Dealers are watching the bank debt for Winn Dixie, noting that its stock price nearly halved last week from $20 to $11. The company's "B" paper traded in the 99 1/4 to 99 3/4 range early last week, a drop from levels around 100. Dealers said that Winn Dixie is not one of the most active names in the market, but there may be increased interest as investors move toward food credits for their stability. Richard McCook, cfo, did not return calls for comment. Micky Claire, head of public relations, also did not return calls.
Still, there was some surprise about the grocery chain ticking down, with dealers remarking that the sector's defensiveness is not as strong as it once had been. "We thought of investing in them, and now we're going to hold off," said a dealer. He speculated some grocers may be feeling the impact of transportation costs, although gas prices have not gone up significantly in recent months. Another dealer said that the grocery business remains highly competitive. "It's a thin margin business. If you don't have good supply chain relationships, you can get squeezed in a time like this," he said.
Last Tuesday, Moody's Investors Service changed the company's outlook to negative from stable based on increased uncertainty about the company's restructuring initiatives given competition within the grocery chain business. According to Elaine Francolino, analyst, the company took cost-cutting initiatives such as store closing and management cutting, but she added it hasn't positively impacted sales.