Inflation feeds Winn-Dixie ident-store growth

JACKSONVILLE, Fla. — Inflationary increases, sales growth at remodeled stores and a boost from fuelperks! helped drive up Winn-Dixie's second quarter identical-store sales, while net sales dipped.

According to Winn-Dixie's chief Peter Lynch, Winn-Dixie is riding a strong headwind into fiscal 2012 powered by a number of influencers — 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.

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