Winn-Dixie files for Chapter 11; Wal-Mart effect blamed for woes
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Winn-Dixie files for Chapter 11; Wal-Mart effect blamed for woes
Southern icon must scale back, become nimbler, analysts say
By ELLIS MNYANDU
Wednesday, February 23, 2005 Updated at 8:44 AM EST
Reuters News Agency
NEW YORK -- Winn-Dixie Stores Inc., once among the most profitable of U.S. grocers, said yesterday it has filed for bankruptcy protection, succumbing to stiff competition from Wal-Mart Stores Inc.
The grocer, founded in 1925, said it had already lined up an $800-million (U.S.) debtor-in-possession financing from Wachovia Bank & Trust Co. NA, which replaces its previous $600-million credit line.
It filed its petitions to restructure under Chapter 11 of the U.S. bankruptcy code late Monday at the U.S. Bankruptcy Court for the Southern District of New York, according to a company statement.
Winn-Dixie said the petition covered itself and 23 U.S. subsidiaries. It said its 920 stores remained open, but analysts said the number of outlets would probably be trimmed because it now would be able to ditch leases it did not want.
In its bankruptcy petition, the Jacksonville, Fla., company listed total assets of $2.23-billion and total debts of $1.87-billion. It listed as its biggest creditor Kraft Foods Inc. and affiliates, owed $15.1-million.
Winn-Dixie said that as part of its restructuring, it would seek additional asset sales and plans to terminate leases of about 150 stores that had previously been closed.
Winn-Dixie, which analysts say has been out of touch with customers and burdened by dilapidated stores, was widely expected to slide into bankruptcy after posting a larger-than-expected quarterly loss earlier this month.
That loss capped more than four years of market share slippage to rivals, including Publix Super Markets Inc.
Winn-Dixie held an unrivalled grip on markets across the U.S. South and in the Bahamas from its founding until recent years, when Wal-Mart moved on to its home turf, selling food at rock-bottom prices that were hard to match.
Despite a 10-month restructuring and a push to improve store operations and cut costs, Winn-Dixie continued to struggle, in the end leaving vendors no other option but to tighten supply terms in the past two weeks.
Chief executive officer Peter Lynch said in a statement Winn-Dixie would use Chapter 11 reorganization to take actions necessary to position itself for the future.
"This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores," said Mr. Lynch, a former Albertsons Inc. executive, who was named CEO two months ago.
Evan Mann, a senior bond analyst at Gimme Credit, said Mr. Lynch's job would not be easy.
"The real big issue is what's going to happen over the next one or two quarters now that they are in bankruptcy and all their customers see this in their local newspapers.
"Bad publicity," he said, "it gives a lot of their competitors maybe a window to steal customers and maybe to be a little bit more aggressive on price."
The New York Stock Exchange halted trading in Winn-Dixie shares yesterday, after the stock slumped to 73 cents on the Inet electronic brokerage system from a Friday NYSE close of $1.47. The shares had largely become a one-way bet for short sellers -- contrarian investors who profit when a stock slides.
Analysts have said Winn-Dixie would do much better if it scaled down its operations, became more nimble, focused on its highly profitable markets and avoided going head to head with the likes of Wal-Mart, whose size allows it to extract better terms from suppliers.
Winn-Dixie's bankruptcy filing came as U.S. movie theatres began screening Because of Winn-Dixie, a film about a young girl who adopts an orphaned dog, named Winn-Dixie for the supermarket where she found him.
© Copyright 2005 Bell Globemedia Publishing Inc. All Rights Reserved.
Winn-Dixie files for Chapter 11; Wal-Mart effect blamed for woes
Southern icon must scale back, become nimbler, analysts say
By ELLIS MNYANDU
Wednesday, February 23, 2005 Updated at 8:44 AM EST
Reuters News Agency
NEW YORK -- Winn-Dixie Stores Inc., once among the most profitable of U.S. grocers, said yesterday it has filed for bankruptcy protection, succumbing to stiff competition from Wal-Mart Stores Inc.
The grocer, founded in 1925, said it had already lined up an $800-million (U.S.) debtor-in-possession financing from Wachovia Bank & Trust Co. NA, which replaces its previous $600-million credit line.
It filed its petitions to restructure under Chapter 11 of the U.S. bankruptcy code late Monday at the U.S. Bankruptcy Court for the Southern District of New York, according to a company statement.
Winn-Dixie said the petition covered itself and 23 U.S. subsidiaries. It said its 920 stores remained open, but analysts said the number of outlets would probably be trimmed because it now would be able to ditch leases it did not want.
In its bankruptcy petition, the Jacksonville, Fla., company listed total assets of $2.23-billion and total debts of $1.87-billion. It listed as its biggest creditor Kraft Foods Inc. and affiliates, owed $15.1-million.
Winn-Dixie said that as part of its restructuring, it would seek additional asset sales and plans to terminate leases of about 150 stores that had previously been closed.
Winn-Dixie, which analysts say has been out of touch with customers and burdened by dilapidated stores, was widely expected to slide into bankruptcy after posting a larger-than-expected quarterly loss earlier this month.
That loss capped more than four years of market share slippage to rivals, including Publix Super Markets Inc.
Winn-Dixie held an unrivalled grip on markets across the U.S. South and in the Bahamas from its founding until recent years, when Wal-Mart moved on to its home turf, selling food at rock-bottom prices that were hard to match.
Despite a 10-month restructuring and a push to improve store operations and cut costs, Winn-Dixie continued to struggle, in the end leaving vendors no other option but to tighten supply terms in the past two weeks.
Chief executive officer Peter Lynch said in a statement Winn-Dixie would use Chapter 11 reorganization to take actions necessary to position itself for the future.
"This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores," said Mr. Lynch, a former Albertsons Inc. executive, who was named CEO two months ago.
Evan Mann, a senior bond analyst at Gimme Credit, said Mr. Lynch's job would not be easy.
"The real big issue is what's going to happen over the next one or two quarters now that they are in bankruptcy and all their customers see this in their local newspapers.
"Bad publicity," he said, "it gives a lot of their competitors maybe a window to steal customers and maybe to be a little bit more aggressive on price."
The New York Stock Exchange halted trading in Winn-Dixie shares yesterday, after the stock slumped to 73 cents on the Inet electronic brokerage system from a Friday NYSE close of $1.47. The shares had largely become a one-way bet for short sellers -- contrarian investors who profit when a stock slides.
Analysts have said Winn-Dixie would do much better if it scaled down its operations, became more nimble, focused on its highly profitable markets and avoided going head to head with the likes of Wal-Mart, whose size allows it to extract better terms from suppliers.
Winn-Dixie's bankruptcy filing came as U.S. movie theatres began screening Because of Winn-Dixie, a film about a young girl who adopts an orphaned dog, named Winn-Dixie for the supermarket where she found him.
© Copyright 2005 Bell Globemedia Publishing Inc. All Rights Reserved.
posted by JimG at 8:44 AM
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