Winn-Dixie Stores Inc.’s (WINN) fiscal 2010 third-quarter net income grew to $20.9 million or 38 cents per share from $16.6 million or 30 cents per share in the year-ago quarter. Quarterly earnings also surpassed the Zacks Consensus Estimate by 13 cents, or 52%. The growth in earnings was primarily the result of absence of a significant income tax expense recorded in the year-ago period. 

Quarterly Details
 
Winn-Dixie’s sales declined 2.3% to $1.69 billion from $1.73 billion in the prior year period. The reduction was mainly attributable to a 2.2% decline in same-store sales due to macroeconomic headwinds 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 contracted 3.9% year-over-year to $479.2 million, while gross margin decreased by 50 basis points (bps) to 28.4%. The decline was primarily the result of increased competition which prevented the company to pass on cost increases or retain cost decreases in certain product categories. 

Other operating and administrative expenses reduced by 2.2% to $458.3 million mainly due to lower utility rates, payroll and occupancy costs. However, sluggish sales and gross margin more than offset the decline in operating expenses. Accordingly, Winn-Dixie’s operating income declined by 30.7% to $20.9 million from $30.1 million in the prior year quarter, while operating margin dipped by 50 bps to 1.2%.
 
Balance Sheet & Cash Flow
 
At quarter-end, Winn-Dixie had cash and cash equivalents of $183.8 million, compared to $177.3 million in the prior year period. During the first nine months of fiscal 2010, the company generated $134.7 million of cash from operations and utilized $116.2 million towards capital expenditure. For the entire fiscal, the company plans to deploy $200 million towards capital expenditure primarily for the ongoing store-remodeling program. 

Outlook and Zacks Consensus 

Looking ahead, Winn-Dixie continues to expect earnings before interest, taxes, depreciation and amortization (EBITDA) to be at the lower range of its earlier guidance of $140 million to $160 million. The Zacks Consensus Estimate on the company’s earnings for the fiscal year ending June 2010 currently stands at 39 cents per share, which moved up by 4 cents over the past 2 months. For the next fiscal, the Zacks Consensus Estimate has increased by 5 cents over the past 2 months to 20 cents per share. 

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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