Banking on the strength of the Jitney Jungle name and fending off rivals such as Wal-Mart Supercenters, Winn-Dixie executives are confident about the grocery store chain’s return to the Mississippi marketplace.
Last November, after 80 years of business as a one-time icon among Mississippi companies, Jitney Jungle Stores of America Inc. sold 68 grocery stores and 32 gas stations to Jacksonville, Fla.-based Winn-Dixie Stores Inc. for $85 million.
The transaction, which did not include inventory costs, represented stores located primarily in Mississippi, with a concentration in metro Jackson. In an ironic twist, Jitney purchased six Winn-Dixie stores in Jackson, Vicksburg and Hattiesburg in 1986 as the grocer pulled out of most of the state.
“This acquisition (was) a very good strategic fit for Winn-Dixie,” said Allen R. Rowland, Winn-Dixie president and CEO. “These stores will give us good market share in a new geographic area.”
Established in 1925, Winn-Dixie Stores Inc. (NYSE: WIN), one of the nation’s largest supermarket retailers, operates more than 1,000 stores in 14 states, mainly in the South, including about 450 in Florida. The family of Winn-Dixie founder William Davis owns 42% of the company.
Revenue from the acquired stores is expected to generate approximately $650 million in annual sales. The acquisition, which required bankruptcy court and governmental approval, was completed Jan. 11.
“We’ve cleaned up and filled up the stores and we’re ready for business,” said Mickey Clerc, vice president of public relations for Winn-Dixie. “They were in need of some cash to fill up the shelves inventory-wise, and we’ve been able to furnish that. We have some great, experienced people already working in them. We’ve been able turn the stores back into very nice, wonderful little neighborhood stores for people to shop in.”
Jitney had operated as a debtor-in-possession under Chapter 11 of the U.S. Bankruptcy Code since Oct. 12, 1999. At the time, the beleaguered grocery store chain was operating nearly 200 stores, including conventional stores such as Jitney Jungle and Delchamps, food-and-drug combination stores such as Jitney Premier and Delchamps Premier and discount stores, such as Sack & Save, 55 gas stations and 10 liquor stores.
Company officials cited reasons for filing for bankruptcy protection as integration challenges associated with the acquisition of Delchamps and affects from competition.
“Since Jitney cut back on inventory, parking lot maintenance and store upkeep, most communities viewed the news (of the sale to Winn-Dixie) positively,” said Bob Wilson, director of program services for the Mississippi Main Street Association.
Jitney was founded by Jackson natives William Henry Holman, Judson McCarty Holman and William Bonner McCarty in 1912 and opened its first store April 19, 1919 on East Capitol Street in Jackson.
Winn-Dixie retained a “substantial number” of Jitney employees, bringing in only “a few people from our operation where we needed replacement because … not everybody stayed,” Clerc said.
In the Jitney deal, Winn-Dixie purchased the exclusive right to the store names and will operate the newly acquired stores under the Jitney banner. Winn-Dixie also operates stores under the Thriftway and The City Meat Markets banners. Its larger Marketplace stores feature amenities such as pharmacies, photo labs and food courts.
“The Jitney name has been around for a long time,” Clerc said. “It’s familiar to people, and I think that, prior to the last few years, Jitney enjoyed an excellent reputation for good service and good food. We felt that it would be probably easier using an established name than it would be to try to re-enter Winn-Dixie into the area. Hopefully, that will be true.”
The Jitney stores are administered from the company’s New Orleans division and receive supervision and support from New Orleans and Montgomery division distribution centers.
It’s too early to talk numbers, Clerc said.
“We don’t break sales numbers down by area,” he said.
“We’ve had a pretty good size job converting the stores. We had to make sure the front end cash register system was compatible with ours, make sure all of our price files were coordinated, and that what was on the shelf was what it was supposed to be. It’s taken a good deal of work to make sure all store equipment was in good operating condition.”
Since Jitney Jungle filed for bankruptcy protection, the service level of product fell below the industry standard 95% to 96% service level, sometimes as low as 58%.
“Stock levels are back to 100%,” Clerc said. “We’re ready for business. The stores are full.”
Among other strategies, Winn-Dixie officials are counting on well-established, high quality, competitively priced store brands to lure shoppers back into Jitney stores. Among them: Astor/Thrifty Maid canned goods, Superbrand dairy items, Prestige all-natural ice cream, Arrow detergent, Chek drinks and WD brand beef.
“As far as I know, we are the only major supermarket chain in the country that still ages its beef like fine restaurants,” Clerc said. “That means that the beef that you buy — steaks, roast, for example — have been aged to the peak of tenderness and flavor. The WD brand beef represents a little more money for us on the front end because we have to withstand the cost of that process. But we have a wonderful reputation for being known as the ‘beef people’ and we believe we have the best beef in the supermarket industry.”
Winn-Dixie faces stiff competition from Wal-Mart (NYSE: WMT), the world’s largest retailer. With 4,000 stores — bigger than Sears, K-Mart and J.C. Penney combined — analysts attributed Jitney’s demise partly to being “slammed by Wal-Marts.”
And despite its apparent strength in numbers of stores, many industry analysts have viewed Winn-Dixie as distressed, primarily because it has been trying to streamline its own operations. Last June, the food giant tried to sell its Texas and Oklahoma operations to Kroger but was blocked by the Federal Trade Commission.
In April 2000, the board of directors of the company listed on the stock chart as No. 123 in the Fortune 500, and No. 158 in Hoover’s 500, adopted a restructuring plan that Rowland said is going well.
“We are pleased to see our efforts from restructuring starting to provide improved operating results,” Rowland said. “Identical store sales continue to be affected by retrofit construction disruption at 537 stores and the elimination of unprofitable sales departments.
Gross profit is improving as our central procurement operation begins to overcome the start-up process. Labor reduction from 217 completed retrofits helped reduce operating expenses. We continue to focus on building sales through improved stores operations. In addition … we welcome our new Jitney Jungle, Sack & Save and Pump & Save associates to the Winn-Dixie family.”
For FY2000, which ended in June, Winn-Dixie reported $13.7 billion in sales, a 3% increase over the previous year. The company listed 127,901 employees, a 3% increase over FY1999.
The day before the Jitney acquisition was official, Winn-Dixie reported $4 billion in sales for the 16 weeks ended Jan. 10, 2001, a 7.5% decrease compared to the same quarter last year.
The decrease was attributed to the elimination of unprofitable sales departments, such as melon bars, salad bars and dry cleaners, the reduction in the number of 24-hour stores and construction disruptions from numerous store modifications.
During the second quarter, 537 locations had construction in progress due to retrofit activity as part of the company’s restructuring pl
MBJ contributing writer Lynne Wilbanks Jeter at email@example.com or (601) 853-3967.