Supermarket giant Winn-Dixie Stores Inc., which has struggled to compete with Wal-Mart Supercenters and other grocery chains in the Southeast, said Tuesday it has filed for bankruptcy protection from its creditors while it reorganizes its finances.
The filing came less than two weeks after Winn-Dixie reported bigger losses and lower revenue versus a year ago.
Winn-Dixie and 23 of its U.S. subsidiaries filed to reorganize under Chapter 11 of the bankruptcy code late Monday in U.S. Bankruptcy Court for the Southern District of New York, a company news release said.
The Jacksonville-based company also announced Tuesday that it has secured $800 million in credit from Wachovia Bank to help pay for its reorganization, the release said. The new credit amount, subject to court approval, replaces the company’s previous $600 million credit line.
The company said all 920 Winn-Dixie stores in eight states mostly in the Southeast and the Bahamas are open. It has about 79,000 employees, including 33,000 who work full-time.
Winn-Dixie’s shares closed Friday at $1.47 on the New York Stock Exchange and had not opened for trading by midday Tuesday on the exchange. Its 52-week high was $8.42 per share. In 1998, the stock was trading at $59.38 a share. Its 52-week high was $8.42 per share.
The company plans to use the reorganization process to improve its operations and financial performance, but also to reduce its expenses and decide how to use its assets to make its stores more productive, the release said.
“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 Peter Lynch, president and chief executive officer. The former Albertsons Inc. executive was hired in December to turn Winn-Dixie around.
But Winn-Dixie said it will seek court approval to terminate the leases of two warehouses and about 150 stores that were closed previously, for an annual cash savings of approximately $60 million. It also plans to sell all of its remaining manufacturing operations to reduce expenses, the release said.
Second-quarter blues
Winn-Dixie, one of the largest food retailers in the nation, reported recently that it lost $399.7 million, or $2.84 per share, for the three months ending Jan. 12, compared with a loss of $79.5 million, or 57 cents per share, for the same quarter last year.
Second-quarter revenues were $3.08 billion, compared with $3.23 billion a year ago.
Excluding $258 million in restructuring and income tax charges and $72.2 million in expenses related to discontinued operations, the company lost $69.4 million or 50 cents per share — exceeding the 11 cents per share loss forecast of analysts surveyed by Thomson First Call.
For the first six months of this fiscal year, Winn-Dixie reported a net loss of $552.8 million, or $3.93 per share, on sales of $5.41 billion.
Tuesday’s news release cited the company’s problematic second quarter, which led to “subsequent credit downgrades from the major debt rating agencies” and “a tightening of trade credit from some of its vendors, which further reduced its cash availability.”
Burt P. Flickinger III, managing director of Strategic Resources Group in New York, said Tuesday he doubts Winn-Dixie will be able to succeed under Chapter 11 reorganization and may eventually be forced into a Chapter 7 bankruptcy, which calls for liquidation of the company and its assets.
“It don’t believe the company will be able to fight off the Wal-Mart Supercenter tsunami,” said Flickinger, who said Wal-Mart Stores Inc. plans to open new grocery stores this year in Florida, Louisiana, Mississippi and North Carolina.
“It is literally the biggest tragedy in American business last century,” Flickinger said. “It’s absolutely tragic, the company ... got wiped out by Wal-Mart.”
Jason D. Whitmer, an analyst for FTN Midwest Research, said the new CEO Lynch “probably came in too late to fix a bigger problem.”
“It has been like this for a while — a slippery slope. There hasn’t been a lot of positive news,” Whitmer said.
Both Standard & Poor’s Rating Services and Moody’s Investor Services have lowered Winn-Dixie’s credit ratings. In early December, Winn-Dixie was dropped from the Standard & Poor’s 500 index after recording the worst performance in 2003 in the select stock index.
Winn-Dixie’s largest shareholder is the Davis family, which founded the company in 1925 and owns 51.7 million shares, or 36.7 percent of the common stock. The Davis family holdings were worth about $3.5 billion when the stock peaked in 1998, but the value has been reduced to about $75 million.
