US grocery giant Winn-Dixie Stores is set to exit its Texas and Oklahoma operations by 26 June, after continued losses and a reduction of market share.
The operations consist of 71 stores in Texas, five stores in Oklahoma, and a distribution centre and dairy plant in Fort Worth.
The company is in final negotiations to sell the dairy plant and the majority of the stores to various buyers. As individual agreements for groups of stores are reached, stores will be notified. If buyers are not found for the remaining stores and distribution centre they will be closed. Approximately 5,300 employees will be affected. Severance packages will be offered to most employees who remain with the company through the closing of their facility. The transactions should be completed by the end of the company’s fiscal year, 26 June 2002.
In management’s best estimate, the transactions will result in a one-time non-recurring charge of about US$75m after-tax, or US$0.53 per diluted share. The cash in-flow from the sale of properties and liquidation of inventories is estimated at about US$90m, which can be used to pay down debt and/or reinvested in areas of the company that yield a greater return. The transactions are anticipated to decrease future annual sales by about US$630m per year, but positively impact annual net earnings by about US$31m or US$0.22 per diluted share. The financial results may vary based on the final negotiations with the buyers and the final determination of all the exit costs.
The company has obtained the approval of its bank group to exclude the non-recurring charge from the bank debt covenant calculations. Completions of the individual sales are subject to the satisfaction of customary conditions.
Al Rowland, president and CEO, stated: “The exiting of our Texas and Oklahoma operations will allow us to focus our management talent and capital in our core markets where we get a higher return for our shareholders. We appreciate the customer and associate loyalty we have experienced and are working to find buyers that would want to operate supermarkets in these locations.”