman Bros. said. "...this is a company that decided to remake itself, build bigger stores, but they didn't really understand how to operate the new kinds of stores ... Everything they're doing to me makes a lot of sense. They've got an awful lot of stuff on their plate right now, and the question is: Can they execute?"
Other analysts applauded the move as well, agreeing with Adler that the restructuring is long overdue for a company with a management team that has had a difficult time adjusting to changes in supermarket retailing.
"It's an essential move. Winn-Dixie was in a downward spiral, and this kind of restructuring helps them pull out of it," Mark Husson, a Merrill Lynch analyst said. "If you've got a body that's sick, you perform major surgery. What we're seeing here is that major surgery."
Husson said Winn-Dixie, a 75-year-old family-owned chain, has operated "like seven or eight different companies," all operating independently from one another. "It's about time it started operating like a huge multi-national chain," Husson said.
Merrill Lynch is maintaining a "neutral" rating on the company, pending the outcome of Thursday's announcement.
Edward Comeau, an analyst with Donaldson, Lufkin & Jenrette, said Winn-Dixie is making the right move, but it may be too late to undo the damage caused by years of sloppy management.
"At least they brought in an outside CEO who has at least taken some action," Comeau said. "These guys have milked their business for so long, and now they're undertaking what is arguably one of the largest turnarounds in history right in Wal-Mart alley. The question is whether they can success or not."
Comeau said he has an "underperform" rating on the company.
Winn-Dixie shares were down 5/8 to 18-7/16 in late afternoon trading on the New York Stock Exchange Thursday. 
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Winn-Dixie
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