Ingles Trims Capital Spending on New Stores for 2010

MARK HAMSTRA

ASHEVILLE, N.C. — Ingles Markets here said the weak economy has led the company to ratchet back its spending outlook for the current year.

In a conference call with analysts last week discussing third-quarter results, Ingles said it has spent only $65.3 million in the first nine months of the current year, vs. $390 million over the previous two years, when the company opened or redeveloped 22 locations.

“Economic conditions have resulted in a longer ramp-up time for these 2008 and 2009 store development projects and has made us more deliberate in our development plans until economic conditions improve,” said Ronald B. Freeman, chief financial officer.

The company plans to spend a total of about $90 million in the current year, he added. During the first nine months of fiscal 2010, Ingles opened two new units and one remodeled store.

Ingles also said store traffic continued to accelerate in the most recent quarter, driving sales gains despite a lower average ticket.

Net income for the three-month third quarter, which ended June 26, more than doubled, to $11.7 million, compared with $4.7 million in the year-ago third quarter. Comparable-store sales were up 0.8% in the quarter, excluding gasoline, propelled by a 7.9% gain in the number of transactions. The average transaction size, however, fell 7%. Total sales for the quarter were up 3.5%, to $856.1 million, vs. year-ago results.

“The trend in total and average transactions has followed this pattern for several recent quarters and is indicative of the effective economic recession on consumer spending,” said Freeman. “That is more trips to the store but spending less on each trip.”

Sales increases are “broad-based across all product lines,” he added, with faster growth in private label and prepared foods “consistent with industrywide trends.”

Through three quarters, the company said net income fell 1.3% to $23.3 million, on a sales gain of 4.7%, to $2.53 billion. Comparable-store sales for the year-to-date period were up 0.9%, including a 10% increase in number of transactions and a 7.7% decrease in average transaction size, all excluding gasoline.

Gross margin as a percentage of sales — excluding gasoline sales — was basically flat, at 26% in the most recent quarter, vs. 25.9% in the year-ago period.

The company said that although recent deflation has decreased, “price competition and customer purchasing habits continue to influence margins.”

Ingles currently operates 202 supermarkets in the Southeast, vs. 201 at the end of the third quarter a year ago.

Q3 RESULTS

*EXCLUDING GASOLINE.

**CLASS A SHARES, DILUTED.