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Retrenching to remain number one in Dixieland.

After decades of dominating the Southern supermarket scene, Winn-Dixie Stores of Jacksonville, Fla., is confronting challenges imposed by scores of competitors in a myriad of markets. The once untouchable chain has realized that its old ways of doing business will no longer guarantee the sales and earnings performance it has enjoyed during the past five decades.

Winn-Dixie's blessing, the burgeoning growth of the Sunbelt region it serves, is also part of its problem. Strong companies looking for growth markets are invading its territory, rolling out super warehouse stores, combination units and other high volume moneymakers. This competitive fury has been particularly intense in Florida, where Winn-Dixie has approximately one-third of its 1,231 supermarkets.

The result is a stagnation in the incredible growth curve that Winn-Dixie has enjoyed for years. During the fiscal year that ended June 27, 1984, Winn-Dixie's sales totaled $7.3 billion, an increase of 4% over the prior year although fourth-quarter sales were up 6.3%.

While sales increases have roughly equaled the rate of inflation, a steady but unimpressive growth pace, earnings did not fare as well. Earnings after taxes for fiscal 1984 were $115.92 million, a 2.2% increase over the $113.46 million the company earned the previous year. But Winn-Dixie's year-end earnings were given a boost by an impressive fourth quarter, which saw earnings skyrocket by 20.2% over what they had been during the fourth quarter of fiscal 1983. For the first nine months of fiscal 1984, earnings at the chain had dropped by 3.4%.

Net earnings as a percentage of sales stood at 1.6% for the year ended June 27, 1984, well above the industry average but below the earnings percentage that Winn-Dixie has historically achieved.

The squeeze on earnings in a direct result of intensified competition. Winn-Dixie has always operated with "comfortable" margins, the type of margins that have allowed it to build an earnings record that has made it one of the steadiest performers in the industry.

Realizing that Winn-Dixie is vulnerable on prices, competition has taken aim at that flank. Winn-Dixie has had to bite the bullet lower prices.

According to competitors, Winn-Dixie has been subtly altering its pricing strategy during the past few years and the chain is slowly slipping away from its emphasis on private labels.

Winn-Dixie has begun to emphasize the national brands via increased advertising, lower everyday prices and more prominent displays. Nevertheless, manufacturing and private label sales still remain central to the Winn-Dixie way of running a supermarket chain. Although Winn-Dixie has trailed other chains in the adoption of combination units and superstores, the firm is starting to build bigger stores with a more profitable mix of non-foods and service departments. Yet Winn-Dixie still lags behind most chains in average size at approximately 23,200 square feet. The average sales per store in fiscal 1984 were $6 million.

1984 signifies a resurgence in Winn-dixie's new store construction. Whereas the chain only opened 29 new stores in fiscal 1983 and 40 in 1982, compared with 89 in 1979 and 84 in 1980, the slack in new store openings has been compesated for by more remodelings.

Capital expenditures for fiscal 1984 were $165.4 million, an increase of 0.7% from the previous year. During 1984, the company opened 61 new stores and remodelled 11 stores previously operated by Grand Union. It remains to be seen whether the company's belated effort to modernize its stores and upgrade its merchandise mix will help it regain the momentum of the past.
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Title Annotation:Winn Dixie
Publication:Progressive Grocer
Date:Oct 1, 1984
Previous Article:Shooting for a new service niche.
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