Ingles Sees Double-digit Q4 Sales Gains

Ingles Markets, Inc. yesterday posted a net sales increase of 13.0 percent, to $842.8 million for the quarter ended Sept. 27, 2008, vs. $746.0 million for the year-ago period.

Grocery segment comparable-store sales climbed 13.0 percent in the quarter thanks to a rise in average weekly customer visits and the average purchase amount, Ingles said. Excluding gas, comps were up 7.8 percent compared with last year's fourth quarter.

Net income for the fourth quarter, however was $10.5 million, vs. $14.2 million for the 2007 quarter.

Gross profit for the quarter came to $191.6 million, $12.1 million higher than the year-ago period. Gross profit as a percentage of sales was 22.8 percent, compared with 24.1 percent last year. Excluding lower-margin gasoline sales, grocery segment gross profit as a percentage of sales was 26.6 percent vs. 26.9 percent for the comparable 2007 quarter.

Hurricane-caused disruptions in retail gasoline supplies in September, and the subsequent price volatility, hurt fourth-quarter gross profits, according to Ingles. The grocer sold much of its gasoline at cost during the height of the crisis, and could only offer reduced supply at many of its fuel stations. Ingles estimates gross profit losses of about $1.5 million during that time period. Fluid dairy gross profits were also down.

Total operating expenses were $165.0 million for the fourth quarter of fiscal 2008 compared with $146.3 million last year, growth that was partly attributable to eight stores that opened or were remodeled during the third and fourth quarters of fiscal year 2008.

"We opened or remodeled more stores in 2008 than we have in a number of years," noted c.e.o. Robert P. Ingle. "This affected our short-term results, but put us in good position to expand market share and enhance our customers' shopping experience in the future."

Ingle emphasized that the company as made a conscious decision to forgo short-term profits for longer-term benefits. "During the fourth quarter, we absorbed many cost increases to keep our prices low," he explained. "We believe this strategy is important to maintain customer loyalty and to help our customers during these uncertain economic times."

For the full fiscal year, net income was $52.1 million vs. $58.6 million for the previous fiscal year 2007. Among the major factors affecting comparative net income were energy costs, weather-related disruptions in retail gasoline operations, and higher costs related to the retailer's accelerated store expansions in the year, Ingles said. Capital expenditures nearly doubled to $248.8 million in fiscal 2008 compared with the previous year.

Despite the year-over-year decrease, Ingles said that fiscal year 2008 net income was still the second-highest in its history.

Ingles also reported its 44th consecutive year of sales growth, with sales rising 13.6 percent to $3.24 billion for the year ended Sept. 27, 2008, vs. $2.85 billion for the year-ago period. This was the first time in the company's history that sales surpassed $3 billion. Fourth-quarter sales came to $842.8 million, a 13.0 percent rise from last year.

Sales rose in every major grocery segment product category and in the fluid dairy segment in fiscal 2008. Year over year, both average weekly customer visits and average purchase amounts grew.

Ingles opened two new stores in 2008, closed two older stores, and completed 10 replacement or remodeled stores. Retail square footage increased to 10.2 million square feet at Sept. 27, 2008, vs. 9.7 million square feet in the year-ago period.

Gross profit for the fiscal year increased $61.6 million, or 9.0 percent, to $747.9 million, or 23.1 percent of sales, compared with $686.2 million, or 24.1 percent of sales, last year.

The growth in grocery segment gross profit dollars was mainly because of higher sales volume, Ingles noted. Grocery segment gross profit margin was lower for fiscal 2008 primarily due to higher sales growth in the gasoline department, which has the lowest gross margin. Excluding gasoline sales, grocery segment gross profit margin rose to 26.9 percent for fiscal year 2008, vs. 26.7 percent for fiscal year 2007. Fluid dairy gross profits declined $2.9 million as a result of cost and competitive factors.

The company attributed increased operating and administrative expenses to higher distribution, energy, and insurance expenses, along with increased credit/debit card processing and supply costs, but added that many of these cost increases weren't passed on to its shoppers in the form of higher sales prices. "The company believes it is important to maintain customer loyalty and overall sales growth during the current uncertain economic conditions," the grocer said.

For fiscal year 2009, Ingles plans to open 12 new, replacement, or remodeled stores, and add 10 fuel stations either at existing stores or in conjunction with its new, replacement and remodeled stores. Most of the projects are already underway, with some expenditures included in fiscal year 2008.

Asheville, N.C.-based Ingles operates 197 supermarkets. As well as its supermarket operations, the company also operates 73 neighborhood shopping centers, all but 16 of which contain an Ingles store.
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