Winn-Dixie continues Down Down (the drain?)

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Winn-Dixie continues Down Down (the drain?)

Post by pseudo3d »

So apparently despite the damage last year with the pharmacy closures and the fast-n-cheap conversions, Winn-Dixie now wants to continue doing Down Down on even more products, despite the fact that they're pouring $40 million into the project this year alone. McLeod is convinced that the strategy is working, and had promised to keep the prices low "as long as we can". But how long is that going to be? It's clear that this strategy has already completely de-railed their ambitious renovation strategy (again?) and they haven't built a new store in years. Even Albertsons, whose "new store" counts seriously dropped off in the mid-2000s as they closed stores left and right have started to build new stores again, something Winn-Dixie can't muster. And while Publix and Walmart have always been problems in Florida and the South, Aldi is starting to cut into Florida, and that is absolute bad news for Winn-Dixie.

http://www.montgomeryadvertiser.com/sto ... /96151668/
http://www.orlandosentinel.com/business ... story.html
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Re: Winn-Dixie continues Down Down (the drain?)

Post by wnetmacman »

pseudo3d wrote:So apparently despite the damage last year with the pharmacy closures and the fast-n-cheap conversions, Winn-Dixie now wants to continue doing Down Down on even more products, despite the fact that they're pouring $40 million into the project this year alone. McLeod is convinced that the strategy is working, and had promised to keep the prices low "as long as we can". But how long is that going to be? It's clear that this strategy has already completely de-railed their ambitious renovation strategy (again?) and they haven't built a new store in years. Even Albertsons, whose "new store" counts seriously dropped off in the mid-2000s as they closed stores left and right have started to build new stores again, something Winn-Dixie can't muster. And while Publix and Walmart have always been problems in Florida and the South, Aldi is starting to cut into Florida, and that is absolute bad news for Winn-Dixie.

http://www.montgomeryadvertiser.com/sto ... /96151668/
http://www.orlandosentinel.com/business ... story.html
The only thing you don't have to back up your claim is sales numbers, which SEG doesn't report since they're a private company. However, you wouldn't keep or extend a price drop program unless it were working.

While they may not be building new stores, conversions to Fresco Y Mas and Harvey's are moving along pretty rapidly. I would hate to think that an expansion of this isn't working. I know there is precedent for it in the past of expanding a failing price drop program (Kmart, 2000-2001), but I wouldn't think they'd have the money they're putting into their store base for remodels if it weren't.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by pseudo3d »

wnetmacman wrote:
The only thing you don't have to back up your claim is sales numbers, which SEG doesn't report since they're a private company. However, you wouldn't keep or extend a price drop program unless it were working.

While they may not be building new stores, conversions to Fresco Y Mas and Harvey's are moving along pretty rapidly. I would hate to think that an expansion of this isn't working. I know there is precedent for it in the past of expanding a failing price drop program (Kmart, 2000-2001), but I wouldn't think they'd have the money they're putting into their store base for remodels if it weren't.
They didn't post sales numbers NOR even report a same-store sales account, which Albertsons (also private) has cheerfully done in the last few years, even as they've flat-lined in the most recent quarters. Conversely, Winn-Dixie last put out numbers in 2014, and none of them have been particularly encouraging. Pre-McLeod, in 2012, W-D had narrowed their loss from about $78M to $25M (link). If Down Down was going as well as McLeod says it is, then same-store sales increases should show that. The Winn-Dixie renovation and reopening was supposed to bring about 50 more of that type to the chain, which never happened (Tampa got a remodel similar, though not nearly as nice, and others did get the red décor), while in reality they started closing pharmacies and cutting hours.

To me, the biggest evidence that things aren't going completely wrong is that Lone Star Funds isn't trying to sell down entire divisions, but I can't help but wonder if that's just a matter of time.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by klkla »

pseudo3d wrote:They didn't post sales numbers NOR even report a same-store sales account, which Albertsons (also private) has cheerfully done in the last few years, even as they've flat-lined in the most recent quarters.
To be fair Albertsons only reports their numbers because they have been trying to get an IPO going for quite a long time.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by pseudo3d »

klkla wrote:
pseudo3d wrote:They didn't post sales numbers NOR even report a same-store sales account, which Albertsons (also private) has cheerfully done in the last few years, even as they've flat-lined in the most recent quarters.
To be fair Albertsons only reports their numbers because they have been trying to get an IPO going for quite a long time.
Yeah, but still, for company health, it's real numbers (selected ones to make the company look good, of course) or circumstantial evidence. Word of a CEO is always going to be suspect, I've learned with Lampert. Now it's not I think McLeod is a dishonest crook destroying a storied name, I just don't think that Down Down is a good long-term strategy. A large part of Coles success in Australia was the fact that Woolworths was tricked into a price war that undermined its own "fresh food" image while focusing too much on its other non-food brands.

The fundamental problem is that unlike Coles, SEG isn't engaging in a price war with its competitors and I doubt it's enough to pull people back in, which seemed vital in the war on Woolworths. I also don't know if they're at Walmart-level prices, which they definitely weren't before. And so, what happens next, when SEG can no longer maintain "Down Down"? Will prices rise to pre-Down Down levels (if not higher?), will they do a round of closings, will they sell divisions, or the whole company? And how long can they do so at what cost? Will the Harvey's stores start to drop their full service departments and upkeep of other stores drop off? Put it simply, what exactly is McLeod's long-term strategy?
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Re: Winn-Dixie continues Down Down (the drain?)

Post by storewanderer »

Down Down is probably the right strategy since so many of Winn Dixie's prices are higher than Publix. Plus the stores suck. Period.

But maybe if they can get the prices Down Down, some additional customers will tolerate the deplorable store conditions, so sales may just go Level Level which is certainly better than sales going Down Down which they have no doubt been doing for quite some time.

At this point it may not be as much about making sales go up as it may be about trying to get volumes/tonnage growing and trying to at least get sales to breakeven. At least they stuck to the same program for a year... that is a bit of a record for them. They deserve some credit for finally sticking to something.

No privately held grocer reports sales unless they have to. For instance, Stater Bros. used to report sales since they had to due to having publicly held debt. Albertsons did not report any sales at all (LLC) from 2006-2014 or so and only started to report sales due to the trying to get its IPO going which so far has yet to happen.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by pseudo3d »

storewanderer wrote:Down Down is probably the right strategy since so many of Winn Dixie's prices are higher than Publix. Plus the stores suck. Period.

But maybe if they can get the prices Down Down, some additional customers will tolerate the deplorable store conditions, so sales may just go Level Level which is certainly better than sales going Down Down which they have no doubt been doing for quite some time.

At this point it may not be as much about making sales go up as it may be about trying to get volumes/tonnage growing and trying to at least get sales to breakeven. At least they stuck to the same program for a year... that is a bit of a record for them. They deserve some credit for finally sticking to something.

No privately held grocer reports sales unless they have to. For instance, Stater Bros. used to report sales since they had to due to having publicly held debt. Albertsons did not report any sales at all (LLC) from 2006-2014 or so and only started to report sales due to the trying to get its IPO going which so far has yet to happen.
It still leaves the question of what the end-game is. From what I've read, Coles' store conditions were terrible--probably worse than Winn-Dixie in some aspects.
Things weren't much better for a despondent workforce, with staff weary of navigating head-office approval for trivial expenditure items like replacing blown light globes, and working with deli slicers from a different era -- so old that the spare parts had gone out of production. For McLeod, the true depth of neglect at Coles was highlighted during a tour of one store when he encountered a sign mounted on a refrigerator door. It read: "Warning. Open this door with care. It might fall off."
- http://www.theaustralian.com.au/busines ... 89b31226e6

McLeod's focus on prices pushed Woolworths into doing a price war, but ultimately Coles was able to actually snipe customers from Woolworths and
With Coles, McLeod's strategy was mostly focused on tackling their competitor, Woolworths. The numbers show it too, they were able to out-perform Woolworths for 18 straight months, and they made more in half of 2013 then all of 2009.

For SEG, it's a bit different. Rather than fighting against one competitor, SEG is fighting against the amorphous threat of three indirect competitors and trying to brag that it's the only full-line, low-cost option out there (those competitors would be Publix, ALDI, and Walmart). It's going to be near-impossible to engage in price wars with two of those, and the third has a fleet of far better stores that has expanded out to many other states (something Winn-Dixie once did years ago). It would be hard to even coax shoppers back from those stores, like what they did with Woolworths. With those types of odds, the greater long-term strategy is muddled.

If Winn-Dixie can update its store base, restore its reputation for being an inexpensive and solid grocer, and bring back most of its stores into the future, then I would count that as a win. But I don't see that happening, nor can I see anything good for SEG when they stop pushing Down Down, because how long can they? If they're converting cast-off stores into other brands and closing pharmacies to stay alive, then they're just going to hollow out their store base and de-value a potential sale.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by mbz321 »

pseudo3d wrote:
storewanderer wrote:Down Down is probably the right strategy since so many of Winn Dixie's prices are higher than Publix. Plus the stores suck. Period.


If Winn-Dixie can update its store base, restore its reputation for being an inexpensive and solid grocer, and bring back most of its stores into the future, then I would count that as a win. But I don't see that happening, nor can I see anything good for SEG when they stop pushing Down Down, because how long can they? If they're converting cast-off stores into other brands and closing pharmacies to stay alive, then they're just going to hollow out their store base and de-value a potential sale.

As someone who frequently travels to Florida, Publix's prices are ridiculously high. Great stores with quality products which are clean, well run, and friendly staff, but it's really unaffordable to do a whole shopping trip..I usually end up popping into a SuperTarget or Walmart to pick up a few things. Winn-Dixie's are few and far between in South Florida and usually not on my route, but if they could just position themselves between Walmart (whose prices really aren't that low overall from my experiences) and Publix, I don't see why they can't make it...there is such little competition in the Florida market compared to where I am up in the Northeast. Aldi is a threat, but they really have plenty of room to grow in the state.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by storewanderer »

Publix is very well priced compared to, say, any west coast Safeway or Albertsons. But they are higher than what you would see at a Kroger (or a Wal Mart) in most other states down south. I have also noticed they engage in some very heavy zone pricing so it may be the locations you are going to are priced higher.

The problem Winn Dixie has is they were stuck in the trap of increasing prices to make up for falling customer counts. This is a horrible strategy and what they are doing with "Down Down" (and the fact they have actually stuck to "Down Down" for a year which is amazing to me given how often this company seems to keep changing strategy the past few years) is a slow attempt to reverse that. It will take years to fix their pricing but if they can slowly rebuild their business, it will work. They need to rebuild business, rebuild their perimeters and restock them, get more labor in the stores which is paid for by increasing sales and customer counts, etc. Is it working? Who knows.

I also agree Wal Mart's prices are really not that low at all. I was in there tonight and numerous items I was looking to purchase; packaged meat, milk, eggs, bread, produce, were all at everyday prices 15-20% higher than Smiths and ina couple cases a little bit higher priced than Safeway would be for a comparable item, though in other cases still 1/2 the Safeway price. So it does vary depending what competitor you are talking. I would guess Wal Mart is generally comfortably 10-20% below Winn Dixie's typical pricing (likely higher than the Down Down prices).

Down Down is a small subset of items. It reminds me of the preliminary stages of Kroger's price cutting program (Right Store Right Price) about 10-12 years ago. This is how it went. Started with a few items, then a few more, then a few more, then a few more... items came and went from it from time to time. Over time it got them a working strategy to be very competitively priced (below Wal Mart now, back then that was who they were trying to cut prices to the level of) on a pretty good number of popular items.
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Re: Winn-Dixie continues Down Down (the drain?)

Post by veteran+ »

Decades of missed opportunities!

A continuing departure from its winning formula demographics.

I have family and friends living in Naples, Tampa, Tallahassee, Orlando, Ocala, W. Palm Beach, Ft. Lauderdale, Miami and more.

Time is not on W/D's side. Their mistakes are too old and too deep to mend or heal. The capital needed to undo their mistakes and reverse what TIME has done is just not available.

W/D cannot do a better version or conquerable version of Publix.

W/D cannot do a better version of Walmart or Aldi.

They could have done an excellent version of Stater Brothers in carefully chosen demographics (and believe it or not those demographics have actually increased but not so much in areas like Miami). Even their hispanic format does not have the money required to rip those customers from their decades of loyalty to hispanic grocers.

Clearly the European experienced boss does not understand any of this and continues plowing forward with HIS vision in the WRONG market.
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