Ingles Posts Sales Gains, Boosts Cap-Ex

ASHEVILLE, N.C. — Ingles Markets here last week said it plans to continue increasing its capital expenditures over the next few years.

In a conference call discussing its fourth-quarter earnings, Robert P. Ingle, chief executive officer, said the company expects to spend $100 million in fiscal 2007, compared with $94.3 million in fiscal 2006 and $59.9 million in fiscal 2005.

“We found some great locations, and we have got some ambitious plans for some new stores,” he said. “So it's not necessarily driven by anything that's [happening] out there in the market right now — it's just good for our customer base and good for our company.”

The 197-store chain plans to open four replacement stores in 2007, remodel four others and add fuel stations at several store locations. In 2006, the company opened one new store and three replacement units, added 10 fuel centers and purchased land for future development.

Ronald Freeman, chief financial officer, said the bulk of spending will go to store remodelings. “We've got eight stores with some level of remodeling going on, and that's going to be the lion's share of it, as it always is.”

The company posted record sales and earnings for the fiscal year that ended Sept. 30, which it attributed to efforts to drive top-line results, combined with higher revenues from gas sales, despite increases in some expenses.

With the price of gasoline dropping, Ingle said the company anticipates a slowdown in overall sales. “With just the decrease in cost per gallon, it's pretty hard to see the kind of percentage increases we saw this year,” he said.

For the 14-week fourth quarter, net income rose 22.6% to $11.5 million on a sales increase of 22.4% to $723 million and a comparable-store sales increase of 5.9%, excluding gasoline. Net income for the 53-week year rose 60.3% to a record $42.6 million, with sales increasing 14.9% to a record high of $2.6 billion and comparable store sales up 7.9%, excluding gasoline.

Ingle said sales increased in every department during 2006. “We've expanded our product offerings and are building new stores that allow our customers to get what they need with one stop,” he explained.

Gallons of gasoline sold increased by 98%, the company said, and the average price per gallon increased approximately 10% compared with the fourth quarter of 2005. At the end of fiscal 2006, Ingles had 36 fuel centers, including 10 opened during the year.

Freeman said the company saw expenses increase in labor, along with utility and supply costs, increased costs to maintain store appearances, and increases in bank interchange fees. “Yet sales growth exceeded the increases in these expenses.

“Whenever possible, increases in controllable expenses were focused in those areas that increased sales, such as advertising and costs to improve the appearance and effective operation of our stores.”

The company doesn't have plans to sell off excess real estate, which would include 18 supermarkets that it does not occupy. “We receive inquiries on a regular basis, but we currently don't have sales contracts, and at the present time we've got adequate sources of capital and liquidity so we are not compelled to consider offers that we don't believe are adequate,” Freeman said.

The chain opened its second convenience store earlier this month in Woodfin, just north of here, following the opening earlier in the year of a store in Brevard, N.C. The company has no current plans for further expansion, Freeman said.

4TH-QUARTER RESULTS