================================================================================
                                  United States
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-K

(Mark One)
    [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended June 24, 1998

                                       OR

    [ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
        For the transition period from _______________ to _______________

                          Commission File Number 1-3657
                          -----------------------------
                             WINN-DIXIE STORES, INC.
             (Exact name of registrant as specified in its charter)

                        Florida                               59-0514290
            (State of other jurisdiction of                  (IRS Employer
             incorporation or organization)                Identification No.)

       5050 Edgewood Court, Jacksonville, Florida               32254-3699
        (Address of  principal executive offices)               (Zip Code)

                            Area Code (904) 783-5000
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
      Title of each class             Name of each exchange on  which registered
 Common Stock Par Value $1.00 Per Share         New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  registrant,  based upon the closing  sale price of common stock on June 24,
1998,   as  reported  on  the  New  York  Stock   Exchange   was   approximately
$4,295,684,979.  Shares of  common  stock  held by each  executive  officer  and
director and by principal  shareholders  filing  Schedules 13D and 13G have been
excluded in that such persons may be deemed to be affiliates.  The determination
of affiliate  status is not  necessarily  a conclusive  determination  for other
purposes.

     As of June 24,  1998,  registrant  had  outstanding  148,530,736  shares of
common stock.

     DOCUMENTS  INCORPORATED BY REFERENCE:  Portions of the  registrant's  Proxy
Statement in respect to the 1998 Annual Meeting of Shareholders are incorporated
by reference in Part III hereof, as more specifically described herein.



<PAGE>


                                TABLE OF CONTENTS

                                                                           Page
                                                                          Number

PART I

Business....................................................................   1

Properties..................................................................   5

Legal Proceedings...........................................................   6

Submission of Matters to a Vote of Security Holders.........................   6

Executive Officers of the Registrant........................................   7

PART II

Market for the Registrant's Common Equity and Related Shareholder Matters...   8

Selected Financial Data.....................................................   8

Management's Discussion and Analysis of Financial Condition and Results
 of Operations..............................................................   8

Quantitative and Qualitative Disclosure About Market Risk...................   8

Financial Statements and Supplementary Data.................................   8

Changes in and Disagreements with Accountants on Accounting and Financial
 Disclosure.................................................................   8

PART III

The information required by Part III is hereby incorporated by reference
to Winn-Dixie Stores, Inc.'s definitive proxy statement to be filed on or
before August 26, 1998, in connection with its Annual Meeting of
Shareholders................................................................   9

PART IV

Exhibits, Financial Statement Schedules and Reports on Form 8-K.............   9

Signatures..................................................................  13


<PAGE>


                                     PART I

ITEM 1:  BUSINESS

General

         Winn-Dixie Stores,  Inc., organized in Florida on December 26, 1928, is
a major  food  retailer  with  1,168  stores in  fourteen  states and the Bahama
Islands.  According to published  reports of sales at June 24, 1998, the Company
is one of the nation's largest supermarket retailers.

         All of the Company's  subsidiaries except Bahamas  Supermarkets Limited
are  wholly-owned.  Except  where  the  context  indicates  otherwise,  the term
"Company"  includes  Winn-Dixie  Stores,  Inc.  and  all  of  its  subsidiaries,
collectively.

         Financial  information  on industry  segments  and lines of business is
omitted  because,   apart  from  the  principal  business  of  operating  retail
self-service food stores, the Company has no other lines of business or industry
segments.

Store Formats and Business Strategy

         The  business  of the  Company  is the  operation  of a chain of retail
self-service food stores which sell groceries,  meats,  seafood,  fresh produce,
deli/bakery, pharmaceuticals and general merchandise items. The Company's stores
offer broad lines of merchandise,  including  nationally  advertised and private
label brands and unbranded merchandise (principally meats, seafood and produce),
and  generally  operate  on the basis of  competitive  pricing.  Food items sold
include dry groceries,  dairy products, baked goods, meats, poultry, fish, fresh
fruit, vegetables, frozen foods and other items commonly marketed by retail food
stores.  The Company's stores also sell many general  merchandise items, such as
magazines,  soaps, paper products,  health and cosmetic  products,  hardware and
numerous small household items.  Many locations have ancillary  departments such
as pharmacies,  photo labs, dry cleaners and in-store  banks.  At June 24, 1998,
the Company  operated  1,168 retail stores of which 427 were located in Florida,
126 in North Carolina,  119 in Georgia, 101 in Alabama, 77 in South Carolina, 77
in Louisiana,  67 in Texas, 61 in Kentucky, 35 in Virginia, 23 in Tennessee,  20
in Ohio, 15 in Mississippi,  13 in the Bahamas,  5 in Oklahoma and 2 in Indiana.
Such stores were operated  under the names of  "Winn-Dixie"  (405),  "Winn-Dixie
Marketplace" (726), "Thriftway" (26), "The City Meat Markets" (10) and "Buddies"
(1).

Support and Other Services

         The following  table shows the locations of the Company's  distribution
centers and its  manufacturing  and processing  plants, as well as the principal
products produced in the plants:




                                       1
<PAGE>



ITEM 1:  BUSINESS, continued

LOCATION                          FACILITIES
-------------------------------------------------------------------------------

ALABAMA              Montgomery       Two distribution centers; Plants:  milk
                                      bottling and frozen
                                      pizza

FLORIDA              Jacksonville     Two distribution centers and a general
                                      merchandise distribution center; Plants:
                                      detergents; paper bags; and coffee, tea
                                      and spices
                     Madison          Plant:  meat processing
                     Miami            Distribution center; Plant:  milk bottling
                     Orlando          Distribution center
                     Bartow           Plant:  egg processing
                     Plant City       Plants:  ice cream and milk bottling
                     Pompano          Distribution center
                     Sarasota         Distribution center
                     Tampa            Distribution center

GEORGIA              Atlanta          Distribution center
                     Fitzgerald       Plants:  jams, jellies, mayonnaise, salad
                                      dressing, peanut butter and condiments;
                                      canned and bottled carbonated beverages
                     Gainesville      Plants:  oleomargarine; natural cheese
                                      cutting and wrapping, processed cheese and
                                      pimento cheese
                     Valdosta         Plants:  crackers and cookies; and snacks

KENTUCKY             Louisville       Distribution center

LOUISIANA            New Orleans      Distribution center
                     Hammond          Distribution center; Plant:  milk bottling

NORTH CAROLINA       Charlotte        Distribution center
                     Raleigh          Distribution center
                     High Point       Plants:  milk bottling and cultured
                                      products

SOUTH CAROLINA       Greenville       General merchandise distribution center; 
                                      Plants: ice cream and milk bottling

TEXAS                Fort Worth       Distribution center and a general
                                      merchandise distribution center; Plant:
                                      milk bottling

BAHAMAS              Nassau           Distribution center



                                       2
<PAGE>


ITEM 1:  BUSINESS, continued

         An insignificant  portion of the production of the manufacturing plants
is sold to others.

         Types of  products  produced  by the Company for sale in its stores are
described  above.  Services  provided by the Company  such as check  cashing are
incidental to the total business.

           The Company has not publicly  announced,  or  otherwise  made public,
information  about any new product or industry  segment  which would require the
investment of a material  amount of the assets of the Company or which otherwise
is material.

         Sources of available  raw materials are factors which do not affect the
Company  in any  different  manner  than they  affect  other  manufacturers  and
processors of the goods identified.

         Patents  and  trademarks  owned  by the  Company  are  not of  material
importance to its operations.

         Seasonality  does not  materially  affect the  business of the Company.
However,  due to the  influx of winter  residents  to the  Sunbelt,  Florida  in
particular,  and  increased  purchases  of food items for the  Thanksgiving  and
Christmas holiday seasons,  there is a seasonal sales increase during the period
of November - April each fiscal year.

         The Company and other food  retailers have no unusual  working  capital
requirements.

         The  business  of the Company is not  dependent  upon a single or a few
customers. The Company does not sell goods or services in an amount which equals
10 percent or more of the Company's consolidated sales to any single customer or
group of customers under common control or to any affiliated group of customers.

         Backlog ordering is not a factor in the business of the Company.

         No portion of the  business of the Company is subject to  renegotiation
of profits or  termination of contracts or  subcontracts  at the election of any
government.

Marketing and Competition

         In all areas in which the  Company  operates,  the  business  is highly
competitive  with  local  and  national  food  chain  stores,  as  well  as with
independent  stores  and  markets.  Many  factors  enter  into the  competition,
including price, quality of goods and services, product mix and convenience.







                                       3
<PAGE>


ITEM 1:  BUSINESS, continued

         The retail food industry is extremely competitive.  Each division faces
somewhat different competitive  conditions.  The following table lists the major
competitors for each division.

Division                                  Major Competitors

Jacksonville     Publix, Albertson's, Wal-Mart Supercenter, Food Lion, Super K
Charlotte        Food Lion, Harris-Teeter, Bi-Lo, Super K, Publix
Raleigh          Food Lion, Harris-Teeter, Kroger, Hannaford, U-Krops
Bahamas          Super Value
Tampa            Publix, Albertson's, Food Lion/Kash N Karry, Wal-Mart
                  Supercenter, U-Save
Miami            Publix, Sedano's, Albertson's
Fort Worth       Kroger, Albertson's, Minyards, Randall's, Wal-Mart Supercenter,
                  H.E. Butt
Midwest          Kroger, Wal-Mart Supercenter, Biggs, Meijers
Atlanta          Kroger, Ingles, A&P, Cub, Publix, Harris-Teeter, Wal-Mart
                  Supercenter
Orlando          Publix, Albertson's, Goodings, Food Lion, Wal-Mart Supercenter,
                  Super K
Montgomery       Bruno, Delchamps, Wal-Mart Supercenter
New Orleans      Delchamps, Schwegmans, Albertson's

         Additionally,  local chains and  wholesaler-supported  independents are
well represented in all regions.

         Winn-Dixie is considered a major  competitor in all geographic areas in
which it competes.

         The  Company  did not  spend a  material  amount  on  Company-sponsored
research and development activities or on Company-sponsored  research activities
relating to the  development  of new products,  services or  techniques,  or the
improvement of existing products, services or techniques during any of the years
in the three-year period ended June 24, 1998.

Government Regulation

         The  Company's  compliance  with  federal,  state and local  provisions
regulating  the  discharge  of  materials  into the  environment,  or  otherwise
relating to the protection of the  environment  has not had, and is not expected
to have, a material effect on its capital expenditures,  earnings or competitive
position.

Associates

         At the end of fiscal 1998, the Company had 57,000  full-time and 82,000
part-time associates.



                                       4
<PAGE>



ITEM 1:  BUSINESS, continued

Bahamas

         All sales of the Company are to customers  within the United States and
the Bahama Islands.  The Company exports an insignificant  amount of merchandise
to its  subsidiaries  in the  Bahamas  which  operate 13 retail  food  stores as
outlined above.

ITEM 2:  PROPERTIES

Stores

         All of the  retail  stores  operated  by the  Company  are on  premises
occupied on a rental basis.  See "Note 8 of the Notes to Consolidated  Financial
Statements," page F-21, included herein.

Support Properties

         The warehousing and distribution centers are rented under leases due to
expire as follows:  Montgomery  (perishable) - 2023;  Raleigh - 2023;  Orlando -
2022;  Atlanta  -  2019;  Charlotte  -  2019;  Jacksonville  (Edgewood)  - 2019;
Louisville - 2019; Sarasota - 2019; Miami - 2018; Montgomery - 2018; New Orleans
-  2018;  Tampa -  2018;  Fort  Worth  -  2016;  Hammond  -  2016;  Jacksonville
(Commonwealth)  - 2011;  Nassau - 2011 and Pompano - 2003.  All of these contain
renewal options, which vary from lease to lease.

           An expansion  and  refurbishment  of the  corporate  headquarters  in
Jacksonville, Florida is under construction.

           A new  distribution  center  and  retail  support  center  is in  the
planning stages for the Jacksonville, Florida division. The new facility will be
leased. The existing  Jacksonville  (Commonwealth)  distribution  center will be
converted to a general merchandise distribution center.

         The new distribution  center for our Raleigh,  North Carolina  division
and the new perishable  warehouse for our Montgomery,  Alabama  division are now
open and  operating.  With the  opening  of the new  distribution  center in the
Raleigh,  North  Carolina  division,  we are converting  the  Greenville,  South
Carolina  warehouse  into a general  merchandise  distribution  center.  The old
distribution center in Raleigh was sold.

         The Deep South  plant in  Orlando,  Florida  was closed in 1995 and the
property was sold during 1998.



                                       5
<PAGE>


ITEM 2:  PROPERTIES, continued

         The Company's  Valdosta cracker and cookie,  and snacks bakeries;  Fort
Worth dairy plant;  Madison meat processing plant; Plant City ice cream and milk
bottling plants; Miami reclaim center; and Gainesville  oleomargarine and cheese
processing and packaging plants are owned in fee.

         The Company's Jacksonville coffee, tea and spices processing, detergent
and bag plants;  Montgomery milk bottling plant; and Hammond milk bottling plant
are situated at the leased  warehousing  and  distribution  center  locations in
those cities.  The Bartow egg  processing  plant;  Greenville ice cream and milk
bottling plants and general  merchandise  distribution  center;  High Point milk
bottling and cultured  products  plants;  Miami milk bottling plant;  Montgomery
frozen pizza plant; and the Fitzgerald jam, jellies, mayonnaise, salad dressing,
peanut butter and condiments and canned and bottled  carbonated  beverage plants
are rented under leases.

         All of the above support  properties  are considered to be in excellent
condition.

ITEM 3:  LEGAL PROCEEDINGS

         There are  pending  against  the Company  various  claims and  lawsuits
arising in the normal course of business, including suits charging violations of
certain civil rights laws and various proceedings  arising under federal,  state
or local regulations protecting the environment.

         Among the suits charging violations of certain civil rights laws, there
are  actions  which  purport  to  be  class  actions  and  which  allege  sexual
harassment,  retaliation  and/or  a  pattern  and  practice  of  race-based  and
gender-based   discriminatory   treatment  of  employees  and  applicants.   The
plaintiffs seek, among other relief,  certification of the suits as proper class
actions,  declaratory  judgment that the Company's practices are unlawful,  back
pay,  front pay,  benefits and other  compensatory  damages,  punitive  damages,
injunctive relief and reimbursement of attorneys' fees and costs. The Company is
committed to full compliance with all applicable  civil rights laws.  Consistent
with this commitment,  the Company has firm and long-standing  policies in place
prohibiting discrimination and harassment. The Company denies the allegations of
the various complaints and is vigorously defending the actions.

         While the  ultimate  outcome of  litigation  cannot be  predicted  with
certainty, in the opinion of management the ultimate resolution of these actions
will not have a material adverse effect on the Company's  financial condition or
results of operations.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters  submitted to a vote of security  holders  during
the quarter ended June 24, 1998.



                                       6
<PAGE>


Executive Officers of the Registrant

         Set  forth  below  is  certain  information  concerning  the  executive
officers of the Company:

<TABLE>
<CAPTION>
                                                                                   YEAR                 YEAR FIRST
                          AGE IN                                                 APPOINTED               EMPLOYED
                         YEARS AT                                               TO CURRENT                  BY
NAME                     06-24-98              OFFICE HELD                       POSITION               WINN-DIXIE

<S>                         <C>         <C>                                        <C>                     <C>
A. Dano Davis               53          Chairman of the Board                      1988                    1968
                                          and Principal Executive Officer
James Kufeldt               59          President                                  1988                    1961
C. H. McKellar              60          Executive Vice President                   1988                    1957
H. E. Hess                  58          Senior Vice President                      1988                    1958
R. A. Sevin                 55          Senior Vice President                      1997                    1961
C. E. Winge                 53          Senior Vice President                      1988                    1963
R. P. McCook                45          Financial Vice President                   1984                    1984
                                          and Principal Financial Officer
L. H. May                   53          Vice President                             1989                    1964
E. E. Zahra, Jr.            51          Vice President and General Counsel         1995                    1995
D. H. Bragin                54          Treasurer and Principal Accounting         1985                    1961
                                          Officer
R. J. Brocato               54          Vice President                             1993                    1963
W. C. Calkins               59          Vice President                             1987                    1958
J. W. Critchlow             51          Vice President                             1988                    1967
R. J. Ehster                57          Vice President                             1983                    1958
J. D. Fitzgerald            48          Vice President                             1998                    1970
D. G. Lafever               49          Vice President                             1990                    1966
R. C. Lunn                  46          Vice President                             1997                    1969
H. E. Miller                66          Vice President                             1984                    1956
L. J. Sadlowski             57          Vice President                             1983                    1961
J. A.  Schlosser            49          Vice President                             1997                    1967
M. A. Sellers               44          Vice President                             1997                    1973
</TABLE>

         All of the officers  listed  above,  with the exception of E. E. Zahra,
Jr.,  have been  employed for the past five years in either the same capacity as
listed,  or in a position  with the Company  which was  consistent in occupation
with the present  assignment.  Prior to becoming General Counsel,  Mr. Zahra was
the  managing  partner of the  Jacksonville  office of LeBoeuf,  Lamb,  Greene &
MacRae L.L.P., an international law firm.

         Officers are elected annually by the Board of Directors and serve for a
one-year  period  or until  their  successors  are  elected.  No  officers  have
employment contracts with the Company.




                                       7
<PAGE>


                                     PART II

ITEM 5:  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
         MATTERS

         The principal  market on which the Company's  common stock is traded is
the New York  Stock  Exchange.  The number of record  holders  of the  Company's
common stock as of June 24, 1998 was 51,997.

         Information  required  by this  Item  concerning  sales  prices  of the
Company's  common stock and the frequency and amount of dividends is in "Note 12
of the  Notes to  Consolidated  Financial  Statements,"  on page  F-25  included
herein.

ITEM 6:  SELECTED FINANCIAL DATA

         The information required by this Item is on page F-1 included herein.

ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The information required by this Item is on page F-2 included herein.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The information required by this Item is on page F-18 included herein.

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

         Financial  statements and supplemental data are set forth in the "Index
to Consolidated  Financial  Statements,  Supporting  Schedules and  Supplemental
Data" on page 15 included herein.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         There have been no disagreements on accounting and financial disclosure
between  the  Company and its  auditors  within the 24 months  prior to June 24,
1998.



                                       8
<PAGE>


                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11: EXECUTIVE COMPENSATION

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The  information  required  by these Items are  incorporated  herein by
reference to the Company's definitive proxy statement to be filed on, or before,
August 26, 1998, in connection with its Annual Meeting of Shareholders.


                                     PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)    Financial Statements and Financial Statement Schedules:

                (1)      Financial Statements:

                         See  "Index  to  Consolidated   Financial   Statements,
                         Supporting  Schedules and Supplemental Data" on page 15
                         included herein.

                (2)      Financial Statement Schedules:

                         See  "Index  to  Consolidated   Financial   Statements,
                         Supporting  Schedules and Supplemental Data" on page 15
                         included herein.

                (3)      Exhibits:

                         Certain of the following exhibits which have heretofore
                         been filed with the Securities and Exchange  Commission
                         under  the  Securities  Act of 1933  or the  Securities
                         Exchange Act of 1934 and which are  designated in prior
                         filings  as noted  below,  are hereby  incorporated  by
                         reference and made a part hereof:



                                       9
<PAGE>


ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
         continued

<TABLE>
<CAPTION>
Exhibit
Number                  Description of Exhibit                           Incorporated by Reference From

<S>            <C>                                             <C>     
3.1            Restated  Articles  of  Incorporation  as       Previously  filed as Exhibit  3.1 to Form 10-K for
               filed  with  the  Secretary  of  State of       the year ended  June 30,  1993,  which  Exhibit is
               Florida.                                        herein incorporated by reference.

3.1.1          Amendment  adopted  October 7,  1992,  to       Previously  filed as  Exhibit  3.1.1 to Form  10-K
               Restated Articles of Incorporation.             for the year ended June 30,  1993,  which  Exhibit
                                                               is herein incorporated by reference.

3.1.2          Amendment  adopted  October 5,  1994,  to       Previously  filed as  Exhibit  3.1.2 to Form  10-Q
               Restated Articles of Incorporation.             for the  quarter  ended  January 11,  1995,  which
                                                               Exhibit is herein incorporated by reference.

3.1.3          Amendment  adopted  October 1,  1997,  to       Previously  filed as  Exhibit  3.1.3 to Form  10-Q
               Restated Articles of Incorporation.             for the quarter ended  September  17, 1997,  which
                                                               Exhibit is herein incorporated by reference.

3.2            Restated  By-Laws  of the  Registrant  as       Previously  filed as Exhibit  3.2 to Form 10-K for
               amended through June 21, 1995.                  the year ended  June 28,  1995,  which  Exhibit is
                                                               herein incorporated by reference.

9.1            Agreement  of   Shareholders  of  D.D.I.,       Previously  filed as Exhibit  9.1 to Form 10-K for
               Inc. (formerly Vadis  Investments,  Inc.)       the year ended  June 30,  1993,  which  Exhibit is
               dated April 19, 1989.                           herein incorporated by reference.

10.1           Annual  Officer  Incentive   Compensation       Previously  filed as Exhibit 10.2 to Form 10-K for
               Plan as amended, effective June 17, 1991.       the year ended  June 30,  1993,  which  Exhibit is
                                                               herein incorporated by reference.
</TABLE>




                                       10
<PAGE>


ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
         continued

<TABLE>
<CAPTION>
Exhibit
Number                  Description of Exhibit                           Incorporated by Reference From

<S>            <C>                                             <C>     
10.2           Long-term Officer Incentive  Compensation       Previously  filed as Exhibit 10.3 to Form 10-K for
               Plan as amended, effective June 27, 1991.       the year ended  June 30,  1993,  which  Exhibit is
                                                               herein incorporated by reference.

10.2.1         Restricted    Stock    Plan,    effective       Previously  filed as  Exhibit  10.2.1 to Form 10-Q
               June 29, 1995.                                  for the  quarter  ended  January 10,  1996,  which
                                                               Exhibit is herein incorporated by reference.

10.3           Key    Employee    Stock    Option   Plan       Previously  filed as Exhibit 10.5 to Form 10-K for
               effective  January 24,  1990,  as amended       the year ended  June 30,  1993,  which  Exhibit is
               through October 7, 1992.                        herein incorporated by reference.

10.3.1         Amendment  adopted June 22, 1994,  to Key       Previously  filed as  Exhibit  10.5.1 to Form 10-Q
               Employee Stock Option Plan.                     for the  quarter  ended  January 11,  1995,  which
                                                               Exhibit is herein incorporated by reference.

10.3.2         Amendment  adopted July 25, 1994,  to Key       Previously  filed as  Exhibit  10.5.2 to Form 10-Q
               Employee Stock Option Plan.                     for the  quarter  ended  January 11,  1995,  which
                                                               Exhibit is herein incorporated by reference.

10.4           Supplemental  Retirement  Plan dated July       Previously  filed as Exhibit 10.6 to Form 10-K for
               1, 1994.                                        the year ended  June 29,  1994,  which  Exhibit is
                                                               herein incorporated by reference.

10.5           Management  Security  Plan as amended and       Previously  filed as Exhibit 10.5 to Form 10-K for
               restated effective June 30, 1982.               the year ended  June 26,  1996,  which  Exhibit is
                                                               herein incorporated by reference.
</TABLE>



                                       11
<PAGE>


ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
         continued

<TABLE>
<CAPTION>
Exhibit
Number                   Description of Exhibit                          Incorporated by Reference From

<S>            <C>                                             <C> 
10.5.1         Amendment   effective  May  1,  1992,  to       Previously  filed as  Exhibit  10.5.1 to Form 10-K
               Management Security Plan.                       for the year ended June 26,  1996,  which  Exhibit
                                                               is herein incorporated by reference.

10.6           Senior  Corporate  Officer's  Management        Previously  filed as Exhibit 10.6 to Form 10-K for
               Security  Plan as amended  and  restated        the year ended  June 26,  1996,  which  Exhibit is
               effective June 30, 1982.                        herein incorporated by reference.

10.6.1         Amendment  effective May 1, 1992, to            Previously filed as Exhibit 10.6.1 to Form 10-K
               Senior Corporate Officer's Management           for the year ended June 26, 1996,  which Exhibit
               Security  Plan.                                 is herein incorporated by reference.

21.1           Subsidiaries of Winn-Dixie Stores, Inc.

23.1           Consent of KPMG Peat Marwick LLP.
</TABLE>


         (b)   Reports on Form 8-K:

               The  Company  did  not file any  reports  on Form 8-K  during the
quarter ended June 24, 1998.




                                       12
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                WINN-DIXIE STORES, INC.



                                       By           A. DANO DAVIS
                                               --------------------------
                                                A. Dano Davis, Chairman


                                       Date         August 6, 1998
                                               --------------------------


         Pursuant to the  requirements  of the  Securities  Exchange Act of 1934
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.


       A. DANO DAVIS         Chairman (Principal                  August 6, 1998
------------------------
      (A. Dano Davis)        Executive Officer) and Director


       JAMES KUFELDT         President and Director               August 6, 1998
------------------------
      (James Kufeldt)


     RICHARD P. MCCOOK       Financial Vice President             August 6, 1998
------------------------
    (Richard P. McCook)      (Principal Financial Officer)


      DAVID H. BRAGIN        Treasurer                            August 6, 1998
------------------------
     (David H. Bragin)       (Principal Accounting Officer)


      ROBERT D. DAVIS        Director                             August 6, 1998
------------------------
     (Robert D. Davis)






                                       13
<PAGE>


SIGNATURES, continued



      T. WAYNE DAVIS         Director                             August 6, 1998
------------------------
     (T. Wayne Davis)


    CHARLES H. MCKELLAR      Director                             August 6, 1998
------------------------
   (Charles H. McKellar)


     RADFORD D. LOVETT       Director                             August 6, 1998
------------------------
    (Radford D. Lovett)


    CHARLES P. STEPHENS      Director                             August 6, 1998
------------------------
   (Charles P. Stephens)


     ARMANDO M. CODINA       Director                             August 6, 1998
------------------------
    (Armando M. Codina)


      DAVID F. MILLER        Director                             August 6, 1998
------------------------
     (David F. Miller)


     CARLETON T. RIDER       Director                             August 6, 1998
------------------------
    (Carleton T. Rider)


      JULIA B. NORTH         Director                             August 6, 1998
------------------------
     (Julia B. North)




                                       14
<PAGE>


                    WINN-DIXIE STORES, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
                   SUPPORTING SCHEDULES AND SUPPLEMENTAL DATA



Selected Financial Data                                                      F-1

Management's Discussion and Analysis of Financial Condition and Results
     of Operations                                                           F-2

Consolidated Financial Statements and Supplemental Data:

         Independent Auditors' Report                                        F-6

         Report of  Management                                               F-7

         Consolidated Statements of Earnings, Years ended
           June 24, 1998, June 25, 1997 and June 26, 1996                    F-8

         Consolidated Balance Sheets, June 24, 1998 and June 25, 1997        F-9

         Consolidated Statements of Cash Flows, Years ended
           June 24, 1998, June 25, 1997 and June 26, 1996                   F-10

         Consolidated Statements of Shareholders' Equity, Years ended
           June 24, 1998, June 25, 1997 and June 26, 1996                   F-11

         Notes to Consolidated Financial Statements                         F-12

Financial Statement Schedules:

         Independent Auditors' Report on Financial Statement Schedule        S-1

         II  Consolidated Valuation and Qualifying Accounts, Years ended
               June 24, 1998, June 25, 1997 and June 26, 1996                S-2


All other  schedules  are omitted  either  because  they are not  applicable  or
because  information  required  therein is shown in the Financial  Statements or
Notes thereto.




                                       15
<PAGE>


<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA

                                                                  1998       1997       1996       1995     1994
                                                                     Dollars in millions except per share data
<S>                                                          <C> <C>        <C>        <C>        <C>     <C>
Sales
   Net sales...........................................      $   13,617     13,219     12,955     11,788  11,082
   Percent increase....................................             3.0        2.0        9.9        6.4     2.3
   Average annual sales per store......................      $     11.7       11.3       11.0       10.0     9.6
Earnings Summary
   Gross profit........................................      $    3,624      3,316      3,093      2,723   2,534
     Percent of sales..................................            26.6       25.1       23.9       23.1    22.9
   LIFO charge (credit)................................      $      (12)         3         10          7      (2)
   Operating and administrative expenses...............      $    3,375      3,094      2,803      2,462   2,270
     Percent of sales..................................            24.8       23.4       21.6       20.9    20.5
   Net earnings........................................      $      199        204        256        232     216
     Basic earnings per share..........................      $     1.34       1.36       1.69       1.55    1.45
     Diluted earnings per share........................      $     1.33       1.36       1.68       1.55    1.45
   Percent of net earnings to sales....................             1.5        1.5        2.0        2.0     2.0
   Percent of net earnings to average equity...........            14.7       15.3       19.9       20.3    21.2
EBITDA ................................................      $    676.7      632.8      656.9      569.3   520.2
EBITDAR  ..............................................      $  1,089.2    1,015.6    1,009.7      890.7   809.2
Dividends
   Dividends paid......................................      $    150.9      144.2      134.0      116.5   107.4
   Percent of net earnings.............................            76.0       70.5       52.4       50.2    49.7
   Per share (present rate $1.02)......................      $     1.02        .96       .885        .78     .72
Common Stock (WIN)
   Total shares outstanding (000,000)..................           148.5      148.9      151.7      151.1   148.4
     NYSE - Stock price range
     Common   - High...................................      $    59.25      42.38      38.38      28.94   33.88
                Low....................................      $    33.69      29.88      28.06      21.32   21.75
Financial Data
   Cash flow information:
     Net cash provided by operating activities.........      $    464.5      413.9      556.9      414.2   436.3
     Net cash used in investing activities.............      $    325.9      477.7      387.9      379.3   214.7
     Net cash provided by (used in) financing
      activities.......................................      $   (129.2)      45.7     (167.3)     (35.9) (212.4)
   Capital expenditures, net...........................      $    369.6      423.1      362.0      371.6   277.7
   Depreciation and amortization.......................      $    330.4      291.2      248.3      200.9   157.4
   Working capital.....................................      $    228.6      195.4      388.7      414.9   486.2
   Current ratio.......................................             1.2        1.1        1.4        1.4     1.6
   Total assets........................................      $    3,069      2,921      2,649      2,472   2,145
   Obligations under capital leases....................      $       49         54         61         78      85
   Shareholders' equity................................      $    1,369      1,337      1,342      1,231   1,056
   Book value per share................................      $     9.22       8.98       8.85       8.14    7.12
Stores
   In operation at year-end............................           1,168      1,174      1,178      1,175   1,159
   Opened and acquired during year.....................              84         83         61        108      60
   Closed or sold during year..........................              90         87         58         92      66
   Enlarged or remodeled during year...................             136         79        128         86      87
   New/enlarged/remodeled in last five years...........             912        805        743        654     535
     Percent to total stores in operation..............            78.1       68.6       63.1       55.7    46.2
   Year-end retail square footage (000,000)............            49.6       47.8       45.7       43.8    40.7
   Average store size at year-end (000)................            42.4       40.7       38.8       37.3    35.1
Other Year-end Data
   Associates (000)....................................             139        136        126        123     112
   Shareholder accounts (000)..........................            52.0       55.2       56.3       44.8    39.5
   Shareholders per store..............................              45         47         48         38      34
Taxes
   Federal, state and local............................      $      302        285        288        261     261
   Per diluted share...................................      $     2.03       1.90       1.89       1.74    1.75

</TABLE>




                                      F-1
<PAGE>




                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Results of Operations

        Sales for 1998 were $13.6  billion,  compared to $13.2  billion for 1997
and $13.0  billion for 1996.  This  reflects a 3.0%,  2.0% and 9.9%  increase in
sales per year for 1998, 1997 and 1996, respectively. Average weekly store sales
increased  3.0%,  1.8% and 8.4% for each of the last three fiscal  years,  while
identical  store  sales  decreased  0.3% in  1998,  decreased  0.9% in 1997  and
increased 4.4% for 1996.  Fourth  quarter sales were $3.3 billion,  $3.1 billion
and $3.0 billion for 1998,  1997 and 1996,  respectively.  Sales for the quarter
were positively  impacted by Easter being in the fourth quarter this year and in
the third  quarter  last  year.  For the fourth  quarter,  average  store  sales
increased 7.0% in 1998, 1.2% in 1997 and 4.5% in 1996. Identical store sales for
the fourth quarter increased 3.1% in 1998,  decreased 1.8% in 1997 and increased
1.7% in 1996.

         In fiscal year 1998,  the  Company  continued  to increase  its average
store size by opening and  acquiring 84 stores,  averaging  50,000  square feet,
enlarging  or  remodeling  136 stores and closing 90 smaller  stores,  averaging
30,500 square feet.

        As a percent of sales,  gross profit margins were 26.6%, 25.1% and 23.9%
in fiscal 1998, 1997 and 1996, respectively.  Operating margins improved with an
increase in the number of larger stores,  added service departments and improved
pricing.  Approximately  88% of the Company's  inventories  are valued under the
LIFO (last-in,  first-out) method.  The LIFO calculations  resulted in a pre-tax
increase  in gross  profit of $12.1  million  in 1998,  and a  decrease  of $2.7
million in 1997 and a decrease of $9.9 million in 1996.

        Operating  and  administrative  expenses,  as a percent  of sales,  were
24.8%, 23.4% and 21.6% in fiscal 1998, 1997 and 1996, respectively. Increases in
depreciation expense, occupancy costs, a higher payroll percentage in our larger
stores and training costs associated with our emphasis toward increased customer
service,  were major  contributing  factors of our  increase  in  operating  and
administrative expenses in 1998.

          During 1998,  the Company began its  consolidation  of our  accounting
departments  to corporate  headquarters.  The  opening  of the new  distribution
facility in Raleigh, North Carolina, resulted in the closing and the sale of the
older  Raleigh  distribution  facility;  the  closing of the  Greenville,  South
Carolina   distribution   facility  which  will  be  converted  into  a  general
merchandise  facility;  and the  reorganization  of the  Raleigh  and  Charlotte
divisions.  The  Company  experienced  a  non-recurring   administrative  charge
totaling $18.1 million (after tax, $11.0 million or $0.07 per diluted share) due
to these activities.

        Cash  discounts  and other  income  amounted to $115.4  million,  $119.4
million  and $118.0  million in 1998,  1997 and 1996,  respectively.  Investment
income  amounted to $0.3 million,  $0.3 million and $0.6 million in fiscal 1998,
1997 and 1996, respectively.


                                      F-2
<PAGE>

Results of Operations, continued

        Interest expense totaled $28.5 million,  $22.1 million and $21.2 million
in fiscal 1998, 1997 and 1996, respectively. Interest expense primarily reflects
a  computation  of  interest  on  capital  lease   obligations   and  short-term
borrowings. The 1998 and 1997 increase in interest expense is due to an increase
in short-term borrowings.

        Earnings  before income taxes were $317.8  million,  $319.4  million and
$387.3 million in fiscal 1998,  1997 and 1996,  respectively.  The 1998 and 1997
decrease in pre-tax  earnings is primarily a result of the increase in operating
expenses as previously  mentioned.  The  effective  income tax rates were 37.5%,
36.0% and 34.0% for fiscal 1998,  1997 and 1996,  respectively.  The increase in
the effective tax rate during fiscal 1998 and 1997 reflects a change made by the
Health  Insurance  Portability  and  Accountability  Act of 1996 whereby certain
deductions  for  interest  relating  to  indebtedness  with  respect  to certain
Corporate  Owned Life  Insurance  (COLI)  policies  are being  phased out over a
three-year period.

        Net earnings  amounted to $198.6  million or $1.33 per diluted share for
1998,  $204.4  million or $1.36 per diluted share for 1997 and $255.6 million or
$1.68 per diluted share for 1996. The LIFO  calculations  increased net earnings
by $7.4 million or $0.05 per diluted  share in 1998,  decreased  net earnings by
$1.6 million or $0.01 per diluted  share in 1997 and  decreased  net earnings by
$6.0 million or $0.04 per diluted share in 1996.

Liquidity and Capital Resources

        The Company's  financial condition remains sound and strong at year end.
Cash and cash  equivalents  amounted to $23.6  million,  $14.1 million and $32.2
million  at the end of fiscal  years  1998,  1997 and 1996,  respectively.  Cash
provided by  operating  activities  amounted to $464.5  million in 1998,  $413.9
million in 1997 and $556.9 million in 1996.

        Net capital  expenditures  totaled  $369.6  million,  $423.1 million and
$362.0 million in fiscal 1998, 1997 and 1996,  respectively.  These expenditures
were for new  store  locations,  store  enlargements  and  remodelings,  and the
expansion of warehouse  facilities.  Total capital  investment in Company retail
and support  facilities,  including  operating  leases,  is estimated to be $850
million in fiscal 1998 and  projected  to be $800  million in fiscal  1999.  The
Company has no material  construction or purchase commitments  outstanding as of
June 24, 1998.

        Working capital amounted to $228.6 million and $195.4 million at the end
of fiscal years 1998 and 1997,  respectively.  Inventories on a FIFO  (first-in,
first-out) basis increased $143.6 million in 1998 and $72.7 million in 1997. The
increase in  inventories  is  primarily  due to the increase in the total retail
square footage through new openings and store  enlargements,  and the opening of
our new Raleigh,  North  Carolina  distribution  center and the new  Montgomery,
Alabama perishable warehouse in 1998.


                                      F-3
<PAGE>


Liquidity and Capital Resources, continued

     The Company has an authorized $500.0 million  commercial paper program.  In
support of this program,  or as an independent source of funds, the Company also
has $495.0  million of  short-term  lines of credit.  These  lines of credit are
available at any time during the year and are renewable on an annual basis.  The
Company had no short-term borrowings against bank lines of credit as of June 24,
1998 or June 25, 1997. There was $420.0 million in commercial paper  outstanding
at the end of 1998,  compared to $380.0 million in commercial paper  outstanding
at  the  end of  1997.  The  average  interest  rate  on  the  commercial  paper
outstanding  on June  24,  1998 was  5.6%,  compared  to 5.7% on June 25,  1997.
Excluding capital lease  obligations,  the Company had no outstanding  long-term
debt as of June 24, 1998 or June 25, 1997.

        The Company's cash flow from operations and available credit  facilities
are considered  adequate to fund both the short-term and long-term capital needs
of the Company.

        The Company is a party to various  proceedings  arising  under  federal,
state and local  regulations  protecting the  environment.  Management is of the
opinion that any liability which might result from any such proceedings will not
have a material adverse effect on the Company's  financial  condition or results
of operations.

Impact of Inflation

        Winn-Dixie's   primary  costs,   inventory  and  labor,   increase  with
inflation.  Recovery  of  these  costs  has  to  come  from  improved  operating
efficiencies,  and to the extent permitted by our competition,  through improved
gross profit margins.

Year 2000 Compliance

         In 1996,  the  Company  created a Year 2000  Project  Office to address
potential  problems within the Company's  operations which could result from the
century  change in the Year  2000.  The  Project  Office was  authorized  by the
Company's Executive Committee,  is staffed primarily with representatives of the
Company's  Corporate  Information  Systems  Department,  and has  access  to key
associates in all areas of the  Company's  operations.  The Project  Office also
uses outside consultants on an as-needed basis.

         To address the Year 2000 issues,  the Project Office is identifying all
computer-based systems and applications  (including embedded systems) that might
not be Year 2000 compliant;  determining what revisions or replacements would be
necessary to achieve  compliance and prioritizing and implementing the revisions
or  replacements;  conducting tests necessary to verify that the revised systems
are  operational;  and  transitioning  the  compliant  systems into the everyday
operations  of  the  Company.   Management   believes  that  these  actions  are
approximately  sixty  percent  (60%)  complete.  Winn-Dixie  estimates  that all
critical systems will be compliant with the century change by June 30, 1999.



                                      F-4
<PAGE>



2000 Compliance, continued

         The Company has  budgeted  approximately  $15.0  million to address the
Year 2000 issues,  which includes the estimated costs of all  modifications  and
the salaries of associates  and the fees of  consultants  addressing the issues.
Approximately  $9.1  million of this amount had been  expended  through June 24,
1998.

         As a part of the  Year  2000  review,  the  Company  is  examining  its
relationships  with  certain  key  outside  vendors  and others with whom it has
significant  business  relationships  to determine to the extent  practical  the
degree of such  parties'  Year 2000  compliance  and to develop  strategies  for
working  with them  through the  century  change.  The  Company  does not have a
relationship with any third-party  vendor which is material to the operations of
the Company and,  therefore,  believes  that the failure of any such party to be
Year 2000 compliant would not have a material adverse effect on the Company.
 
         Should the Company or a third party with whom the Company  deals have a
systems  failure due to the century change,  the Company  believes that the most
significant  impact would likely be the inability to timely deliver inventory to
a group of stores or to  electronically  process  sales to the customer at store
level.  While the Company does not expect any such impact to be material,  it is
developing  contingency  plans for alternative  methods of product  delivery and
transaction  processing  and estimates that such plans will be finalized by June
30, 1999.

Cautionary Statement Regarding Forward-Looking Information and Statements

         This  Annual  Report on Form 10-K  contains  certain  information  that
constitutes  "forward-looking  statements"  within the  meaning  of the  Private
Securities Litigation Reform Act, which involves risks and uncertainties. Actual
results may differ materially from the results described in the  forward-looking
statements.  When  used in this  document,  the  words,  "estimate,"  "project,"
"intend,"  "believe,"  and  other  similar  expressions,  as they  relate to the
Company,  are  intended  to  identify  such  forward-looking   statements.  Such
statements  reflect the current  views of the Company and are subject to certain
risks  and  uncertainties  that  include,   but  are  not  limited  to,  growth,
competition,  inflation,  pricing and margin  pressures,  law and taxes.  Please
refer to  discussions of these and other factors in this Annual Report and other
Company  filings  with the  Securities  and  Exchange  Commission.  The  Company
disclaims  any intent or  obligation to update  publicly  these  forward-looking
statements, whether as a result of new information, future events or otherwise.




                                      F-5
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Shareholders and the Board of Directors
Winn-Dixie Stores, Inc.:

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Winn-Dixie Stores,  Inc. and subsidiaries as of June 24, 1998 and June 25, 1997,
and the related consolidated  statements of earnings,  shareholders' equity, and
cash flows for each of the years in the  three-year  period ended June 24, 1998.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated  financial statements referred to above
present fairly, in all material  respects,  the financial position of Winn-Dixie
Stores,  Inc.  and  subsidiaries  at June 24,  1998 and June 25,  1997,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended June 24, 1998, in conformity  with  generally  accepted
accounting principles.




                                                 KPMG  Peat Marwick LLP


Jacksonville, Florida
July 27, 1998




                                      F-6
<PAGE>


                              REPORT OF MANAGEMENT


        The  Company  is  responsible   for  the   preparation,   integrity  and
objectivity of the  consolidated  financial  statements and related  information
appearing in the Annual Report. The consolidated  financial statements have been
prepared in conformity with generally accepted accounting  principles applied on
a  consistent  basis and include  amounts  that are based on  management's  best
estimates and judgments.

        Management  is also  responsible  for  maintaining  a system of internal
controls that provides reasonable assurance that the accounting records properly
reflect the  transactions  of the Company,  that assets are safeguarded and that
the consolidated  financial statements present fairly the financial position and
operating results. As part of the Company's  controls,  the internal audit staff
conducts  examinations in each of the retail and manufacturing  divisions of the
Company.

        The Audit  Committee  of the Board of  Directors,  composed  entirely of
outside directors, meets periodically to review the results of audit reports and
other accounting and financial reporting matters with the independent  certified
public accountants and the internal auditors.




     A. Dano Davis                               Richard P. McCook
     Chairman of the Board                       Financial Vice President
     and Principal Executive Officer             and Principal Financial Officer





                                      F-7
<PAGE>


                       CONSOLIDATED STATEMENTS OF EARNINGS
           Years ended June 24, 1998, June 25, 1997 and June 26, 1996


<TABLE>
<CAPTION>
                                                                       1998             1997              1996
                                                                  ---------------   --------------   ---------------
                                                                       Amounts in thousands except per share data

<S>                                                             <C>   <C>              <C>               <C>
Net sales.....................................................  $     13,617,485       13,218,715        12,955,488
Cost of sales, including warehousing and delivery expense.....         9,993,568        9,902,862         9,862,244
                                                                  ---------------   --------------   ---------------
   Gross profit on sales......................................         3,623,917        3,315,853         3,093,244
Operating and administrative expenses.........................         3,374,905        3,093,767         2,802,712
Consolidation and distribution facility closing charge........            18,080                -                 -
                                                                  ---------------   --------------   ---------------
   Operating income...........................................           230,932          222,086           290,532
Cash discounts and other income, net..........................           115,395          119,435           118,038
                                                                  ---------------   --------------   ---------------
                                                                         346,327          341,521           408,570
                                                                  ---------------   --------------   ---------------
Interest:
   Interest on capital lease obligations......................             6,528            7,055             8,199
   Other interest.............................................            22,007           15,024            13,046
                                                                  ---------------   --------------   ---------------
     Total interest...........................................            28,535           22,079            21,245
                                                                  ---------------   --------------   ---------------
Earnings before income taxes..................................           317,792          319,442           387,325
Income taxes..................................................           119,172          114,999           131,691
                                                                  ---------------   --------------   ---------------
Net earnings..................................................  $        198,620          204,443           255,634
                                                                  ===============   ==============   ===============

Basic earnings per share......................................  $           1.34             1.36              1.69
                                                                  ===============   ==============   ===============
Diluted earnings per share....................................  $           1.33             1.36              1.68
                                                                  ===============   ==============   ===============
</TABLE>

See accompanying notes to consolidated financial statements.








                                      F-8
<PAGE>


                           CONSOLIDATED BALANCE SHEETS
                         June 24, 1998 and June 25, 1997


<TABLE>
<CAPTION>
                                                                                        1998              1997
                                                                                    --------------   ---------------
                                                                                         Amounts in thousands

<S>                                                                              <C>    <C>               <C>
Assets
Current Assets:
   Cash and cash equivalents.................................................    $         23,566            14,116
   Trade and other receivables, less allowance for doubtful items of
     $2,623,000  ($1,699,000 in 1997)........................................             146,166           175,679
   Merchandise inventories at lower of cost or market less LIFO reserve
     of $212,869,000 ($224,999,000 in 1997)..................................           1,404,917         1,249,215
   Prepaid expenses..........................................................             161,141           148,961
                                                                                    --------------   ---------------
     Total current assets....................................................           1,735,790         1,587,971
                                                                                    --------------   ---------------

Investments and other assets:
   Cash surrender value of life insurance, net...............................              38,789            88,081
   Other assets..............................................................             101,661            94,547
                                                                                    --------------   ---------------
     Total investments and other assets......................................             140,450           182,628
                                                                                    --------------   ---------------
Deferred income taxes........................................................              22,626            22,129
Net property, plant and equipment............................................           1,169,848         1,128,681
                                                                                    --------------   ---------------
                                                                                 $      3,068,714         2,921,409
                                                                                    ==============   ===============
Liabilities and Shareholders' Equity
Current Liabilities:
   Accounts payable..........................................................    $        660,539           604,034
   Short-term borrowings.....................................................             420,000           380,000
   Reserve for insurance claims and self-insurance...........................              71,779            60,219
   Accrued wages and salaries................................................             107,590            98,771
   Accrued rent..............................................................              96,987            76,528
   Accrued expenses..........................................................             135,287           137,115
   Current obligations under capital leases..................................               2,908             3,023
   Income taxes..............................................................              12,119            32,923
                                                                                    --------------   ---------------
     Total current liabilities...............................................           1,507,209         1,392,613
                                                                                    --------------   ---------------
Obligations under capital leases.............................................              48,580            54,026
Defined benefit plan.........................................................              37,102            33,452
Reserve for insurance claims and self-insurance..............................              93,514            94,783
Other liabilities............................................................              13,426             9,041
                                                                                    --------------   ---------------
Shareholders' equity:
   Common stock of $1 par value.  Authorized 400,000,000 shares; issued
     148,530,736 shares in 1998 and 148,875,899 shares in 1997...............             148,531           148,876
   Retained earnings.........................................................           1,220,352         1,188,618
                                                                                    --------------   ---------------
     Total shareholders' equity..............................................           1,368,883         1,337,494
                                                                                    --------------   ---------------
Commitments and contingent liabilities (Notes 6, 8 and 9)
                                                                                 $      3,068,714         2,921,409
                                                                                    ==============   ===============
</TABLE>

See accompanying notes to consolidated financial statements.




                                      F-9
<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           Years ended June 24, 1998, June 25, 1997 and June 26, 1996

<TABLE>
<CAPTION>
                                                                         1998            1997            1996
                                                                     -------------   -------------   -------------
                                                                                 Amounts in thousands

<S>                                                               <C>    <C>             <C>             <C>
Cash flows from operating activities:
   Net earnings.................................................  $       198,620         204,443         255,634
   Adjustments to reconcile net earnings to net cash provided
     by operating activities:
       Depreciation and amortization............................          330,408         291,236         248,287
       Deferred income taxes....................................          (17,040)        (17,988)         (7,698)
       Defined benefit plan.....................................            3,650           3,919           3,371
       Reserve for insurance claims and self-insurance..........           10,291          (3,967)         (3,788)
       Stock compensation plans.................................           (1,398)         10,086           5,725
       Change in cash from:
         Receivables............................................           29,513         (17,234)         (6,533)
         Merchandise inventories................................         (155,702)        (70,089)        (19,542)
         Prepaid expenses.......................................            3,813            (314)        (14,037)
         Accounts payable.......................................           56,191           3,914          42,199
         Income taxes...........................................          (20,804)         (9,631)         23,223
         Other current accrued expenses.........................           26,952          19,533          30,104
                                                                     -------------   -------------   -------------
           Net cash provided by operating activities............          464,494         413,908         556,945
                                                                     -------------   -------------   -------------

Cash flows from investing activities:
   Purchases of property, plant and equipment, net..............         (369,636)       (423,105)       (361,961)
   Increase (decrease)  in investments and other assets.........           43,785         (54,548)        (25,915)
                                                                     -------------   -------------   -------------
           Net cash used in investing activities................         (325,851)       (477,653)       (387,876)
                                                                     -------------   -------------   -------------

Cash flows from financing activities:
   Increase (decrease) in short-term borrowings.................           40,000         270,000         (20,000)
   Payments on capital lease obligations........................           (2,653)         (2,713)         (3,077)
   Purchase of common stock.....................................          (21,055)        (94,500)        (51,581)
   Proceeds of sales under associates' stock purchase plan......            8,747          13,111          40,205
   Dividends paid...............................................         (150,923)       (144,165)       (134,042)
   Other........................................................           (3,309)          3,920           1,220
                                                                     -------------   -------------   -------------
           Net cash provided by (used in) financing activities..         (129,193)         45,653        (167,275)
                                                                     -------------   -------------   -------------

Increase (decrease) in cash and cash equivalents................            9,450         (18,092)          1,794
Cash and cash equivalents at the beginning of the year..........           14,116          32,208          30,414
                                                                     -------------   -------------   -------------
Cash and cash equivalents at end of the year....................  $        23,566          14,116          32,208
                                                                     =============   =============   =============

Supplemental cash flow information:
   Interest paid................................................  $        20,316          17,840          14,569
   Interest and dividends received..............................  $         1,449           1,183           8,049
   Income taxes paid............................................  $       152,652         142,684         114,572
                                                                     =============   =============   =============
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-10
<PAGE>


                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
           Years ended June 24, 1998, June 25, 1997 and June 26, 1996


<TABLE>
<CAPTION>
                                                                         1998            1997             1996
                                                                     -------------   --------------   -------------
                                                                                 Amounts in thousands

<S>                                                               <C>   <C>              <C>             <C>
Common stock:
   Beginning of year ...........................................  $       148,876          151,685          75,561
   Add par value of common stock issued for stock
     compensation plans and acquisition.........................              156              140           2,149
   Add par value of common stock issued in connection
     with 2-for-1 stock split...................................                -                -          75,580
   Deduct par value of common stock acquired....................              501            2,949           1,605
                                                                     -------------   --------------   -------------
   End of year..................................................          148,531          148,876         151,685
                                                                     -------------   --------------   -------------

Retained earnings:
   Beginning of year............................................        1,188,618        1,190,611       1,155,031
   Net earnings.................................................          198,620          204,443         255,634
   Deduct excess of cost over par value of common stock
     acquired...................................................           20,554           91,551          49,976
   Deduct cash dividends on common stock of $1.02, $0.96 and
     $0.885 per share in 1998, 1997 and 1996, respectively......          150,923          144,165         134,042
   Deduct par value of common stock issued in connection
     with 2-for-1 stock split...................................                -                -          75,580
   Add (deduct) excess of value or proceeds over par value of
     common stock and compensation costs recorded for stock
     compensation plans and acquisition.........................           (1,398)           9,946          53,129
   Add (deduct) associates' stock loans, net of payments........            8,747           13,111         (14,330)
   Unrealized gain on marketable securities.....................              796            1,964               -
   Add (deduct) other...........................................           (3,554)           4,259             745
                                                                     -------------   --------------   -------------
   End of year..................................................        1,220,352        1,188,618       1,190,611
                                                                     -------------   --------------   -------------

Total shareholders' equity......................................  $     1,368,883        1,337,494       1,342,296
                                                                     =============   ==============   =============
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-11
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Summary of Significant Accounting Policies and Other Information

          (a)     Fiscal  Year:  The fiscal year ends on the last  Wednesday  in
                  June.  Fiscal  years ended 1998,  1997 and 1996  comprised  52
                  weeks.

          (b)     Basis of Consolidation:  The consolidated financial statements
                  include  the  accounts  of  Winn-Dixie  Stores,  Inc.  and its
                  subsidiaries  which  operate  as  a  major  food  retailer  in
                  fourteen states and the Bahama Islands.

          (c)     Cash and Cash Equivalents:  Cash equivalents consist of highly
                  liquid  investments  with a maturity  of three  months or less
                  when purchased.  Cash and cash  equivalents are stated at cost
                  plus accrued interest, which approximates market.

          (d)     Inventories:  Inventories  are  stated at the lower of cost or
                  market. The "dollar value" last-in, first-out (LIFO) method is
                  used to determine the cost of approximately 88% of inventories
                  consisting primarily of merchandise in stores and distribution
                  warehouses.  Manufacturing and produce  inventories are valued
                  at the lower of  first-in,  first-out  (FIFO)  cost or market.
                  Elements of cost included in manufacturing inventories consist
                  of material, direct labor and plant overhead.

          (e)     Marketable  Securities:  Included  in  investments  and  other
                  assets was  $24,400,000 at June 24, 1998,  and  $19,400,000 at
                  June 25, 1997,  consisting  principally  of marketable  equity
                  securities       categorized      as       available-for-sale.
                  Available-for-sale  securities  are  recorded  at fair  value.
                  Unrealized  holding  gains and losses,  net of the related tax
                  effect,  are excluded from earnings and reported as a separate
                  component of shareholders' equity until realized. A decline in
                  the fair  value of  available-for-sale  securities  below cost
                  that is deemed  other than  temporary  is charged to earnings,
                  resulting  in the  establishment  of a new cost  basis for the
                  security.  Realized  gains and losses are included in earnings
                  and are derived using the specific  identification  method for
                  determining the cost of securities sold.

          (f)     Financial  Instruments:  Interest rate swaps are accounted for
                  under the accrual  method.  Net  interest  paid or received on
                  these instruments is included in operating and  administrative
                  expense. See Note 6(b) for additional  information on interest
                  rate swap agreements.



                                      F-12
<PAGE>


1.       Summary of Significant Accounting Policies and Other Information,
         continued

          (g)     Income  Taxes:   Deferred  tax  assets  and   liabilities  are
                  recognized   for  the   estimated   future  tax   consequences
                  attributable  to differences  between the financial  statement
                  carrying  amounts of existing assets and liabilities and their
                  respective tax bases.  Deferred tax assets and liabilities are
                  measured using the enacted tax rates in effect for the year in
                  which those temporary differences are expected to be recovered
                  or settled.

          (h)     Self-insurance:  Self-insurance  reserves are  established for
                  automobile and general  liability,  workers'  compensation and
                  property loss costs based on claims filed and claims  incurred
                  but not reported,  with a maximum per occurrence of $2,000,000
                  for  automobile  and  general  liability  and  $1,000,000  for
                  workers' compensation. Self-insurance reserves are established
                  for  property  losses  with  a  maximum  annual  aggregate  of
                  $5,000,000 and a $100,000 per occurrence  deductible after the
                  aggregate  is  obtained.  The Company is insured for losses in
                  excess of these limits.

          (i)     Estimates:   The   preparation  of  financial   statements  in
                  conformity  with  generally  accepted  accounting   principles
                  requires  management to make  estimates and  assumptions  that
                  affect the  reported  amounts of assets and  liabilities,  the
                  disclosure of contingent assets and liabilities at the date of
                  the financial  statements and the reported amounts of revenues
                  and expenses during the reporting period. Actual results could
                  differ from those estimates.

          (j)     Property,  Plant and Equipment:  Property, plant and equipment
                  are stated at historical  cost.  Depreciation is provided over
                  the estimated useful lives by the straight-line  method. Store
                  equipment  depreciation is based on lives varying from five to
                  eight  years.  Transportation  equipment  is  based  on  lives
                  varying from three to ten years.  Warehouse and  manufacturing
                  equipment  is based on lives  varying  from five to ten years.
                  Amortization  of  improvements  to leased premises is provided
                  principally  by the  straight-line  method over the periods of
                  the leases or the estimated useful lives of the  improvements,
                  whichever is less.  Amortization  for retail  store  leasehold
                  improvements is based on lives varying from eight to 15 years.
                  Amortization   for  warehouse  and   manufacturing   leasehold
                  improvements is based on a 15 year life.

                  The  Company  reviews its  property,  plant and  equipment for
                  impairment   whenever  events  or  changes  in   circumstances
                  indicate   the   carrying   value  of  an  asset  may  not  be
                  recoverable.  Recoverability  is measured by comparison of the
                  carrying amount to the net cash flows expected to be generated
                  by the asset.

          (k)     Store  Opening  and  Closing  Costs:  The costs of opening new
                  stores and  closing  old stores are charged to earnings in the
                  year incurred.



                                      F-13
<PAGE>


1.       Summary of Significant Accounting Policies and Other Information,
         continued

          (l)     Earnings Per Share: The Company adopted Statement of Financial
                  Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128")
                  during the second quarter of fiscal 1998. The adoption of this
                  statement did not materially effect the Company's earnings per
                  share.  All prior period  earnings per share amounts have been
                  restated to conform with the provisions of SFAS 128.

                   The  following  weighted  average  number of shares of common
                  stock were used in the  calculations  for  earnings per share.
                  The diluted weighted average number of shares includes the net
                  shares that would be issued upon the exercise of stock options
                  using the treasury stock method.

                                           1998           1997           1996
                                           ----           ----           ----
                   Basic               148,697,634    150,040,137    151,577,205
                   Diluted             148,866,167    150,231,820    151,946,196

          (m)     Stock-Based Compensation: During fiscal year 1996, the Company
                  adopted  Statement of Financial  Accounting  Standard No. 123,
                  "Accounting for Stock-Based  Compensation" ("SFAS 123"), which
                  establishes  a fair  value  based  method  of  accounting  for
                  stock-based compensation plans. Prior to fiscal year 1996, the
                  Company  followed the intrinsic  value method set forth in APB
                  Opinion 25,  "Accounting for Stock Issued to Employees." Since
                  the Company historically  recorded  compensation expense under
                  APB Opinion 25 for its performance  based plans,  the adoption
                  of  this  Standard  in  1996  had no  material  effect  on the
                  Company's financial statements (see Note 7).

          (n)     New  Accounting  Pronouncements:  In June 1997,  the Financial
                  Accounting  Standards  Board  issued  Statement  of  Financial
                  Accounting Standards No. 130 "Reporting  Comprehensive Income"
                  ("SFAS 130") and Statement of Financial  Accounting  Standards
                  No.  131  "Disclosure  about  Segments  of an  Enterprise  and
                  Related  Information"  ("SFAS  131").  SFAS 130 relates to the
                  change in the equity of a business  during a reporting  period
                  from  transactions  of the  business.  The  Company  currently
                  intends to adopt this new accounting standard effective in the
                  first quarter of fiscal 1999. SFAS 131 supersedes Statement of
                  Financial Accounting Standards No. 14 "Financial Reporting for
                  Segments of a Business  Enterprise." SFAS 131 provides for the
                  disclosure of financial  information  desegregated  by the way
                  management organizes the segments of the enterprise for making
                  operating  decisions.  The  Company  intends to adopt this new
                  accounting  standard in the fourth  quarter of fiscal 1999 and
                  is still  determining  how SFAS 131 will impact the  financial
                  statement disclosure.

          (o)     Reclassification:   Certain   prior  year  amounts  have  been
                  reclassified to conform with the current year's presentation.



                                      F-14
<PAGE>


2.       Accounts Receivable

                     Accounts receivable at year-end were as follows:

                                                            1998         1997
                                                          ---------    ---------
                                                           Amounts in thousands

                  Trade and other receivables........... $  90,672       76,471
                  Construction advances.................    58,117      100,907
                                                          ---------    ---------
                                                           148,789      177,378
                  Less:  Allowance for doubtful items...     2,623        1,699
                                                          ---------    ---------
                                                         $ 146,166      175,679
                                                          =========    =========

3.       Inventories

         At June 24, 1998, inventories valued by the LIFO method would have been
         $212,869,000 higher ($224,999,000 higher at June 25, 1997) if they were
         stated  at the  lower  of  FIFO  cost or  market.  If the  FIFO  method
         inventory  valuation  had been used,  reported net earnings  would have
         been  $7,411,000 or $0.05 per diluted share lower,  $1,624,000 or $0.01
         per diluted  share  higher and  $6,022,000  or $0.04 per diluted  share
         higher in 1998, 1997 and 1996, respectively.

4.       Property, Plant and Equipment

         Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                        1998             1997
                                                                                    --------------   -------------
                                                                                        Amounts in thousands

         <S>                                                                     <C>  <C>               <C>
         Land..............................................................      $         11,343           8,862
         Buildings.........................................................                28,739          32,442
         Furniture, fixtures, machinery and equipment......................             2,356,376       2,149,817
         Transportation equipment..........................................               132,381         124,419
         Improvements to leased premises...................................               457,931         435,837
         Construction in progress..........................................                69,365          62,224
                                                                                    --------------   -------------
                                                                                        3,056,135       2,813,601
         Less:  Accumulated depreciation and amortization..................             1,919,432       1,723,198
                                                                                    --------------   -------------
                                                                                        1,136,703       1,090,403
         Leased property under capital leases, less accumulated
            amortization of $36,568,000 ($37,090,000 in 1997)..............                33,145          38,278
                                                                                    --------------   -------------
         Net property, plant and equipment.................................      $      1,169,848       1,128,681
                                                                                    ==============   =============
</TABLE>

         The Company had no non-cash  additions  to leased  property for 1998 or
         1997.



                                      F-15
<PAGE>


5.       Income Taxes

         The provision for income taxes consisted of:

<TABLE>
<CAPTION>
                                                                           Current       Deferred         Total
                                                                         ------------   ------------   ------------
                                                                                  Amounts in thousands
         <S>      <C>                                                 <C>    <C>            <C>            <C>
         1998
                  Federal.....................................        $      115,109        (15,779)        99,330
                  State.......................................                21,103         (1,261)        19,842
                                                                         ------------   ------------   ------------
                                                                      $      136,212        (17,040)       119,172
                                                                         ============   ============   ============

         1997
                  Federal.....................................        $      115,347        (17,440)        97,907
                  State.......................................                17,640           (548)        17,092
                                                                         ------------   ------------   ------------
                                                                      $      132,987        (17,988)       114,999
                                                                         ============   ============   ============

         1996
                  Federal.....................................        $      117,136         (7,523)       109,613
                  State.......................................                22,251           (173)        22,078
                                                                         ------------   ------------   ------------
                                                                      $      139,387         (7,696)       131,691
                                                                         ============   ============   ============
</TABLE>

         The following  reconciles the above provision to the Federal  statutory
income tax rate:

<TABLE>
<CAPTION>
                                                                          1998           1997           1996
                                                                       ------------   ------------    -----------

         <S>                                                                  <C>            <C>            <C>  
         Federal statutory income tax rate....................                35.0%          35.0%          35.0%
         State and local income taxes, net of federal
            income tax benefits...............................                 3.8            3.1            3.5
         Other tax credits....................................                (0.6)          (0.6)          (0.2)
         Life insurance.......................................                (0.2)          (2.1)          (3.1)
         Other, net...........................................                (0.5)           0.6           (1.2)
                                                                       ------------   ------------   ------------
                                                                              37.5%          36.0%          34.0%
                                                                       ============   ============   ============
</TABLE>

         The  effective tax rate for 1998 and 1997 reflects a change made by the
         Health  Insurance  Portability and  Accountability  Act of 1996 whereby
         certain  deductions for interest  relating to indebtedness with respect
         to certain  corporate  owned life insurance  (COLI)  policies are being
         phased out over a three-year period.

         In addition to the  provision  for income taxes  presented  above,  the
         Company  recorded  deferred  taxes of $551,000 and $1,105,000 in fiscal
         1998  and  1997,  respectively,  related  to  the  unrealized  gain  on
         marketable securities.



                                      F-16
<PAGE>


5.       Income Taxes, continued

         The tax effects of temporary  differences that give rise to significant
         portions of the deferred tax assets and  deferred  liabilities  at June
         24, 1998, June 25, 1997 and June 26, 1996 are presented below:

<TABLE>
<CAPTION>

                                                                            1998           1997           1996
                                                                         ------------   ------------   ------------
                                                                                   Amounts in thousands
         <S>                                                          <C>    <C>            <C>            <C>
         Deferred tax assets:
            Reserve for insurance claims and self-insurance.......... $       61,160         57,169         58,501
            Reserve for vacant store leases..........................         20,137         14,521         10,319
            Unearned promotional allowance...........................          6,844         12,520          7,568
            Reserve for accrued vacations............................         14,172         10,145          9,278
            State net operating loss carry forwards..................          9,249          7,410          6,962
            Excess of book over tax depreciation.....................         10,985         11,033         10,026
            Excess of book over tax rent expense.....................          1,058          1,482          1,133
            Excess of book over tax retirement expense...............         14,757         12,565         10,750
            Uniform capitalization of inventory......................          7,796          6,797          5,181
            Other, net...............................................         38,066         31,366         25,464
                                                                         ------------   ------------   ------------
              Total gross deferred tax assets........................        184,224        165,008        145,182
              Less:  Valuation allowance.............................          9,154          7,314          6,896
                                                                         ------------   ------------   ------------
              Net deferred tax assets................................        175,070        157,694        138,286
                                                                         ------------   ------------   ------------
         Deferred tax liabilities:
            Excess of tax over book depreciation.....................        (11,958)       (16,312)       (18,514)
            Bahamas subsidiary foreign earnings......................        (12,616)       (10,680)       (11,506)
            Unrealized gain on marketable securities.................         (1,656)        (1,105)             -
            Other, net...............................................        (20,632)       (17,879)       (13,429)
                                                                         ------------   ------------   ------------
              Total gross deferred tax liabilities...................        (46,862)       (45,976)       (43,449)
                                                                         ------------   ------------   ------------
              Net deferred tax assets................................ $      128,208        111,718         94,837
                                                                         ============   ============   ============
</TABLE>

         Current  deferred income taxes of $105,582,000 and $89,589,000 for 1998
         and  1997,  respectively,  are  included  in  prepaid  expenses  in the
         accompanying consolidated balance sheets.

         The Company  believes the results of future  operations  will  generate
         sufficient taxable income to realize the deferred tax assets.





                                      F-17
<PAGE>


6.       Financing

          (a)     Credit  Arrangements:  The  Company  has  available  a  $500.0
                  million  commercial paper program.  As of June 24, 1998, there
                  was $420.0  million  outstanding,  compared to $380.0  million
                  outstanding on June 25, 1997. The average interest rate on the
                  commercial  paper  outstanding  on June 24, 1998,  was 5.6% as
                  compared  to 5.7% on June  25,  1997.  The  Company  also  has
                  short-term lines of credit totaling $495.0 million.  The lines
                  of credit are  available  when needed  during the year and are
                  renewable on an annual  basis.  The Company is not required to
                  maintain  compensating  bank balances in connection with these
                  lines of credit.  There were no short-term  borrowings against
                  bank lines of credit as of June 24, 1998 or June 25, 1997.

                  The carrying amount of short-term borrowings approximates fair
                  value  because  of their  short-term  maturity.  As such,  the
                  Company is not  exposed to a  significant  amount of  interest
                  rate risk.

          (b)     Interest Rate Swap: The Company has entered into interest rate
                  swap  agreements  to reduce  the  impact of  changes in rental
                  payments  on retail  locations,  distribution  facilities  and
                  manufacturing  facilities  that have a lease  term of 25 years
                  and whose primary rent expense  fluctuates with the commercial
                  paper (CP) interest  rate.  At June 24, 1998,  the Company had
                  outstanding  four  interest  rate  swap  agreements,  having a
                  notional  principal  amount  of $50.0  million  each,  with an
                  investment  bank.  These  agreements  effectively  change  the
                  Company's  exposure on its leased  real  estate with  floating
                  rental  payments  to fixed  rental  payments  based on a 7.19%
                  interest  rate.  The interest rate swap  agreements  mature on
                  June 30, 2004,  2005, 2006 and 2007. The Company is exposed to
                  credit  loss in the  event of  nonperformance  by the  counter
                  party to these  interest rate swap  agreements.  However,  the
                  Company  does not  anticipate  non-performance  by the counter
                  party.

                  Since current  short-term  interest rates at June 24, 1998 are
                  below  the  7.19%  rate  of  these  contracts,  the  estimated
                  negative value of these swaps was approximately $15.6 million.

                  The table below presents notional amounts and weighted average
                  interest rates by contractual maturity dates. Notional amounts
                  are used to calculate the contractual payments to be exchanged
                  under the contracts.  Weighted  average variable receive rates
                  are based on implied  forward  rates in the yield curve at the
                  reporting date.




                                      F-18
<PAGE>


6.       Financing, continued

<TABLE>
<CAPTION>
                                                          Expected Maturity Dates
                                                                                        There-
                                              1999     2000     2001    2002     2003   after     Total
                                              ----     ----     ----    ----     ---- --------    -----
                                                                 Amounts in millions
                <S>                           <C>      <C>      <C>     <C>      <C>      <C>      <C>
                Interest Rate Swaps
                  Variable to Fixed       $      -        -        -       -        -      200      200
                  Average Pay Rate        %   7.19     7.19     7.19    7.19     7.19     7.07     7.08
                  Average Receive Rate    %   5.80     5.84     5.91    5.96     6.01     6.05     6.00
</TABLE>

7.       Stock Compensation Plans

         The Company has an employee stock purchase  plan,  long-term  incentive
         stock  compensation  plans and a  performance  based stock option plan.
         Under SFAS 123,  purchase  discounts  for the employee  stock  purchase
         plan, the fair value at date of grant for the long-term incentive stock
         compensation  plans and the  performance  based  stock  option plan are
         charged to compensation  costs over the vesting or performance  period.
         The fair value of the fiscal  1997 grant  under the  performance  based
         stock  option  plan was  estimated  on the date of the grant  using the
         Black-Scholes  option  pricing model under the  following  assumptions:
         risk-free interest rate of 7.0%; dividend yield of 2.8%; expected lives
         of 7 years; and volatility of .225.

         Compensation  costs for these  stock  compensation  plans  resulted  in
         income  of $1.4  million  in 1998,  primarily  due to the  reversal  of
         compensation  expense previously  recognized for restricted shares that
         did not vest.  Compensation  costs  charged  against  income  was $10.1
         million in 1997 and $5.7 million in 1996.

          (a)     Stock  Purchase Plan: The Company has a stock purchase plan in
                  effect  for  associates.  Under  the terms of this  Plan,  the
                  Company may grant options to purchase  shares of the Company's
                  common  stock at a price not less than the  greater  of 85% of
                  the fair  value at the date of grant or $1.00.  During  fiscal
                  year 1996,  1,069,251 shares  (pre-split) of common stock were
                  sold to associates at an aggregate  price of  $54,531,801.  On
                  October 2, 1996, the shareholders approved an amendment to the
                  Revised Winn-Dixie Stock Purchase Plan for Employees, so as to
                  make an additional  2,000,000  shares of the Company's  common
                  stock  available for sale.  There are 2,392,626  shares of the
                  Company's  common  stock  available  for the grant of  options
                  under the Plan.




                                      F-19
<PAGE>


7.       Stock Compensation Plans, continued

                  Loans to associates  for the purchase of the Company's  common
                  stock are reported in the financial  statements as a reduction
                  of Shareholders' Equity, rather than as a current asset. Loans
                  outstanding  were  $3,087,000 and $11,834,000 at June 24, 1998
                  and June 25, 1997, respectively.

          (b)     Stock Compensation  Plans: The Company has long-term incentive
                  stock  compensation  plans.  Under these  programs the Company
                  issues  restricted  shares of the  Company's  common  stock to
                  eligible management  associates.  Restricted shares issued and
                  the  weighted  average  fair  value on the  grant  date are as
                  follows:  149,743  shares  ($37.25)  in 1998  (118,200  shares
                  forfeited);  150,338 shares  ($35.21) in 1997 (119,283  shares
                  forfeited);  and 42,076 shares  ($27.88) in 1996 (3,626 shares
                  forfeited).  The vesting of these shares are  contingent  upon
                  certain  specified  goals  being  attained  over a three  year
                  period.

          (c)     Stock  Option Plan:  Under the  Company's  Key Employee  Stock
                  Option Plan,  2,000,000  shares of the Company's  common stock
                  were made  available for grant at an exercise price of no less
                  than the market value at date of grant.  Options granted under
                  this performance based stock option plan are earned over a two
                  year period, if certain  performance  goals are attained.  The
                  options  for  226,000  shares  granted in 1992 at an  exercise
                  price of $21.063  have been earned and will expire on December
                  31, 1998. The options for 466,000 shares granted in 1994 at an
                  exercise  price of $22.438 have also been earned and expire on
                  January 15, 2001.

                  On July 29,  1996,  the  Compensation  Committee  approved the
                  grant of options for 237,000 shares,  effective June 19, 1996,
                  at an exercise  price of $34.625 ($9.84 fair value of option).
                  As of June 24,  1998,  options  for  32,000  shares  have been
                  forfeited.  Of these options granted,  102,500 would have been
                  exercisable  on June 24,  1998,  but were  not  earned.  These
                  options  will now  become  exercisable  on June 30,  1999,  if
                  earned.  The remaining 102,500 shares will become  exercisable
                  on June 28, 2000, if earned.  These options  expire on January
                  15, 2003.





                                      F-20
<PAGE>


7.       Stock Compensation Plans, continued

                  Changes in options  under these  plans  during the years ended
                  June 24,  1998,  June 25,  1997  and  June 26,  1996,  were as
                  follows:

<TABLE>
<CAPTION>
                                                                                                      Weighted
                                                                                                      Average
                                                                              Number of             Option Price
                                                                               Shares                Per Share
                                                                         --------------------    -------------------


                  <S>                                                           <C>            <C>       <C>            
                  Outstanding - June 28, 1995........................            876,000       $         20.13
                  Granted............................................                  -       $
                                                                                                             -
                  Exercised..........................................           (236,000)      $         14.94
                  Forfeited..........................................            (10,000)      $         22.44
                                                                            -------------           -----------
                  Outstanding - June 26, 1996........................            630,000       $         22.04
                  Granted............................................            237,000       $         34.63
                  Exercised..........................................           (142,000)      $         21.97
                  Forfeited..........................................            (22,000)      $         34.63
                                                                            -------------           -----------
                  Outstanding - June 25, 1997........................            703,000       $         25.90
                  Granted............................................                  -       $             -
                  Exercised..........................................           (361,000)      $         22.11
                  Forfeited..........................................            (10,000)      $         34.63
                                                                            -------------           -----------
                  Outstanding - June 24, 1998........................            332,000       $         29.76
                                                                            =============           ===========
                  Exercisable  - June 24, 1998.......................            127,000       $         21.90
                                                                            =============           ===========
                  Shares available for additional grant..............            723,000
                                                                            =============
</TABLE>

                  The number of shares  exercisable  and their weighted  average
                  exercise price at the end of the year are as follows:  127,000
                  shares ($21.90) in 1998;  488,000 shares ($22.05) in 1997; and
                  389,000 shares ($21.67) in 1996. At June 24, 1998, the 332,000
                  options  outstanding have a weighted average  contractual life
                  of 4.3 years.

8.       Leases

          (a)     Leasing  Arrangements:  There were  1,439  leases in effect on
                  store  locations  and other  properties  at June 24, 1998.  Of
                  these  1,439  leases,  37 store  leases  and 2  warehouse  and
                  manufacturing   facility  leases  are  classified  as  capital
                  leases.  Substantially all store leases will expire during the
                  next twenty years and the warehouse and manufacturing facility
                  leases will expire during the next twenty-five years. However,
                  in the normal  course of business,  it is expected  that these
                  leases  will  be  renewed  or  replaced  by  leases  on  other
                  properties.



                                      F-21
<PAGE>


8.       Leases, continued

                  The rental  payments  on  substantially  all store  leases are
                  based on a minimum  rental plus a  contingent  rental which is
                  based  on a  percentage  of the  store's  sales in  excess  of
                  stipulated  amounts.  Most  of the  Company's  leases  contain
                  renewal options for five-year periods at fixed rentals.

          (b)     Leases:  The  following is an analysis of the leased  property
                  under capital leases by major classes:

<TABLE>
<CAPTION>
                                                                                          Asset balances at
                                                                               June 24, 1998       June 25, 1997
                                                                              ---------------     ---------------
                                                                                       Amounts in thousands

                  <S>                                                    <C>        <C>                  <C>
                  Store facilities....................................   $          53,991               59,646
                  Warehouses and manufacturing facilities.............              15,722               15,722
                                                                               ------------          -----------
                                                                                    69,713               75,368
                  Less: Accumulated amortization......................              36,568               37,090
                                                                               ------------          -----------
                                                                          $         33,145               38,278
                                                                               ============          ===========
</TABLE>

                  The  following is a schedule by year of future  minimum  lease
                  payments under capital and operating leases, together with the
                  present value of the net minimum lease payments as of June 24,
                  1998.

<TABLE>
<CAPTION>
                                                                                Capital                Operating
                                                                                       Amounts in thousands
                  <S>                                                     <C>    <C>                   <C>
                  Fiscal Year:
                      1999.............................................   $       9,334                  330,721
                      2000.............................................           9,214                  326,064
                      2001.............................................           9,220                  321,201
                      2002.............................................           9,280                  316,986
                      2003.............................................           9,259                  312,999
                      Later years......................................          49,537                3,120,170
                                                                             -----------           --------------
                  Total minimum lease payments.........................          95,844                4,728,141
                                                                                                   ==============

                  Less:  Amount representing estimated
                          taxes, maintenance and insurance
                          costs included in total minimum
                          lease payments...............................           1,744
                                                                             -----------
                  Net minimum lease payments...........................          94,100
                  Less:  Amount representing interest..................          42,612
                                                                             -----------
                  Present value of net minimum lease
                    payments...........................................   $      51,488
                                                                             ===========
</TABLE>


                                      F-22
<PAGE>


8.       Leases, continued

                  Rental  payments  under  operating  leases  including,   where
                  applicable,  real  estate  taxes  and  other  expenses  are as
                  follows:

                                                 1998       1997       1996
                                                 ----       ----       ----
                                                    Amounts in thousands

                  Minimum rentals...........  $ 307,289    276,259    254,705
                  Contingent rentals........      1,869      2,618      3,320
                                               ---------  ---------  ---------
                                              $ 309,158    278,877    258,025
                                               =========  =========  =========

9.       Commitments and Contingent Liabilities

          (a)     Associate Benefit Programs:  The Company has  noncontributory,
                  trusteed  profit  sharing  retirement  programs  which  are in
                  effect  for  eligible   associates   and  may  be  amended  or
                  terminated at any time.  Charges to earnings for contributions
                  to the  programs  amounted  to  $67,250,000,  $62,250,000  and
                  $62,200,000 in 1998, 1997 and 1996, respectively.

                  In addition to providing profit sharing benefits,  the Company
                  makes group  insurance  available to early  retirees  from the
                  time  they  retire   until  age  65  when  they   qualify  for
                  Medicare/Medicaid.   Currently,   the  early   retiree   group
                  constitutes  88  associates.  This group of retirees bears the
                  entire  costs  of  this  plan,  which  is  maintained  totally
                  separate from the Company's  regular group insurance plan. The
                  Company reserves the right to modify these benefits.

          (b)     Defined  Benefit Plan:  The Company has a Management  Security
                  Plan (MSP),  which is a  non-qualified  defined  benefit  plan
                  providing  disability,  death and  retirement  benefits to 611
                  qualified  active  associates  of the  Company  and 408 former
                  participants.   Total  MSP  cost  charged  to  operations  was
                  $5,406,000,  $5,485,000 and $4,942,000 in 1998, 1997 and 1996,
                  respectively.  The  projected  benefit  obligation at June 24,
                  1998 was  approximately  $41,095,000.  The effective  discount
                  rate used in  determining  the net  periodic MSP cost was 8.0%
                  for 1998, 1997 and 1996.

                  Life  insurance  policies,  which  are not  considered  as MSP
                  assets for liability accrual  computations,  were purchased to
                  fund the MSP payments.  These insurance  policies are shown on
                  the  balance  sheet at their  cash  surrender  values,  net of
                  policy loans aggregating $183,771,000 and $170,479,000 at June
                  24, 1998 and June 25, 1997, respectively.



                                      F-23
<PAGE>


9.       Commitments and Contingent Liabilities, continued

                  During  1998,  the  Company   phased-out  all  life  insurance
                  policies  previously held on a broad-based  group of qualified
                  associates,  which had no  material  effect  on the  Company's
                  consolidated financial statements. At June 25, 1997, insurance
                  policies  were  shown  on the  balance  sheet  at  their  cash
                  surrender value, net of policy loans aggregating $302,055,000.

          (c)     Supplemental  Retirement  Plan:  The  Company  has a  deferred
                  compensation   Supplemental  Retirement  Plan  in  effect  for
                  eligible management associates.  At June 24, 1998 and June 25,
                  1997,  the  Company's  liability  under this program was $11.8
                  million and $7.6 million, respectively.

          (d)     Litigation:  There are pending  against  the  Company  various
                  claims and lawsuits  arising in the normal course of business,
                  including  suits  charging  violations of certain civil rights
                  laws and various proceedings  arising under federal,  state or
                  local regulations protecting the environment.

                  Among the suits  charging  violations  of certain civil rights
                  laws,  there are actions which purport to be class actions and
                  which allege sexual  harassment,  retaliation and/or a pattern
                  and practice of  race-based  and  gender-based  discriminatory
                  treatment of employees and  applicants.  The plaintiffs  seek,
                  among other relief, certification of the suits as proper class
                  actions, declaratory judgment that the Company's practices are
                  unlawful, back pay, front pay, benefits and other compensatory
                  damages, punitive damages, injunctive relief and reimbursement
                  of attorneys' fees and costs. The Company is committed to full
                  compliance with all applicable  civil rights laws.  Consistent
                  with this commitment,  the Company has firm and  long-standing
                  policies in place prohibiting  discrimination  and harassment.
                  The Company denies the  allegations of the various  complaints
                  and is vigorously defending the actions.

                  While the ultimate  outcome of litigation  cannot be predicted
                  with  certainty,  in the opinion of  management  the  ultimate
                  resolution of these  actions will not have a material  adverse
                  effect on the  Company's  financial  condition  or  results of
                  operations.

10.      Related Party Transactions

         The  Company is  self-insured  for  purposes  of  employee  group life,
         medical,  accident and sickness insurance,  with American Heritage Life
         Insurance Company, a related party, providing  administrative  services
         and  expenses  for  medical  and  accident   claims.   Total   payments
         aggregating $29,440,000, $29,995,000 and $25,001,000 were made in 1998,
         1997 and 1996, respectively.



                                      F-24
<PAGE>


11.      Consolidation and Distribution Facility Closing

          During 1998,  the Company began its  consolidation  of the  accounting
          departments to  corporate   headquarters.   The  opening  of  our  new
          distribution  facility  in  Raleigh,  North  Carolina, resulted in the
          closing and the sale of the older  Raleigh  distribution  center;  the
          closing of our Greenville,  South Carolina distribution facility which
          will  be  converted  into a  general  merchandise  facility;  and  the
          reorganization  of our Raleigh and  Charlotte  divisions.  The Company
          experienced  a  non-recurring  administrative  charge  totaling  $18.1
          million  (after tax,  $11.0 million or $0.07 per diluted share) due to
          these activities.

12.      Quarterly Results of Operations (Unaudited)

         The  following  is a summary  of the  unaudited  quarterly  results  of
         operations for the years ended June 24, 1998 and June 25, 1997:

<TABLE>
<CAPTION>
                                                                              Quarters Ended
                                                         Sept. 17        Jan. 7          April 1        June 24
                      1998                              (12 Weeks)     (16 Weeks)      (12 Weeks)     (12 Weeks)
                      ----                              ----------     ----------      ----------     ----------
                                                               Dollars in thousands except per share data
         <S>                                      <C>    <C>             <C>            <C>            <C>
         Net sales.............................   $      3,056,203       4,150,243      3,160,878      3,250,161
         Gross profit on sales.................   $        822,823       1,095,557        858,214        847,323
         Net earnings..........................   $         47,510          56,128         60,972         34,010
         Basic earnings per share..............   $           0.32            0.38           0.41           0.23
         Diluted earnings per share............   $           0.32            0.38           0.41           0.22
         Net LIFO charge (credit)..............   $          3,055           3,055          1,222        (14,743)
         Net LIFO charge (credit) per diluted
           share...............................   $            .02             .02            .01          (0.10)
         Dividends per share...................   $           0.17            0.34          0.255          0.255
         Market price range....................   $    39.25-33.69     44.13-35.38    59.25-43.56    48.69-36.56
</TABLE>



<TABLE>
<CAPTION>
                                                                              Quarters Ended
                                                         Sept. 18        Jan. 8          April 2        June 25
                      1997                              (12 Weeks)     (16 Weeks)      (12 Weeks)     (12 Weeks)
                      ----                              ----------     ----------      ----------     ----------
                                                               Dollars in thousands except per share data

         <S>                                      <C>    <C>             <C>            <C>            <C> 
         Net sales ............................   $      2,985,702       4,057,174      3,114,029      3,061,810
         Gross profit on sales ................   $        740,723         989,319        790,258        795,553
         Net earnings .........................   $         47,033          47,687         57,343         52,380
         Basic and diluted earnings per share .   $           0.31            0.32           0.38           0.35
         Net LIFO charge (credit) .............   $          3,666           3,666          3,055         (8,763)
         Net LIFO charge (credit) per diluted
           share...............................   $           0.03            0.02           0.02          (0.06)
         Dividends per share ..................   $           0.16            0.32           0.24           0.24
         Market price range ...................   $    36.13-32.75     35.38-31.13    34.13-29.88    42.38-32.00
</TABLE>




                                      F-25
<PAGE>


12.        Quarterly Results of Operations (Unaudited), continued

           During 1998 and 1997,  the fourth  quarter  results  reflect a change
           from  the  estimate  of  inflation  used in the  calculation  of LIFO
           inventory  to the actual rate  experienced  by the Company of 1.2% to
           (0.7)% and 1.9% to 0.2%, respectively.

<TABLE>
<CAPTION>
                                                                           Fourth Quarter Results of Operations

                                                                          June 24, 1998           June 25, 1997
                                                                           (12 Weeks)              (12 Weeks)
                                                                       --------------------    ---------------------
                                                                                   Amounts in thousands

         <S>                                                         <C>        <C>                     <C>
         Net sales...............................................    $          3,250,161               3,061,810
         Cost of sales...........................................               2,402,838               2,266,257
                                                                         -----------------       -----------------
         Gross profit on sales...................................                 847,323                 795,553
         Operating & administrative expenses.....................                 798,444                 738,958
         Consolidation and distribution facility closing.........                  18,080                       -
                                                                         -----------------       -----------------
         Operating income........................................                  30,799                  56,595
         Cash discounts and other income, net....................                  28,444                  29,957
         Interest expense........................................                  (4,827)                 (4,707)
                                                                         -----------------       -----------------
         Earnings before income taxes............................                  54,416                  81,845
         Income taxes............................................                  20,406                  29,465
                                                                         -----------------       -----------------
         Net earnings............................................    $             34,010                  52,380
                                                                         =================       =================
</TABLE>





                                      F-26
<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                         ON FINANCIAL STATEMENT SCHEDULE



The Shareholders and Board of Directors
Winn-Dixie Stores, Inc.:


Under date of July 27, 1998, we reported on the  consolidated  balance sheets of
Winn-Dixie Stores,  Inc. and subsidiaries as of June 24, 1998 and June 25, 1997,
and the related consolidated  statements of earnings,  shareholders' equity, and
cash flows for each of the years in the  three-year  period ended June 24, 1998,
as contained in the annual  report on Form 10-K for the year 1998. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related  consolidated  financial statement schedule as listed in the
accompanying  index on page 15 of the  annual  report  on Form 10-K for the year
1998. This consolidated  financial  statement  schedule is the responsibility of
the Company's  management.  Our  responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.

In our opinion, the consolidated  financial statement schedule,  when considered
in relation to the basic  consolidated  financial  statements  taken as a whole,
presents fairly, in all material respects, the information set forth therein.




                                                     KPMG Peat Marwick LLP



Jacksonville, Florida
July 27, 1998





                                      S-1
<PAGE>


                                                                     Schedule II


                    WINN-DIXIE STORES, INC. AND SUBSIDIARIES
                 Consolidated Valuation and Qualifying Accounts
           Years Ended June 24, 1998, June 25, 1997 and June 26, 1996
                             (Amounts in thousands)


<TABLE>
<CAPTION>
                                                          Balance at      Additions     Deductions      Balance at
                                                          beginning       charged          from             end
                     Description                           of year        to income      reserves         of year
------------------------------------------------------   -------------    -----------   ------------    ------------

<S>                                                           <C>             <C>            <C>            <C>
Year ended June 24,1998:
Reserves deducted from assets to which they apply:
   Allowance for doubtful receivables                 $         1,699         13,995         13,071           2,623
                                                         =============    ===========   ============    ============

Reserves  not  deducted  from  assets:
   Reserves for insurance claims and self-insurance:
     - Current                                        $        60,219         87,893         76,333          71,779
     - Noncurrent                                              94,783              -          1,269          93,514
                                                         -------------    -----------   ------------    ------------
                                                      $       155,002         87,893         77,602         165,293
                                                         =============    ===========   ============    ============


Year ended June 25,1997:
Reserves deducted from assets to which they apply:
   Allowance for doubtful receivables                 $         1,860         14,318         14,479           1,699
                                                         =============    ===========   ============    ============

Reserves  not  deducted  from  assets:
   Reserves for insurance claims and self-insurance:
     - Current                                        $        61,760         81,194         82,735          60,219
     - Noncurrent                                              97,209              -          2,426          94,783
                                                         -------------    -----------   ------------    ------------
                                                      $       158,969         81,194         85,161         155,002
                                                         =============    ===========   ============    ============


Year ended June 26,1996:
Reserves deducted from assets to which they apply:
   Allowance for doubtful receivables                 $         1,105         20,150         19,395           1,860
                                                         =============    ===========   ============    ============

Reserves  not  deducted  from  assets:
   Reserves for insurance claims and self-insurance:
     - Current                                        $        59,373         85,744         83,357          61,760
     - Noncurrent                                             103,384          2,039          8,214          97,209
                                                         -------------    -----------   ------------    ------------
                                                      $       162,757         87,783         91,571         158,969
                                                         =============    ===========   ============    ============
</TABLE>






                                      S-2
<PAGE>