ASHEVILLE, N.C. — Bills for a busy schedule of store openings contributed to a 12.3% decline in first-quarter net income for Ingles Markets, the retailer here said last week.
The results — which accompanied a slower pace of sales gains that Ingles attributed to a softening economy — prompted some debate between company officials and an investor during a conference call. At issue was whether Ingles' capital spending — approximately $375 million over the past two fiscal years, mainly for a fleet of new and replacement stores — was producing an acceptable near-term return on investment.
Ronald Freeman, chief financial officer for Ingles, defended the strategy, saying that larger, renovated stores were necessary to compete over the long term. The company took advantage of real estate opportunities when it had them, he added.
“We believe it's important to keep the store base modern. It's something you have to do if you want to remain successful in this business,” Freeman said. “We had some great opportunities to develop some new stores in the past couple of years, and it was very important for us to do that.”
Ingles reported total operating expenses of $167.9 million in the fiscal first quarter, which ended Dec. 27 — an increase of 11.1% over the same period a year ago — due mainly to expenses around personnel and support for 11 new stores that opened during the previous nine months.
The company spent $60.2 million in capital expenditures during the quarter, when it opened two new stores and one replacement store and added fuel centers to five stores. The company intends to open nine new stores and add four fuel stations during the remainder of the fiscal year.
For the quarter, Ingles reported net earnings of $11.1 million on sales of $804.9 million. Overall sales increased by 3.6%, and comparable-store sales, excluding fuel, improved by 5.4%.