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Winn-Dixie Serves Up A Respectable Quarter

Posted: Oct 30, 2008 14:11 PM by Glenn Curtis

Tickers in this Article: KR, WINN, WMT

Certain stocks have been unduly punished in this market, and grocery chain Winn-Dixie (Nasdaq:WINN) is one of them. The Florida-based company has a good story despite the beating its shares have taken. (Learn more about retail stocks by reading Analyzing Retail Stocks.)

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First-Quarter Results
After the October 27 close, Winn-Dixie reported its first-quarter numbers, but I’m not sure many people were paying attention. After all, the Dow shed more than 200 points that day, and most of us were licking our wounds. However, its results and the release deserve more than a passing glance.

The company posted a loss of 4 cents a share in the period ended September 17. Obviously, it would have been nice to show a profit. But given that the Street was expecting a loss of 14 cents a share, it could win kudos from the sell side (i.e. upbeat research). The positive news could also help stave off some tax-loss selling. In that sense, the quarterly results came at a very good time.

Winn-Dixie also managed to show a 3% same-store sales increase in the quarter. That’s impressive for a few reasons. Consumers aren’t exactly spending big bucks these days, so positive comps can be considered an accomplishment. Second, while it wasn’t going up against some crazy-difficult comparison, it was going up against a positive comp. Last year’s Q1 release reveals that it posted a 0.2% increase in same-store sales (from continuing ops).

The company's comps look competitive when compared with some other big boys in the business. Wal-Mart (NYSE:WMT) turned in a 5% same-store sales increase in its recent quarter, including fuel sales. Meanwhile, Kroger (NYSE:KR) disseminated comments on its Q3 in mid-October, saying "Through the first eight weeks of the third quarter...identical-supermarket sales growth continues to trend above 5% without fuel."

One final plus is that insider information reveals two different directors purchased shares in the company in August. James Olson bought 1,000 shares, and Charles Garcia purchased 3,000. I suspect these executives hopped on board the Winn-Dixie train because of potential to put some coin in their pockets. It's good to see that some execs think the stock is worth purchasing. (Read how insider buying can help you pick the right stocks at Uncovering Insider Trading.)

The Flip Side
The consumer remains fickle, the competition tough, and a slowing economy could have an adverse impact on results going forward. While I think the shares are a good deal around $14.50, there’s no guarantee that others will agree.

Bottom Line
Winn-Dixie's Q1 results brought some good news. Although some risks to the equation remain, the stock has the potential to trade higher in the coming year.

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

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