Wince Dixie

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You don't need a feel-good flick to tell you that Winn-Dixie (OTC: WNDXQ) is a dog. The struggling supermarket chain filed for bankruptcy in the wee hours yesterday, even as Because of Winn-Dixie wins over theater audiences everywhere.

The grocery business can be cruel. While a lot of the stories on the sector's shortcomings seem to be the result of the labor struggles that hurt Safeway (NYSE: SWY), Kroger (NYSE: KR), and Albertson's (NYSE: ABS) out in California,Winn-Dixie's reorganization filing proves things are tough on both sides of the Mason-Dixon line.

Running a supermarket was already low-margin drudgery before Wal-Mart (NYSE: WMT) came in with its grocery-stocked superstores forcing prices even lower. It's not just the world's largest retailer that's causing problems, though. In Winn-Dixie's home state of Florida, the chain is routinely smacked down by the more consumer-friendly Publix.

It's been a gradual -- yet definite -- decline for Winn-Dixie over the years. Seven years ago, with the stock trading close to $40, we featured it critically in our Daily Trouble space. Earlier this month Stephen Simpson took a closer look at the company after a horrendous quarter. Posting its sixth-straight quarter of declining comps, with negative earnings and cash flow, Winn Dixie investors should not confuse this value trap with the turnaround potential of a true value stock, warned Stephen.

With trading in shares of Winn-Dixie suspended yesterday on the way to being delisted, Stephen nailed this bear trap.

But will bankruptcy save Winn-Dixie? The filing is simply a crutch. Winn-Dixie will come back, with fewer stores, but as long as it doesn't come back with a dramatic makeover that places it on even footing with either Publix (in appeal) or Wal-Mart (in pricing), it may as well just pack it in. Let the market remember that while Because of Winn-Dixie has a happy ending -- the chain may not.

Want to bag some more of Winn-Dixie's headlines?

• Read about Winn-Dixie's dreary quarterly report.
• Go retro with the 1998 Daily Trouble obituary on the grocer in decline.
• Is it just coincidence that the chain's CEO hire in December was named Lynch?
• Still hungry? Check out our Recipes discussion board.

Longtime Fool contributor Rick Munarriz does most of his shopping at Publix, even though Winn-Dixie is closer to his home. He does not own shares in any company mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.