Comments on: Winn-Dixie Stores: A Value Trap

by: Arthur Levin

Sun, 14 Jan 2007 13:08:42 +0000

Watching Winn Dixie proceed from Bankruptcy is forgetting that WINN must get more sales at a higher
net income, something they have failed to do. The new Balance sheet is good but their net income has failed to grow and Winn Dixie is now right back where they started before they entered their chapter 11 bankruptcy. All Winn Dixie has done is pay off their creditors with new pieces of paper called stock certificates.

by: Joe

Fri, 12 Jan 2007 22:35:01 +0000

Out of curiosity, where do you get the remodelings leading to a 42% increase in sales per sq. ft? That seems way too optimistic. Also, $11 billion in sales by 2011 is extremely high by almost any account - I’d go so far as to say it’s a near impossibility for this chain.

Finally, I spoke with someone familiar to the bankruptcy, and the projections from the disclosure statement were actually NOT written by management, but rather an independent consulting firm. Also, if anything they dramatically overstate the growth rate in EBIT and net income — they’re anticipating a 66% and 80% CAGR respectively (whoa!)

You may have a point that the company is relatively undervalued based on some price/sales metrics, but unless margins end up near industry norms (a possibility but not certainty), that is meaningless.

by: E S

Fri, 12 Jan 2007 22:20:27 +0000

This story is simple. Upside 1: Trading at 10% of sales while grocers trade at 50%. Upside 2: Sales are at a depressed $280/sq ft and once stores are remodeled will be closer to $400/sq ft, which equates to $11 billion in sales. That, at 50%, is $5.5 billion, or $100/sh. Not bad over the five year period it will take them to remodel the store base.

As an aside: Don’t pay attention to management projections in the disclosure statements. These were published prior to management’s options being priced, a huge incentive to low-ball the figures.

by: Value Investing News

Fri, 12 Jan 2007 15:15:08 +0000

Winn-Dixie Stores: A Value Trap…

Joe over at JoeCit.com touches on the fact that not all “special situations” are universally good investments.
…

by: brad h

Fri, 12 Jan 2007 01:54:31 +0000

I don’t even see WINN looking undervalued. Perhaps in my cursory look I missed a lot that will change during the bankruptcy and organization, but I see a company that, if anything, is trading above its real value.