I gotta admit I did a double take. The press release read: "Winn-Dixie Appoints Peter Lynch President and CEO."
No, it's not that Peter Lynch.
Supermarket chain Winn-Dixie (NYSE:WIN) ousted its current CEO Frank Lazaran and replaced him with a namesake of the all-star investor. It's a shake-up that probably wasn't completely unexpected -- in light of the grocer's recent poor performance. The company has been in a tailspin for the past six years, losing more than 85% of its value, and there seems to be little sign of the malaise abating.
Peter Lynch comes to Winn-Dixie from competitor Albertson's (NYSE:ABS), the No. 2 grocery chain that has itself only recently rebounded. Supermarkets and grocery stores in general, including Kroger (NYSE:KR) and Safeway (NYSE:SWY), have been feeling the pinch from labor disputes that upset the apple cart. Add in discount retailers moving onto their turf, and one sees a picture of supermarket turmoil.
Earlier this year, Winn-Dixie announced a turnaround plan that included strengthening the brand, cost cutting, market analysis, and store remodeling. But when Lazaran said, "This company needs to change," he probably didn't have his own job in mind. Yet with the chain trading below book value of $5.40 per share, declining revenues of $2.3 billion, and a cash-flow-negative status, the board of directors undoubtedly felt the fish was rotting from the head down. The larger-than-expected $153 million loss in first-quarter results, coupled with the decision for the company to be dropped from the S&P 500 stock index, only hastened his departure.
While at Albertson's, Lynch presided over an asset rationalization initiative as well as a $500 million reduction program that led to an 18% increase in net income, a 15% increase in sales, and earnings per share that would have been in line with analyst expectations had it not been for the devastating hurricanes that swept through the Southeast this past summer.
He'll have his work cut out for him at Winn-Dixie. The grocer has been losing market share to the likes of Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST), and privately held Publix, and it expects to close 124 stores by next April. It's sure to be a period of protracted pain.
Whether Peter Lynch the grocer can turn in results similar to those of Peter Lynch the mutual fund superstar remains to be seen.
Fool contributor Rich Duprey is easily distracted by bright shiny objects. He owns shares of Wal-Mart but does not own any of the other stocks mentioned in this article.
