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Winn-Dixie Comeback Flattens Out
Winn-Dixie (Nasdaq:WINN) grocery stores posted a fourth-quarter profit increase on slightly higher revenue. The key measure of same store sales, however, was down when an additional week for the quarter is subtracted. Winn-Dixie faced pricing pressures in the continuing tough grocery store environment.
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A Quarter that Looks Better than it Is
The key measure of same store sales was down by 5.2% on a comparable 12-week basis year-over-year, continuing a trend. Topline revenue increased by 2%, to $1.74 billion from $1.72 billion when the extra week is counted. Net income rose to $14 million, or 25 cents a share, with the 13-week quarter, against $9.4 million, or 17 cents, in the shorter 12-week quarter last year. Adjusted income was $41.3 million for the quarter, compared to $44.3 million in last year's quarter.
Grocery Pressure
Winn-Dixie CEO said the company was unable to pass along higher costs for meat and dairy to customers. Competitors' promotions prevented this. The stock initially rose on the earnings report, but was subsequently hit hard by the market the next day. Fears of the company's plans to continue to battle rivals via aggressive price cutting led to the stock being taken down. The company commented that same-store sales are likely to be flat in this battle with the competition.
Supermarket Stocks Swept Out
Investors have been dumping supermarket stocks this year. Kroger (NYSE:KR), by default, is the star, with only a 2% drop in its stock price this year. SuperValu (NYSE:SVU) stock has fallen 22%, while Safeway (NYSE:SWY) is down 10%. Whole Foods Market (Nasdaq:WFMI), on the other hand, has had a strong performance year to date.
Winn-Dixie's Headway Slowed
Winn-Dixie has been in an ongoing remodeling and store upgrade mode, which will continue. The company has been struggling with its earnings throughout the recession - a grocery store industry malady - as it earned 25 cents per share in fiscal 2008, 73 cents in fiscal 2009 and 52 cents in fiscal 2010. Sales have been uneven, also.
For its full year in fiscal 2010, Winn-Dixie earned $28.9 million, or 52 cents per share. This compares to last year's $39.8 million, or 73 cents per share. Note that last year's numbers included an insurance settlement that added $22.4 million, or 25 cents per share.
The Bottom Line
The company has made some progress, despite the rough edges on this earnings report. What will characterize its future fortunes is how it executes in the face of the pricing and competition squeeze. As of June 30, 2010, the company listed no long-term debt with cash and equivalents of $152 million, so its balance sheet is strong. The stock has looked strong in the past as a potential turnaround play, but less so in this harsh competitive environment now. Though it still has a good balance sheet and potential value, the company has to make more consistent headway on the top and bottom lines. (Retail grocers are no longer a homogeneous group selling products in the same manner. Find out how to evaluate these companies. Read Evaluating Grocery Store Stocks.)
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IN PICTURES: Dealing With 9 Coworker Personality Conflicts
A Quarter that Looks Better than it Is
The key measure of same store sales was down by 5.2% on a comparable 12-week basis year-over-year, continuing a trend. Topline revenue increased by 2%, to $1.74 billion from $1.72 billion when the extra week is counted. Net income rose to $14 million, or 25 cents a share, with the 13-week quarter, against $9.4 million, or 17 cents, in the shorter 12-week quarter last year. Adjusted income was $41.3 million for the quarter, compared to $44.3 million in last year's quarter.
Grocery Pressure
Winn-Dixie CEO said the company was unable to pass along higher costs for meat and dairy to customers. Competitors' promotions prevented this. The stock initially rose on the earnings report, but was subsequently hit hard by the market the next day. Fears of the company's plans to continue to battle rivals via aggressive price cutting led to the stock being taken down. The company commented that same-store sales are likely to be flat in this battle with the competition.
Investors have been dumping supermarket stocks this year. Kroger (NYSE:KR), by default, is the star, with only a 2% drop in its stock price this year. SuperValu (NYSE:SVU) stock has fallen 22%, while Safeway (NYSE:SWY) is down 10%. Whole Foods Market (Nasdaq:WFMI), on the other hand, has had a strong performance year to date.
Winn-Dixie's Headway Slowed
Winn-Dixie has been in an ongoing remodeling and store upgrade mode, which will continue. The company has been struggling with its earnings throughout the recession - a grocery store industry malady - as it earned 25 cents per share in fiscal 2008, 73 cents in fiscal 2009 and 52 cents in fiscal 2010. Sales have been uneven, also.
For its full year in fiscal 2010, Winn-Dixie earned $28.9 million, or 52 cents per share. This compares to last year's $39.8 million, or 73 cents per share. Note that last year's numbers included an insurance settlement that added $22.4 million, or 25 cents per share.
The Bottom Line
The company has made some progress, despite the rough edges on this earnings report. What will characterize its future fortunes is how it executes in the face of the pricing and competition squeeze. As of June 30, 2010, the company listed no long-term debt with cash and equivalents of $152 million, so its balance sheet is strong. The stock has looked strong in the past as a potential turnaround play, but less so in this harsh competitive environment now. Though it still has a good balance sheet and potential value, the company has to make more consistent headway on the top and bottom lines. (Retail grocers are no longer a homogeneous group selling products in the same manner. Find out how to evaluate these companies. Read Evaluating Grocery Store Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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