North Carolina, USA

Winn-Dixie Forges Ahead With Grand Remodel Effort

Gavin P. Smith – The Griffin Report

With “change” being the consummate buzz word these days, Florida-based Winn-Dixie certainly is doing its part to make a few changes of its own.

Despite having to navigate through shaky economic waters, Winn-Dixie has created a remodeling plan that may indeed change a lot of the old familiarities of the Winn-Dixie brand.

This new multimillion-dollar remodeling effort initially began a few years back, but was quickly halted due to a financial overhaul of the company. That overhaul took place with Chapter 11 bankruptcy in 2005. By that time, only a few south Florida stores had undergone minor aesthetic renovations.

Now, after emerging from bankruptcy in 2006, the remodeling plan has been led by Winn Dixie Chairman, CEO and President Peter Lynch. Mr. Lynch, a former Albertson’s executive, has high hopes for the chain’s remodel plan to lift store profits and raise their competitive market edge.

“During tough times—whether we’re in a recession or going to be in a recession or whatever—people are looking for value, and they’re trading down,” Mr. Lynch said. “I feel pretty good about where we are going.”

The remodel plan for Winn-Dixie stores features not just cosmetic overhauls that would do away with the old pink-and-turquoise décor that it adopted a few years ago, but also product expansions. These expansions involve a new collection of store-branded products, including Winn-Dixie’s Thrifty label, and their new Prestige and Winn-Lovett labels.

Storefronts for the newly redesigned stores feature modern glass and painted brick, new lighting and landscaping, and a color scheme to complement the changes inside the stores. The darker earth tones now being used for the stores aim to show off Winn-Dixie’s products and create a much quicker, more pleasant shopping experience for consumers. Even the logo has changed, going for a more modern, simple look.

This year, Winn-Dixie completed Florida store remodels in downtown Jacksonville and in Hollywood. The recently remodeled downtown Jacksonville location delivers a variety of goods and services to the growing Jacksonville community, with a 2,400-square-foot expansion that includes everything from renovated and expanded produce, floral, seafood, wine and dairy departments to a larger, full-size pharmacy. The deli section has been expanded to include an onsite, store-run custom sub shop and wing bar. An aesthetic overhaul of the storefront gives it a more urban, contemporary look.

In addition, this remodel also features a police stop station, where local law enforcement can file paperwork, interact with residents and conduct business. This was added in response to growing customer feedback in which customers said they didn’t shop at the 30-year-old store because they didn’t feel safe.

Winn-Dixie also celebrated the grand reopening of its Hollywood, Fla., location on Aug. 14. As with each store, renovations were tailored to specific needs of each neighborhood. The Hollywood store upgrades include a newly expanded kosher section (including dairy, meat and frozen selections), an expanded organic selection and new and improved produce areas. Other changes include expanded fruit and vegetable sections and new larger meat and seafood departments.

With Winn-Dixie’s extensive plans to remodel its 521 stores throughout the Southeastern U.S. comes the desire to reconnect with its customer base. Focusing on a price, quality and variety formula rather than taking a bargain warehouse approach is the driving force behind the remodels, which have been estimated to cost around $2 million per store. A difficult economy compounded by fierce competition has kept Winn-Dixie lagging behind in fourth place among a list of the top five grocery chains in the region. They hope to raise their rankings with this remodeling plan despite sharp regional competition from Publix Stores and tough national competition with Wal-Mart.

The Winn-Dixie remodeling plan is estimated to continue over the course of seven years, at a pace of about 75 remodels per year. Winn-Dixie expects to have remodeled at least half of its stores by June 2010. The hope is that the remodeling program will generate a 12 percent lift in profits from each remodeled store.

Despite ongoing remodel efforts, recent economic reports for fourth quarter 2008 show that it may be a tougher journey for Winn-Dixie in the short term than Mr. Lynch may have first anticipated.

“Overall, Winn-Dixie had a strong year, with year-over-year increases in sales, gross margin and Adjusted EBITDA, and we made significant progress with the company’s strategic initiatives, which gives us a stronger foundation and added confidence as we head in to fiscal 2009,” said Mr. Lynch. “However, our fourth-quarter profits came in well below our expectations and are not indicative of what we believe Winn-Dixie can deliver.”

Mr. Lynch does see promise in the long view. As of the end of fiscal 2008, the aggressively remodeled stores had a weighted average sales lift of approximately 11.5 percent for the first year of operation after the grand re-opening phase, coming in at a half percent under the desired goal.

“Despite the current economic climate, looking ahead, we see near-term opportunities to improve profitability by focusing on growing profitable sales and keeping a tight control on operating expenses,” said Mr. Lynch. “We have already moderated our promotional spending in the first few weeks of the new fiscal year and are pleased with the early results. In the longer term, we are pursuing sustainable sales growth through initiatives such as our store remodel and corporate brands programs and our neighborhood marketing strategy.”

Winn-Dixie’s headquarters are located in Jacksonville, Fla., with 521 stores throughout Florida, Alabama, Louisiana, Georgia, and Mississippi.

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