Improved Sales Volume Lifts Ingles 2007-12-10

JON SPRINGER

ASHEVILLE, N.C. — Investments in larger stores and in competitive shelf prices continue to improve volume for Ingles Markets.

The retailer here last week said sales totaled $2.85 billion for the 52-week fiscal year that ended Sept. 29. That represented a 9.2% increase from a 53-week fiscal year in 2006. The increased sales volume helped lift yearly profits to $58.6 million, a 37.7% increase over 2006. Quarterly sales of $746 million increased 3.2% — 9.6% when adjusted for an extra week in the fourth quarter last year — with comparable-store sales rising by 9.3%.

Ingles said store visits and average ticket both increased during the fourth quarter. A 16% increase in gasoline sales brought gross profits as a percentage of sales down to 24.1% from 24.6% in the same period last year, but improved overall volumes helped lift net profits by 23.3% to $14.2 million in the quarter.

Ingles spent $127 million on capital projects in fiscal 2007, accounting for two new stores, five replacement or remodeled stores and 12 land parcels for future store development. The company last week said it would spend about $105 million this fiscal year on projects, including 10 new or replacement stores and 10 new fuel centers.

“Our focus has been and will continue to be on driving top-line sales,” Ronald Freeman, chief financial officer, said in a conference call discussing results.

Freeman explained that increased volumes brought an increase in profit dollars, but that higher sales of lower-margin gasoline, as well as price increases not fully passed along to consumers, brought margins down. Better sales of prepared food as part of the overall mix helped offset the margin pressure slightly, he added.

Drought conditions in the Southeast have contributed to increases in feed costs, which in turn have led to increases in prices for meats, Freeman said. “It's been tough, there's no question about it,” he said. “But I don't think we are seeing anything down here that is markedly different from what you are seeing nationwide.”