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CARD PROGRAM BUILT SALES: INGLES

ASHEVILLE, N.C. -- Ingles Markets here said last week it increased its first-quarter sales largely as a result of a new rewards card program it introduced at the beginning of the quarter, which ended Dec. 27.During a conference call with industry analysts to discuss the quarter's results, Brenda Tudor, Ingles' chief financial officer, said, "Obviously, the card was well received by our customers.

ASHEVILLE, N.C. -- Ingles Markets here said last week it increased its first-quarter sales largely as a result of a new rewards card program it introduced at the beginning of the quarter, which ended Dec. 27.

During a conference call with industry analysts to discuss the quarter's results, Brenda Tudor, Ingles' chief financial officer, said, "Obviously, the card was well received by our customers. Both customer traffic and average ticket price increased during the quarter."

Tom Outlaw, Ingles' vice president of sales and marketing, said the company's perishables departments -- its meat departments in particular -- had benefited most from the increased customer traffic and market-basket size generated by the card program.

However, the $1.4 million costs associated with the introduction of the card cut into the company's net income for the quarter.

"We had to completely retag our stores over a weekend," Tudor explained. "We had to sign up our customers.

"For the first two weeks of the card, we had people that we specifically assigned to many of these tables to get our customers signed up. Our goal was to have 80% of our customers signed up within the first month, and we did achieve that."

Also affecting the quarter's profits was a 60% decline in rental income to $600,000 stemming from an $11.7 million shopping center sale in September.

The sale, noted Tudor, will lead to more real-estate activity. "We will have a heavier emphasis on land purchases this year," she said.

Other topics covered in the call included:

The competitive environment. Outlaw said the company anticipates nine new Wal-Mart Supercenters opening in Ingles' market areas in the coming year, with four of them scheduled to open in the first quarter. He noted that the company currently competes with 96 Wal-Mart Supercenters.

Ingles' capital spending budget for the quarter and the rest of 2004.

Capital expenditures for the quarter totaled $27.3 million, according to Tudor. She said during the quarter the company completed two major remodel expansions and two minor remodels, purchased one new store site, and purchased a freestanding retail store leased to another retailer. In addition, she noted that Ingles completed its point-of-sale conversion and self-checkout rollout, and purchased $7.6 million in existing store equipment that was previously on an operating lease.

Capital expenditure plans for all of fiscal 2004 include investments of approximately $70 million, Tudor said. During the balance of 2004, the company plans to open two new stores, complete one major remodel, and add approximately eight fuel stations on existing sites, she noted. Ingles also plans to purchase six store sites for future store expansion, she added.

In the quarter, sales rose 7.9% to $534.3 million, and comparable-store sales grew 6.3%, but net income declined 43.8% to $1.8 million, vs. last year's first quarter.

1st-Quarter Results

Qtr Ended 12/27/03 12/28/02

Sales $534.3 million $495.1 million

Change +7.9%

Comp-store +6.3%

Net Income $1.8 million $3.2 million

Change -43.8%

Inc/Share 8 cents 14 cents

TAGS: Walmart