by Karen Brune Mathis
Managing Editor
Winn-Dixie Stores Inc. Chair Peter Lynch told shareholders Wednesday that the 2010 fiscal year “was a very challenging year for both our company and our industry.”
He reviewed the company’s store remodeling program, which he said has been slowed, and assured stockholders of his commitment to making whatever adjustments were necessary.
“I am confident that our strategy is sound,” he said at the Jacksonville-based company’s Westside headquarters.
At least 225 Winn-Dixie directors, staff and shareholders packed the conference room for the annual meeting.
One of those was George Schultze, managing member of New York-based Schultze Asset Management LLC, a Winn-Dixie stockholder.
Schultze has been critical of Winn-Dixie’s performance and executive compensation and said so.
Schultze made his comments as he put forth an advisory proposal for shareholders to vote on executive compensation every year.
“We believe this vote would provide the company’s board and management useful information about shareholder views on the company’s senior executive compensation,” states the proposal.
The proposal stems from the new “Say on Pay” rules from the Securities and Exchange Commission. They are called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Those rules enable shareholders to cast advisory votes on executive compensation and “golden parachute” agreements. The SEC seeks public comment until Nov. 18 and the rules would take effect for annual shareholder meetings starting Jan. 21.
Winn-Dixie disagrees with Schultze’s proposal and prefers a biennial vote, which is every two years.
Shareholders approved Schultze’s proposal Wednesday and also approved the other proposals: Election of directors; ratification of KPMG as the company’s independent public accounting firm for fiscal 2011; and the compensation for the executive officers and a biennial say on the pay advisory vote.
Because the federal rule on “say on pay” takes effect in January, shareholders will vote at next year’s annual meeting on the timing issue.
Schultze also said the board should do a bond offering to buy back stock, which closed Wednesday at $7.11, down from $14.01 on Nov. 10, 2008. Such a move would be expected to increase the value of the stock.
Schultze called for the company to spend money to buy back stock rather than award it to executives or spending it on store remodelings that might not provide a return on investment.
Schultze asked Lynch whether he thought the stock was undervalued. “We don’t comment on the value of stock,” responded Lynch. “The market dictates the value of the stock.”
Lynch also said that Winn-Dixie leadership feels “that our strategy is on track.”
Schultze asked Lynch why he thought the stock market disagrees, considering the price of the common stock’s “down 50 percent.”
“I can’t comment on why the market does what it does,” said Lynch, saying he could only comment on the company’s strategy. “Our strategy is sound, intact.”
After the almost 30-minute shareholders’ meeting concluded, Schultze said his organization is not advocating for a change in the Winn-Dixie management team.
He also said his group believes that Winn-Dixie “has significant ability to borrow money ... to buy back undervalued stock.”
Schultze said it was a “big feather in our cap” for his advisory proposal to have been approved by shareholders.
In a news interview following the meeting, Lynch said that shareholders will vote next year on the frequency of “say on pay” and whether it will be every one, two or three years.
Lynch also acknowledged the difficulties of the economy.
“The Southeast has been hit harder than other parts of the country,” he said. The company operates 485 stores in the five states of Florida, Georgia, Alabama, Mississippi and Louisiana.
Winn-Dixie filed for Chapter 11 bankruptcy reorganization in February 2005 and emerged in November 2006 as a new company with a new board of directors.
In July, Lynch announced that Winn-Dixie will close 30 stores, including one in Jacksonville, and eliminate about 120 jobs because of the economy. The company closed the store along Baymeadows Road near Florida 9A.
The closed stores were underperforming and had not been renovated. The company employs 47,000 people.
Lynch said the company has slowed its remodeling process. “When we come out (of the recession), we will be better able to compete in the future,” he said.
“We continue to take a hard look at our strategy,” he said. “We’ll continue to fine-tune our strategy going forward.”
Lynch said the company believes it needs to “grow top-of-line sales.”
As for the economy, Lynch said there were two levels of customers. The affluent customer has rebounded for the most part, while customers who face unemployment and salary cuts “continue to be challenged.”
The holiday season is looking up, at least a little.
“We expect it to be better than it was last year.”
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