The action alleges that throughout the applicable period, Winn-Dixie was suffering from substantial undisclosed long-term business and financial problems. The company was unable to market its Winn-Dixie brand competitively, it was unable to reduce excess expenses when needed, it recorded the carrying value of its long-lived assets at inflated levels, and maintained insufficient reserves for self-insurance. In addition, Winn-Dixie allegedly had no credible or workable marketing plan in place which would allow it to compete effectively with other large supermarket chains and discounters, such as Publix and Costco. Nevertheless, throughout the period, defendant Allen Rowland, and later defendant Frank Lazaran, Rowland's successor as CEO, continued to tell investors that Winn-Dixie was following through on its strategic marketing plan. As evidence of its success and financial health, Winn-Dixie declared cash dividends throughout the period.

In June 2003, Rowland stepped down as CEO and received $7.7 million in severance pay, supposedly for improving store operations and enhancing the company's financial condition. When Lazaran replaced him, unbeknownst to the investing public, Lazaran allegedly ordered his senior management to conduct a 'comprehensive review' of Winn-Dixie's 'entire business model.' Even while this plan to restructure the company's business model was underway, Winn-Dixie and Lazaran continued to tell the public that the company was successfully executing its sales and marketing plan, with declared dividends to prove it. WD stock price rose throughout the period on this encouraging news.

On January 30, 2004, before the opening of trading, Winn-Dixie and Lazaran stunned the public with disastrous financial results for the company's second fiscal quarter ended January 7, 2004. WD sales were down over a quarter of a billion dollars from the prior year period. The company had sustained a loss of $79.5 million, or $0.57 per share. The company also announced that it would take a 'series of major actions' to change the way the company does business, including, brand positioning for its Winn-Dixie brand, $100 million in expense reduction by July 1, 2004, in-depth analysis of the company's core markets, market share, and competitive positioning, an 'image makeover program,' and an initiative to 'reengineer' organizational effectiveness and accountability. In addition, the company announced that it would recognize a $36.4 million charge to earnings for impairment to its long-lived assets, namely, its store locations, and would add $21.4 million to its reserves for self-insurance expense, which included additional reserves for workers' compensation claims. WD also cut its dividend indefinitely. The market reacted swiftly to the news-- Winn-Dixie's stock plunged from $9.09 to $6.56 per share on volume of 24.6 million shares.