Sales down, market basket up: Winn Dixie enters 2012 with confidence
JACKSONVILLE, Fla. — According to Winn-Dixie’s chief Peter Lynch, Winn-Dixie is riding a strong headwind into fiscal 2012 powered by a number of influencers, including a marketing program that better sustains margins, its loyalty program Fuelperks!, an improved stocking system and a significant focus on improving the customer experience.
And even as Florida, home to the majority of Winn-Dixie locations, remains one of the hardest-hit states in terms of a down economy, Lynch is optimistic on the coming year. However you couch the economic climate — sustained recession or slow recovery — Americans have learned how to manage their food budgets, Lynch, Winn-Dixie chairman, president and CEO, told analysts Tuesday morning. Lynch also told analysts that Winn-Dixie steadily has been improving its approach to promotions, passing along many inflationary increases to the consumer in place of heavy promotions that make sustaining margins difficult.
That should make an improved customer experience coupled with a strategic loyalty program significant points of differentiation for a grocer reclaiming its brand identity, all the while competing with the other Floridian supermarket heavyweight Publix. The company’s Fuelperks! program will expand across 80% of the chain’s store base by October, Lynch said, up from half of the company’s store base today. By the end of fiscal 2012, Winn Dixie plans to have the Fuelperks! program operative in all locations, the company has reported in the past.
Winn-Dixie pumped up its Fuelperks! program in April — giving consumers a 15-cent-per-gallon discount if a customer purchases three of any particular bonus Fuelperks! reward items. That has become a significant incentive to make Winn-Dixie a one-stop-shop as the average cost of gas remains above $3.50 per gallon.
“Many of our customers are telling us they are saving 50 to 75 cents per gallon or more by shopping at Winn-Dixie,” stated Mary Kellmanson, Winn-Dixie’s group VP marketing, at the time of the announcement.
Winn-Dixie is also well on its way to converting more locations into the "transformational format stores," that on average perform better to its older store base to the tune of 10% higher sales per week. Target sales-per-sq.-ft. range between $400 and $500, Lynch told analysts. That compares with a chain average of an approximate $300 in sales per sq. ft. The company plans to convert 17 locations to the transformational format in fiscal 2012, two of which already are completed. Eventually, Lynch wants to convert some 60% of Winn-Dixie’s store base into the better-performing format.
Winn-Dixie on Monday evening affirmed fiscal 2011 net sales of $6.9 billion, a 1.4% decline, compared with fiscal 2010. The decrease was due to the extra week in the prior0-year period and a slight decline in identical-store sales, which on a comparable 52-week basis decreased 0.1%, compared with the prior fiscal year.
Basket size for identical stores on a comparable 52-week basis increased 1.3% while transaction count decreased 1.5%, compared with the prior fiscal year.
Winn-Dixie projects adjusted EBITDA for fiscal 2012 to be in the range of $120 million to $135 million. Among other factors, the company’s adjusted EBITDA guidance is based on its current expectation that identical-store sales for fiscal 2012 will increase by 2.5% to 3.5% and gross margin rate will be slightly higher than fiscal 2011. The company also expects to pay no income taxes in fiscal 2012 due to the sufficiency of its tax loss carryforwards.
Capital expenditures for fiscal 2012 are expected to be approximately $200 million, of which approximately $125 million will be used for the company’s store remodeling program and new store development. The additional $75 million is expected to be used for retail store improvements and maintenance, IT systems, warehousing and transportation. Due to the continuing strong sales performance in the transformational format stores. In 2012, Winn-Dixie also is setting the groundwork on a new store pipeline for fiscal 2013.
Spectrum Brands reaffirms distribution-only agreement with King of Shaves
MADISON, Wis. — Responding to weekend press reports, consumer products company Spectrum Brands issued a statement indicating that it has not offered to acquire King of Shaves, a U.K.-based company with whom Spectrum has a multiyear distribution agreement through its Remington North America division.
Spectrum Brands signed in November 2010 a multiyear agreement with the King of Shaves, under which Spectrum’s Remington division, a provider of Remington-branded electric shavers, grooming and styling products, distributes King of Shaves products in the United States, Canada and Mexico.
In reaffirming its distribution-only agreement with King of Shaves, Spectrum stated that it looks forward to entering the U.S. market for men’s wet shaving with a full line of products.
Spectrum Brands’ Remington division this fall is launching its Remington King of Shaves Azor 5 line of five-blade razors, disposable cartridges and shaving gels in the United States. Remington also will distribute the King of Shaves branded men’s grooming products.
The U.S. men’s wet shave market, including handles, cartridges and disposable razors, is estimated at nearly $2 billion in annual retail sales, and growing at a compound annual rate of approximately 4%, the company stated.
FDA approves Perrigo, Cobrek dermatitis drug
ALLEGAN, Mich. — The Food and Drug Administration has approved a treatment for dermatitis made by Perrigo under a collaboration with Chicago-based Cobrek Pharmaceutical.
The drug maker said Tuesday that the FDA approved ketoconazole foam in the 2% strength. The drug is a generic version of Stiefel Labs’ Extina, a topical drug used to treat seborrheic dermatitis in patients ages 12 years and older with healthy immune systems.
Extina has annual sales of about $10 million, according to Perrigo.