Winn-Dixie's shares shot up 12.84 percent yesterday after an analyst upgraded the grocer, citing its stable competitive environment and plan to boost profits. The stock closed yesterday at $17.49 on the New York Stock Exchange.

Friedman, Billings, Ramsey & Co. analyst Karen Short had boosted her rating on the Jacksonville, Fla. retailer to "Outperform" from "Market Perform" and her price target to $20 from $16. "While we realize the economic environment remains challenging in Florida, we believe the competitive environment remains stable and think the company continues to execute on plan to restore profitability and drive sales," Short said in a note to clients.

The upgrade comes after Lakeland, Fla.-based Publix Super Markets agreed earlier this month to buy 49 Albertsons stores in Florida from Albertson's LLC. Winn-Dixie said at the time it did not expect the sale to hurt its own performance.

Short suggested the Publix\Albertson's deal could actually help Winn-Dixie. She noted that the grocer already competes with 39 of the 49 stores to be acquired, and 19 of the 39 will be subleased to alternate format retailers, effectively eliminating the supermarket competitors in those locations.

She also observed that the Albertsons format tended to appeal to a lower-middle income demographic -- which is more consistent with the Winn-Dixie customer -- while Publix tends to appeal to a higher-income demographic.

Winn-Dixie operates 521 retail grocery locations in Florida, Alabama, Louisiana, Georgia, and Mississippi.