Winn-Dixie cutting 11,000 jobs

With revenue down, the grocery chain also will close 114 stores and a division headquarters and distribution center in Tampa.

By MARK ALBRIGHT

© St. Petersburg Times, published April 21, 2000

After months of internal upheaval and little improvement at the cash register, Winn-Dixie Stores Inc. on Thursday outlined deep cuts that will cost 11,000 workers their jobs at the nation's sixth-largest supermarket chain.

[Times photo: Thomas Goethe] Winn-Dixie division headquarters at 2400 E. Hillsborough Ave.

The latest round of restructuring will shutter 114 unprofitable stores in the 1,189-store chain and close the chain's oldest division headquarters and distribution center, in Tampa. About 200 workers at the Tampa facility will lose their jobs by June.

It's the nation's biggest job reduction since Hechinger Inc., a Washington, D.C., home improvement chain that ran Builders Square in Florida, closed 89 stores last September.

The disappearance of Winn-Dixie's Tampa Division ends an organization set up in 1931 to serve Winn-Dixie's first expansion beyond Miami. With the Kash n' Karry warehouse on Harney Road now vacant, the closing means Tampa will have lost two of its three major supermarket distribution center operations in three years. The only one left belongs to B&B USave, a grocery wholesaler and small supermarket chain.

Jacksonville-based Winn-Dixie will take up to $550-million in pretax charges to pay for the cuts, which are supposed to help save $400-million in annual expenses.

Calling the company's third quarter performance "disappointing and unacceptable," Al Rowland, a former Albertsons executive brought out of retirement to cure Winn-Dixie's long-running ills, outlined his first broad plan to overhaul and streamline the operation:

Close 9 percent of the company's stores within 12 months. The company will not identify the stores until affected employees are told. Winn-Dixie's stores are spread through 14 states reaching as far north as Ohio and west to Louisiana. The Tampa division, which stretches from the bay area south to Naples, has about 100 stores.

Eliminate the jobs of about 8 percent of the company's 132,000 employees. About 9,600 of the 11,000 jobs being cut are in stores being closed. The rest are at three of the company's 10 regional headquarters that are being eliminated, including Tampa, and at soap and bag factories that are being closed in Jacksonville. Winn-Dixie will begin getting its private label bags and detergents from contractors, like most other grocers.

Remodel 600 stores to meet the company's newer Winn-Dixie Marketplace prototype of larger stores that are fully equipped with service departments. The company's buying and distribution systems are being centralized to be more efficient.

Do housecleaning on high-level management, including early retirement for 10 senior vice presidents. Among them is former Tampa Division chief Robert Sevin. Sevin's successor in Tampa, Mark Sellers, will take over as president of an enlarged Orlando division that will supply Florida west coast stores from existing warehouses in Orlando and Sarasota.

Buy back company stock for the second time in six months. Authorized for purchasing and retiring up to 10-million more shares, the buyback is intended to keep the company's sagging stock price from falling too far too fast.

Still, Winn-Dixie earnings are not covering the company's monthly dividend, which may have to be cut, said Ed Comeau, an analyst with Donaldson Lufkin & Jenrette. Winn-Dixie stock, which lost more than $5.9-billion of its market value over the past two years, closed Thursday at $18.31, down 75 cents.

"Today's grocery business is probably the most competitive in our 75-year history," said A. Dano Davis, Winn-Dixie chairman and third generation of the founding Davis family that controls about 40 percent of the company's stock. "Implementation of our restructuring plan will help ensure continued growth and improved performance."

That would be a switch from the company's recent past. Annual earnings declined each of past three years and in the first three quarters of the fourth. The company's operating margin was 1.47 percent in the 1999 fiscal year, compared with 6.23 percent at rival Albertson Inc. and 6.92 percent at Safeway Inc. Davis stepped aside as chief executive last fall after the company's $3.5-billion investment in newer and bigger stores failed to bring in enough new customers to meet the company's profit goals.

The Winn-Dixie story remained the same in the third quarter that ended April 5, the company reported Thursday. Revenue was $3.2-billion, down $4.2-million from the same quarter in 1999. Net income was $10.3-million, or 7 cents a share, down from $58.8-million or 40 cents a share. Sales in comparable stores open more than a year slipped 1.6 percent.

"Winn-Dixie is caught in a classic squeeze," said Neil Stern, a retail consultant with McMillan & Doolitle in Chicago. "They are not as big or differentiated as Safeway or Kroger and are having a difficult time competing against Wal-Mart and others."

In Florida, where Winn-Dixie has more than a third of its stores, the chain has been losing market share to Publix Super Markets Inc. and Kash n' Karry. In other states, Winn-Dixie has been giving up market share to Kroger and others. No other supermarket in the country is confronted with direct competition from as many of Wal-Mart's 650 supercenters as Winn-Dixie.

Last year the company took steps to put past troubles behind it. The company paid $33-million to settle a class action racial discrimination suit filed on behalf of African-American store employees. It sold all of its 74 stores in Texas and Oklahoma to Kroger. Davis, who ran the company for a decade, stepped outside the company's ranks to hire Rowland as CEO to implement a long-term fix.

It may not be enough, said some observers.

Tom Olson, publisher of Food People, a trade publication, is rekindling rumors that the company is being packaged for sale to a larger competitor such as Kroger, Safeway or Royal Ahold, the Dutch retailer than owns Giant and recently took over Peapod, the online grocer.

"I think Al Rowland is there to buff up Winn-Dixie for a sale," he said.

Added Chuck Gilmer, editor of the Shelby Report of the Southeast, an industry trade paper: "This isn't a restructuring as much as a retrenchment in their core markets. Winn-Dixie's real challenge is to get people back in their stores."

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