Winn-Dixie Files for Bankruptcy

Supermarket giant Winn-Dixie Stores Inc. (WIN), which has struggled to compete with Wal-Mart Supercenters and other grocery chains, said Tuesday it has filed for bankruptcy reorganization. Its shares tumbled.

The filing came less than two weeks after Winn-Dixie reported decreased revenues and increased losses from a year ago.

Winn-Dixie and 23 of its U.S. subsidiaries filed for Chapter 11 reorganization late Monday in U.S. Bankruptcy Court for the Southern District of New York (search), a company news release said.

The Jacksonville-based company also announced Tuesday it has secured an $800 million credit facility from Wachovia Bank to help pay for its reorganization, the release said. The credit facility, subject to court approval, replaces the company's previous $600 million credit line.

The company said its 920 Winn-Dixie stores in eight states mostly on the Southeast and the Bahamas are open. It has about 80,000 employees.

Winn-Dixie's shares fell 67 cents, or 45.6 percent, to 80 cents a share in pre-market trading Tuesday. Its 52-week high was $8.42 per share. In May 2002, the company shares were trading at $19.41 a share.

The company plans to use the reorganization to improve its operations and financial performance, but also to reduce its expenses and decide how to use its assets to make its stores more productive, the release said.

"This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores," said Peter Lynch, president and chief executive officer. The former Albertsons Inc. (ABS) executive was hired in December to turn Winn-Dixie around.

But Winn-Dixie said it will seek court approval to terminate the leases of two warehouses and about 150 stores that were closed previously, for an annual cash savings of approximately $60 million. It also plans to sell all of its remaining manufacturing operations to reduce expenses, the release said.

Winn-Dixie, one of the largest food retailers in the nation, reported recently that it lost $399.7 million, or $2.84 per share, for the three months ending Jan. 12, compared with a loss of $79.5 million, or 57 cents per share, for the same quarter last year.

Second-quarter revenues were $3.08 billion, compared with $3.23 billion a year ago.

Excluding $258 million in restructuring and income tax charges and $72.2 million in expenses related to discontinued operations, the company lost $69.4 million or 50 cents per share — exceeding the 11 cents per share loss forecast of analysts surveyed by Thomson First Call.

Tuesday's news release cited the company's problematic second quarter, which led to "subsequent credit downgrades from the major debt rating agencies" and "a tightening of trade credit from some of its vendors, which further reduced its cash availability."

After Winn-Dixie posted the second-quarter loss and saw its liquidity dip to dangerous levels, many analysts and financial experts believed the supermarket chain was headed for reorganization under Chapter 11.

Jason D. Whitmer, an analyst for FTN Midwest Research, had said before the filing that Winn-Dixie would seek bankruptcy protection.

"I like Peter Lynch, but he probably came in too late to fix a bigger problem," Whitmer said. "It has been like this for a while — a slippery slope. There hasn't been a lot of positive news."

For the first six months of this fiscal year, Winn-Dixie reported a net loss of $552.8 million or $3.93 per share on sales of $5.41 billion, compared with a net loss of $78.3 million or 56 cents per share on sales of $5.65 billion for the same period in 2004.

Both Standard & Poor's Rating Services (search) and Moody's Investor Services (search) have lowered Winn-Dixie's credit ratings. In early December, Winn-Dixie was dropped from the Standard & Poor's 500 index after recording the worst performance in 2003 in the select stock index.