Winn-Dixie Stores Inc. (WINN) reported fiscal 2010 second-quarter results after the closing bell on Tuesday. The company posted a net income of $2.1 million, compared to $16.1 million in the year-ago quarter.
Earnings per share came in at 4 cents, which surged past the Zacks Consensus Estimate of a loss of 16 cents. The better-than-expected result, driven by improved gross margin and lower operating expenses, led to a more than 9% gain in Wednesday trading.
The Jacksonville, FL-based company’s sales posted a decline of 3.3% to $2.18 billion from $2.25 billion in the prior-year period. The decrease was primarily caused by a 2.9% reduction in same-store sales, mainly due to macroeconomic headwinds, deflationary pressures and higher sales of generic drugs, compared to branded ones. The company, which emerged from bankruptcy protection in November 2006, is in the midst of remodeling its stores as part of a turnaround strategy.
Winn-Dixie’s gross profit dipped 3.0% year-over-year to $613.5 million, while gross margin rose slightly by 10 basis points (bps) to 28.2%. The increase in margin was primarily the result of a lower LIFO charge partially offset by higher shrinkage and increased warehouse expenses.
Other operating and administrative expenses decreased by 1.5% to $610.9 million, mainly due to lower payroll, occupancy costs and utility rates. However, sluggish sales more than offset the decline in operating expenses. Accordingly, Winn-Dixie’s operating income slumped by 95.3% to $1.5 million from $33.0 million in the year-ago quarter, which included a non-recurring gain of $22.4 million. Excluding the gain, operating margin dipped by 40 basis points year-over-year to 0.1%.
Winn-Dixie ended the quarter with cash and cash equivalents of $154.3 million, compared to $145.1 million in the prior-year period. During the first-half of fiscal 2010, the company generated $46.3 million of cash from operations and utilized $78.9 million towards capital expenditure. For the current fiscal year, the company plans to deploy $200 million towards capital expenditure primarily for the ongoing store-remodeling program.
Meanwhile, Winn-Dixie expects earnings before interest, taxes, depreciation and amortization (EBITDA) to be at the lower range of its earlier guidance of $140 million and $160 million. The Zacks Consensus Estimate on the company’s earnings for this fiscal year ending June 2010 is currently pegged at 13 cents per share, which has been reduced by 7 cents over the past month as 1 of 4 covering analysts lowered expectations.
Winn-Dixie is one of the leading food retailers in the U.S. and currently operates 515 grocery locations, which includes more than 400 in-store pharmacies across Florida, Alabama, Louisiana, Georgia and Mississippi.
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