Chopping produce aids Winn-Dixie's bottom line

The self-service perishable bars proved too much of a profit drain.

By MARK ALBRIGHT

© St. Petersburg Times, published February 1, 2001

Sales were down but profits were up at Winn-Dixie as the results of shrunken perishables departments began showing up in the Jacksonville supermarket chain's earnings.

So far, the conversion has been completed in 220 stores, but the disruption of construction and the move away from lucrative foods most subject to spoilage depressed fiscal second-quarter sales 7.5 percent to $4-billion from the year-ago quarter.

Winn-Dixie Stores Inc. is spending $144-million to chop the floor space dedicated to produce and other perishables from 37 percent to 23 percent of a typical store. Winn-Dixie hopes to fill the vacated space by June with more general merchandise that's less likely to be thrown away at a total loss.

Meanwhile, Winn-Dixie said Wednesday net income improved to $12.2-million, or 9 cents a share, for the quarter ended Jan. 10, up from a loss of $18.8-million, or 13 cents a share, a year earlier. Without the burden of restructuring charges, Winn-Dixie would have earned $36-million, or 26 cents a share.

"We are pleased to see our efforts from restructuring starting to provide improved operating results," said president and chief executive Al Rowland, who thinks shrinking or eliminating perishables departments in 650 of the 1,089 Winn-Dixie stores will cut $400-million a year in expenses.

Expansive produce departments were the "in" thing among supermarkets over the past decade. But all those self-service melon bars, salad bars, fresh-made takeout food and exotic fruits and vegetables are a huge profit drain if new customers don't show up. Without them, the bigger fresh food presentation goes bad and has to be pitched, a major expense in an industry that survives on a razor-thin profit margin of 1 percent.

Struggling Winn-Dixie has been trying to improve its profitability after a five-year building binge left it with a collection of bigger stores but less market share. After three years of steadily declining profits, Winn-Dixie closed 113 stores, cut the number of stores open around-the-clock, endured a top-level management housecleaning and closed its Tampa distribution center.

Winn-Dixie shares closed at $19.98 Wednesday, up $1.94.

-- Contact Mark Albright at albright@sptimes.com or (727) 893-8252.

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