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Winn Dixie Stores CEO Discusses Q1 2011 Results - Earnings Call Transcript

Winn Dixie Stores CEO Discusses Q1 2011 Results - Earnings Call Transcript

Winn-Dixie Stores, (

WINN

)

Q1 2011 Earnings Conference Call

November 2, 2010 08:30 am ET

Executives

Eric Harris – Investor Relations

Peter Lynch

-

Chairman, CEO and President

Bennett Nussbaum

-

Senior Vice President, Chief Financial Officer

Dan Portnoy - Senior Vice President, Chief Merchandiser and Marketing Officer

Analysts

Susan Anderson - Citi

TheStreet Recommends

Meredith Adler – Barclay's Capital

Bruce Zesser - Advisor Research

Karen Short – BMO Capital

Chuck Cerankosky – NorthCoast Research

Scott Mushkin – Jeffries and Company

Damian Witkowsky – Gabelli and Company

Presentation

Operator

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Good morning ladies and gentlemen and welcome to the First Quarter Fiscal Winn-Dixie Stores Earnings Conference Call. My name is Alisha and I'll be your coordinator for today. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If at anytime you require operator assistance please star followed by zero and a coordinator will be happy to assist you. As a reminder this conference call is being recorded for replay purposes. I would now like to turn the conference over to your hostess for today Mr. Eric Harris, Investor Relations. Please proceed.

Eric Harris

Good morning and thank you for joining us to discuss Winn-Dixie's financial results for the first quarter of fiscal 2011. Joining me this morning are Peter Lynch, Chairman, CEO and President and Bennett Nussbaum, Senior Vice President, Chief Financial Officer and Dan Portnoy, Senior Vice President and Chief Merchandiser and Marketing Officer. Before we begin let me remind you that the information presented and discussed today includes forward-looking statements made under the Safe Harbor Provision of the Privacy Security Litigation Reform Act of 1995.

The risk and uncertainties related to such statements are detailed in our SEC filings. Today's call also will include a discussion of adjusted EBITDA which is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to GAAP, financial measures can be found in the schedules of the press release we issued yesterday which is available on the investor relations section of our website at WinnDixie.com

Today's call is being recorded and a transcript will be archived. A replay of the call will be available on the investor relations section of our website later today. I will also be available after today's call for additional questions. Bennett and Peter will begin with some prepared remarks and afterwards we will open up the call for your questions and now let me turn it over to Peter Lynch.

Peter Lynch

Thank you, Eric, and good morning everyone. And thank you for joining us to discuss our first quarter results for fiscal 2011. A supplemental press release, although adjusted EBITDA was negative in the first quarter our identical store sales trend improved by 220 basis points compared to the fourth quarter of fiscal 2010.

Compared to the year ago period identical store sales decreased by 2.8%. This was driven by a decrease in transaction count of 210 basis points and a decrease in basket-size of 70 basis points. In the first quarter identical store sales were negatively impacted by competitive activity and other general market factors as well as the continued mix-shift from branded to generic pharmaceuticals, which cost us about 80 basis points.

Identical store sales were also negatively impacted by the Gulf oil spill which cost us roughly 40 basis points. As I mentioned last August our top priority right now is improving sales trends. Strategic adjustments to our promotional activities and to new expanded sales initiatives across the chain. In adjusting a promotional activities we monitor competitive activity very closely and make measured adjustments where we see the most promising opportunities.

These adjustments improved our identical stores sales trends from the fourth quarter of fiscal 2010 resulting in 190 basis point improvement in transaction count during the first quarter. While this is encouraging the investment and promotional activity negatively impacted our gross margins by 80 basis points. In the near-term we believe it's critical to focus on the top line and the actions we took this quarter were necessary to position us to achieve sustainable and profitable sales growth.

Our challenge going forward for us will be to maintain the positive momentum up sales while also improving margins. The other factors help address sequential improvement in our ID sales trends, are the companies new and expanded sales initiatives.

Like our successful fuel purchase programs, this customer incentive program continues to generate positive responses and is a great opportunity to drive incremental sales across our chain. Additionally our computer generated order program, also known as CGO, is continuing to do very well. This program is helping improve sales by reducing our out of stocks. As of the end of the first quarter we had the program running at $108 stores and saw an improvement in total identical store sales of 10 basis points.

We expect to roll out the program across the entire chain by the end of the fiscal year and anticipate it will benefit the companies identical store sales by a total of 50 basis points by the end of fiscal 2011. I would now like to briefly discuss our remodel program and new stores.

As you'll recall we provided extensive updates on our remodel program on the fourth quarter call. We plan on providing a similar update at the end of the fiscal year as well with three status updates on the program each quarter. Our remodel stores are continuing to outperform the chain since the programs inception, 179 offensive remodels has generated a waited average sales increase of 6.7% on a cumulative basis since the grand reopening, which includes an increase in transaction count of 2.9% and an increase of basket size of 3.7%.

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