Ingles Markets Posts Higher Sales and Profits in Q2

ASHEVILLE, N.C. -- Southeastern chain Ingles Markets, Inc. said late last week that its net income jumped 72.5 percent to $9.4 million for the three months of its second quarter. Net sales were up 8.9 percent, while comparable store sales grew a healthy 8.0 percent.

"Sales growth like we've had during the second quarter and first six months of fiscal 2006 drive a lot of good things for our company," said c.e.o. Robert P. Ingle in a statement. "Margins are good and expense growth is less than sales growth. As a result, profits have increased. We pay close attention to current customer tastes and try to deliver those products in the best possible store environment. We are also pleased to put the SEC matter behind us without monetary penalty."

Last week Ingles also said it had reached a settlement with the Securities and Exchange Commission resolving a complaint related to certain vendor contracts entered into in fiscal years 2002 and 2003.

For the six months ended March 25, 2006, net income was $17.2 million, 63.3 percent higher than net income for the six months ended March 26, 2005. Net sales for the same period increased 10.2 percent, while comparable store sales grew 8.9 percent.

Ingles said sales growth was broad-based across its departments, with the largest percentage increases in gasoline and pharmacy. These departments experienced both volume growth and price increases, while sales growth in other departments was volume driven.

Easter sales will fall in the June quarter of fiscal 2006, Ingles noted. (Easter sales occurred in the March quarter of fiscal 2005.) The company estimated that comparable store sales increases are slightly higher, at 8.7 percent and 9.2 percent, for the March 2006 three- and six-month periods, respectively, adjusted for the effect of Easter sales.

Gross profit for the latest quarter increased 8.8 percent to $154.5 million over the second quarter of last year. Gross profit, as a percentage of sales, was 25.5 percent for both the quarter and the year ago period.

During the current quarter, lower margins in the gasoline and pharmacy departments were offset by sales and margin growth in high-volume grocery and meat departments, Ingles said.

Gross profit dollars for six months ended in March increased $24.1 million, or 8.5 percent, over the same period of fiscal 2005. Gross profit as a percentage of sales was 25.1 percent and 25.4 percent for the six months ended March 25, 2006 and March 26, 2005, respectively. Lower margins in gasoline and frozen foods attributed to competitive factors and promotional activity, accounted for much of the six-month margin decrease.

During the latest six-month period, Ingles completed one replacement store, opened a convenience store/car wash, and purchased four future store sites. Shortly after the quarter's end, it opened one new store and one replacement store, and closed a store. Capital expenditures for the March 2006 six-month period totaled $43.7 million.

For the balance of the fiscal year, Ingles expects to open one remodeled store, one replacement store and add four new fuel stations. Capital expenditures for the entire fiscal year are expected to be approximately $80 million, including expenditures for stores to open in fiscal 2007.

Ingles operates 197 supermarkets in six Southeastern states. In conjunction with its supermarket operations, the company also operates 74 neighborhood shopping centers, all but 17 of which contain an Ingles supermarket.
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