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Shopping Centers Today -> May 2004
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ANALYSTS WARN OF WINN-DIXIE CLOSINGS
BY IAN RITTER
Analysts predict that Winn-Dixie Stores could close hundreds of supermarkets as a result of both poor sales and an overhaul that is now under way.
The company’s same-store sales fell 6.7 percent last year from the year before. Jacksonville, Fla.-based Winn-Dixie, which has a total of 1,070 supermarkets in 12 states and the Bahamas, points to heightened competitiveness in the grocery business. Wal-Mart’s Supercenters, in particular, have hit hard, analysts say.
Both Moody’s and Standard & Poor’s downgraded Winn-Dixie.
Winn-Dixie says it is remodeling stores and remarketing itself in hopes of reviving sales. The chain has hired a new CFO and also a chief development officer.
Winn-Dixie had announced no closings at press time, (its first-quarter results were scheduled for release on April 30.) but analysts say they are likely to happen. “We believe [Winn-Dixie’s] announced restructuring is likely to result in significant store closures, potentially in the hundreds,” said a Morgan Stanley report.
Morgan Stanley identified Equity One as the REIT with the highest Winn-Dixie exposure. The firm has 18 of the stores in its portfolio. New Plan Excel Realty Trust is a close second, with 17. Of Equity One’s 190 centers, 128 are grocery-anchored, compared with some 60 percent of New Plan’s 400 centers.
Morgan Stanley speculates that Winn-Dixie will not file for Chapter 11, which means it would have to pay lease-termination fees for any closings.
But landlords could still be hurt. “If a closed supermarket is not quickly replaced with another store of similar quality, the center’s occupancy can quickly erode as sales declines force in-line tenants to close,” Morgan Stanley said.
The investment bank also speculates that Winn-Dixie will not be the only grocery chain closing stores in the face of competition from Wal-Mart.
Though he would not talk about Winn-Dixie specifically, Brad M. Hutensky, president and principal of The Hutensky Group, a Hartford, Conn.-based shopping center owner, said landlords need to be aware of struggling tenants.
“Any landlord should really look at what [options they have] with the spaces, and what other tenants would take that space,” he said.
Developers Diversified Realty Corp. is sanguine about the issue. “We’re always looking at opportunities to add value to out portfolio and replace underperforming tenants or categories,” said Scott R. Schroeder, a DDR spokesman. The company has about 360 centers, of which 55 percent are grocery-anchored. Of these, 10 are Winn-Dixies.
Winn-Dixie executives could not be reached for comment.
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