Highlights From WINN's Q4 Conference Call: Seeing Improvements in Same-Store Sales and Gross Margins

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August 25, 2009 1:33 PM EDT

Winn-Dixie Stores (Nasdaq: WINN) reports Q4 EPS of $0.17, 1 cent better than the analyst estimate of $0.16. Revenue for the quarter was $1.72 billion, versus the consensus of $1.71 billion. Shares are down over 8%, maybe on softer first glance at outlook.

Highlights From WINN's Q4 Conference Call:

Same store sales rose 1.6%
Reaffirms its FY10 adj-EBITDA guidance.
(CEO) We were able to produce improvements in both identical store sales and gross margin and an outstanding 61% improvement in adjusted EBITDA compared to fiscal 2008.
Adjusted EBITDA was 44.3 million in the fourth quarter, an increase of 34.7 million compared to the same period last year.
Gross margin as a percentage of net sales was 29.2% in Q4, an improvement of 230 basis points compared to last year.
For fiscal 2009, gross margin was 28.5, an increase of 130 basis points compared to last year.
We remodeled a total of 75 stores in fiscal 2009 and we're currently on track to remodel half of our stores by the end of fiscal year 2010 and to complete substantially all of our stores by 2013.
For the first eight weeks of fiscal 2010, identical store sales were slightly positive when we adjust for the benefit of hurricane related sales in the same period of last year.
Candidly that run rate is a bit softer than we had hoped, but we're only about eight weeks into the fiscal year and we think that it would be premature to adjust our annual sales expectations at this time. However, if the sales trend continues, we could be at the lower end of our sales guidance.
(CFO) As of the end of Q4, Winn-Dixie had approximately $662 million of liquidity comprised of $479 million of borrowing availability under our credit agreement and $183 million of cash and cash equivalents. We're especially pleased that we were able to invest about $220 million in our business over the last 12 months, while still ending the year with a strong cash balance.
We expect our capital expenditures to total approximately $220 million in fiscal 2010 of which approximately $130 million will be spent on our store remodeling program. The initial $90 million of our CapEx for fiscal 2010 will be used for retail store improvements and maintenance, IT systems, new
stores, logistics and back-up generators. We currently have no borrowings under our credit facility. We do not anticipate having any borrowings under our credit facility for fiscal 2010.
(Q&A) On generic drugs, it seems like, as far as what I can find from your other public competitors, it seems like you're getting a better benefit on generics. Is there any -- I should say it seems like it is getting better. Is that something that's -- has the market in gene -- are you seeing more generic substitutions or something excessive [ph] Winn-Dixie through that we should pay attention to? (A)I don't know whether we're not consistent with the industry or not. I think the whole industry has moved toward more and more generics and that trend has continued with Winn-Dixie. So, yes, we're seeing more generics, but I think that's an industry trend.
First, could you talk about whether there's been any response from your competitors in Jacksonville? This might be the first time that you guys are really sort of making trouble, shall we say? Is Publix comfortable with that? (A)We did see a response from Publix. And what they have done is they've zoned their circulars in the Jacksonville area, so for example, if assorted pork chops and the chain for Publix was 1.69, they might have zoned it for the Jacksonville area at 1.49. It is not a lot of items. It is a few. But they fired a round over the battle to let us know that they knew what we were doing.
I was wondering if you could talk a little bit about pharmacy. And I guess specifically, kind of two things. One, what are the scripts counts look like in traffic? And how does that play within your overall promotional plan? (A) Regarding the pharmacy, script counts are up. Okay? And as I indicated before, the generic mix continues to be up. So, scripts are up. Generics are up. As far as pharmacy plays into our promotional activity, as I've said in the past, pharmacy is a key component to our strategy going forward. We firmly believe that one pharmacy customer is -- they're one that sticks around, stays around and buys more. So, we're always trying to make sure that we keep those customers and reach out to them for more business. So, we think pharmacy is a key component going forward. One of the key areas in pharmacy is making sure that you've got the right people behind the counter. And I think we've done a lot of work in making sure that our pharmacists are really out there taking care of the customer. Customer really needs that approach regarding pharmacy and I think we're doing a much, much better job out of here at Winn-Dixie today.