JACKSONVILLE, Fla. — Winn-Dixie Stores, Inc. (NASDAQ:WINN) today reported its financial results for the second quarter of fiscal 2010, a 16-week period that ended on January 6, 2010.
Net sales in the second quarter were $2.2 billion, a decrease of $74.5 million, or 3.3%, compared to the same period in the prior fiscal year. Net sales this quarter were impacted negatively by approximately $22 million due to non-recurring storm-related sales and six store closures that occurred in fiscal 2009.
Identical store sales, which exclude stores that opened or closed during the quarter, decreased 2.9% for the second quarter compared to the same period in the prior fiscal year. The Companys 52 offensive remodel stores which are still within their first year of operation had a 4.9% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase. Identical store sales in both remodeled and non-remodeled stores were negatively impacted this quarter by a challenging economic environment, deflationary pressures, non-recurring storm-related sales and a mix shift from branded pharmaceutical products to generics.
Net income in the second quarter of fiscal 2010 was $2.1 million, or $0.04 per diluted share, compared to net income of $16.1 million, or $0.30 per diluted share, in the second quarter of fiscal 2009. The decrease in net income was due primarily to a non-recurring gain on an insurance settlement of $22.4 million ($13.8 million net of tax, or $0.25 per diluted share) in fiscal 2009.
Adjusted EBITDA was $30.5 million in the second quarter of fiscal 2010, compared to Adjusted EBITDA of $35.5 million in the same period last year. Adjusted EBITDA in the second quarter of fiscal 2009 included an estimated benefit of $1.7 million due to storm-related sales net of storm-related inventory losses and other costs.
Winn-Dixie Chairman, CEO, and President, Peter Lynch, said, The challenging economic environment and deflationary pressures continue to impact sales for the entire supermarket industry. Despite negative identical store sales, we are pleased with our overall operating execution during the quarter. In particular, we maintained our gross margin rate through effective management of our promotional activity and reduced our operating expenses.
Mr. Lynch continued, It is clear that consumers remain very cautious with their spending, which has influenced our sales across the chain, primarily with respect to overall basket size. However, we increased transactions by 4.1% in our first-year offensive remodels compared to last year, and our customers are continuing to respond positively to the changes we are making. Given the prevailing economic conditions, we will continue to be prudent with our capital spending and will selectively remodel a total of 60 stores in fiscal 2010 in locations where we believe we can generate the highest return on our investment.
Details of the Second Quarter Results
Gross profit on sales in the second quarter was $613.5 million, a decrease of $19.0 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 28.2% in the second quarter, compared to 28.1% in the second quarter of fiscal 2009. The improvement in gross margin as a percentage of net sales was attributable primarily to a lower LIFO charge, offset by an increase in inventory shrink and higher warehouse expenses.
Other operating and administrative expenses for the second quarter were $610.9 million, a decrease of $9.3 million compared to the same period in the prior fiscal year. Excluding the Companys adjustments to prior year self-insurance reserves, depreciation and amortization, and share-based compensation, other operating and administrative expenses for the second quarter were $585.4 million, a decrease of $14.1 million compared to the same period in the prior fiscal year. The decrease in other operating and administrative expenses was due primarily to lower payroll-related expenses, occupancy costs and utilities.
28-Week Results Ended January 6, 2010
Net sales for the 28 weeks were $3.8 billion, a decrease of $108.8 million, compared to the same period in the prior fiscal year. Net sales for the 28 weeks were impacted negatively by approximately $50 million due to non-recurring storm-related sales and six store closures that occurred in fiscal 2009.
Identical store sales, which exclude stores that opened or closed during the 28 weeks, decreased 2.3% compared to the same period in the prior fiscal year. The Companys 52 offensive remodeled stores that are still within their first year of operation, had a 5.8% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase.
Gross profit on sales was $1.1 billion, a decrease of $20.5 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 28.3%, compared to 28.0% in the same period in the prior fiscal year. The improvement in gross margin as a percentage of net sales was attributable primarily to a lower LIFO charge and lower transportation costs, offset by increases in inventory shrink.
Other operating and administrative expenses were $1.1 billion, a decrease of $8.3 million compared to the same period in the prior fiscal year. Excluding the Companys adjustments to prior year self-insurance reserves, depreciation and amortization, and share-based compensation, other operating and administrative expenses for the 28 weeks were $1.0 billion, a decrease of $13.1 million compared to the same period in the prior fiscal year. The decrease in other operating and administrative expenses was due primarily to non-recurring storm-related expenses, lower utilities, occupancy costs and payroll-related expenses.
The Company reported a net loss of $6.0 million, or $0.11 per diluted share, compared to net income of $13.8 million, or $0.25 per diluted share, in the same period in the prior fiscal year. The decrease in net income was due primarily to a prior year gain on an insurance settlement of $22.4 million ($13.8 million net of tax, or $0.25 per diluted share) in fiscal 2009.
Adjusted EBITDA for the 28 weeks was $53.3 million compared to $62.5 million in Adjusted EBITDA in the prior year period. Adjusted EBITDA for the 28 weeks of fiscal 2009 included a benefit of approximately $4.4 million due to storm-related sales net of storm-related inventory losses and other costs.
Liquidity and Capital Resources
As of January 6, 2010, Winn-Dixie had approximately $662.8 million of liquidity, comprised of $508.5 million of borrowing availability under its credit agreement and $154.3 million of cash and cash equivalents. The Company noted that its liquidity is sufficient to continue funding its capital program, and it does not expect any borrowings under its credit facility for fiscal 2010.
The Companys capital expenditures for fiscal 2010 are now expected to be approximately $200 million, a $20 million decrease from its prior expectation. The reductions are expected in remodel and other expenditures.
Fiscal 2010 Guidance
The Company re-affirmed its guidance range of $140 to $160 million in Adjusted EBITDA for fiscal 2010. The Company expects the challenging economic environment to continue to affect its business for the remainder of the fiscal year, and therefore expects to be at the low end of the guidance range.
Source: Winn-Dixie Stores Inc.,