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GASOLINE, PHARMACY BOOST INGLES' SALES

Asheville, N.C.-Improved sales in pharmacy and fuel and the closure of several competing Winn-Dixie stores helped spur a sales increase of 8.4% during the fiscal fourth quarter for Ingles Markets here, the company said last week.In a conference call discussing results for the quarter and fiscal year, which ended Sept. 24, James Lanning, president, said that 35 Winn-Dixie stores within eight miles

Asheville, N.C.-Improved sales in pharmacy and fuel and the closure of several competing Winn-Dixie stores helped spur a sales increase of 8.4% during the fiscal fourth quarter for Ingles Markets here, the company said last week.

In a conference call discussing results for the quarter and fiscal year, which ended Sept. 24, James Lanning, president, said that 35 Winn-Dixie stores within eight miles of an Ingles location closed during the quarter, with eight re-opening under a new banner.

"Most of the Winn-Dixies that went away weren't doing a whole lot of business," Lanning said, but Ingles stores in those areas recorded higher comparable-store sales gains than the overall chain average of 7.5%.

Profits, however, decreased to $9.4 million in the fourth quarter and $25.6 million for the fiscal year, compared with $10.8 million and $28.8 million, respectively, in fiscal 2004. The declines were mainly a result of gains from sales of real estate in the prior period, said Ronald B. Freeman, chief financial officer. Income from operations increased by $5.6 million in 2005, due mainly to higher overall sales.

Gross profit as a percentage of sales declined seven basis points for the quarter and 36 basis points for the fiscal year. Lower profits reflected a greater percentage of sales from lower-margin gasoline and pharmacy departments, Freeman said.

Quarterly sales totaled $590.7 million, and sales for the fiscal year of $2.3 billion increased by 6.4%. Comp-store sales grew by 6.1% for the year, but Freeman told analysts he expected that sales would likely moderate in fiscal 2006 as Ingles laps two years of comparable gains.

"We've had two years of really strong comp-store sales growth, and à it's ambitious to keep that going," he said.

In its annual 10-K report filed with the Securities and Exchange Commission, Ingles said it would emphasize growth in higher margin areas such as deli, bakery and other perishable departments in fiscal 2006, as well as count on higher sales from remodeled locations.

Ingles expects capital expenditures of about $75 million in fiscal 2006 vs. $59.9 million in fiscal 2005. It opened four new stores, did two major remodels, purchased three store sites and added fuel centers to five locations during fiscal 2005. In 2006, Ingles plans to open five new replacement stores and add fuel centers at three stores, Freeman said.

A formal investigation by the SEC concerning certain vendor contracts between 2002 and 2004, with which the company is cooperating, is ongoing, Ingles officials said. They have not been in contact with the agency since August.

Ingles operates 197 stores in six states.