Ingles Q1 Total Sales, Comps Inch Up While Net Income Lags

Ingles Markets Inc. today reported first-quarter total sales of $1.08 billion for the three months ended Dec. 28, 2019, a 1.6% increase over the year-ago period. Comparable-store sales, excluding gasoline, climbed 2.4%.

The grocer’s net income came to $17.7 million for the December 2019 quarter, compared with $22.2 million last year, which Ingles attributed to $3.7 million in refinancing costs during Q1 that it said will lead to lower interest expense for future periods.The company added that gas gross profits were unusually high across the industry during the December 2018 quarter, and were lower in the December 2019 quarter.

“We were pleased with our sales growth during the important holiday period,” said Chairman Robert P. Ingle II. “We completed a successful long-term financing that will lower our interest cost for many years to come.”

Gross profit for the December 2019 quarter was $257.5 million, or 23.9% of sales, while gross profit for the December 2018 quarter was $258.4 million, or 24.3% of sales. The company again cited the unusually high gas gross profits for last year’s December quarter as the reason for the decline.

Operating and administrative expenses for the December 2019 quarter were $222 million, versus $218.7 million for the year-ago period. Higher personnel costs accounted for much of the increase, influenced by increased sales and ongoing high demand for labor, Ingles explained.

The company’s interest expense came to $11.9 million for the three-month period ended Dec. 28, 2019, compared with $12.2 million last year. Total debt at the end of December 2019 was $850 million, versus $880 million at the end of December 2018. During the December 2019 quarter, the grocer said that it refinanced $155 million of 5.75% debt with 10-year fixed rate-secured debt at 2.95%, incurring debt extinguishment costs of $3.7 million to wrap up the transaction.

Basic and diluted earnings per share for Ingles’ publicly traded Class A Common Stock were 90 cents and 87 cents, respectively, for the December 2019 quarter, compared with $1.12 and $1.09 per share, respectively, for the December 2018 quarter.

Capital expenditures were $31.1 million for the December 2019 quarter, compared with $71 million last year, when Ingles engaged in additional new store construction, store remodeling and property acquisitions. The company said that it expected total fiscal 2020 capital expenditures of between $120 million and $160 million.

Ingles went on to note that its financial resources, including a $175 million line of credit, of which $165 million is available, as well as other internal and anticipated external sources of funds, would be enough to meet planned capital expenditures, debt service and working capital requirements for the foreseeable future.

Asheville, N.C.-based Ingles operates 198 supermarkets in six southeastern states. Along with its supermarket operations, the company operates neighborhood shopping centers, most of which contain an Ingles supermarket, and also owns a fluid-dairy facility that supplies its own supermarkets and unaffiliated customers. Ingles is No. 24 on Progressive Grocer’s 2019 Super 50 list of the top grocers in the United States.