Sales growth at Ingles Markets moderates in Q2

Ingles Markets reported a fiscal 2021 second-quarter sales uptick after notching double-digit gains a year ago, driven by consumer panic-buying in the early weeks of the COVID-19 pandemic.

For the quarter ended March 27, net sales rose 3.4% to $1.18 billion from $1.14 billion a year earlier, Ingles said yesterday. Grocery retail same-store sales edged up 2.6% year over year, excluding fuel. The Asheville, N.C.-based grocer noted in its 10-Q filing with the Securities and Exchange Commission that gasoline dollar sales and gallons sold were higher in the 2021 quarter versus the the prior-year period because of increased travel as pandemic restrictions have relaxed.

Average basket size grew 8.9% in the 2021 second quarter on a comparable-store basis despite a 6.4% decline in the number of transactions. “We believe that, because of the COVID-19 pandemic, customers have consolidated trips to our stores, resulting in a lower transaction count and a higher spend per visit,” Ingles stated in the 10-Q report.

In fiscal 2020, Ingles’ second-quarter net sales climbed 14% to $1.14 billion from $1 billion in the 2019 quarter, with retail comp-store sales up 17.5% excluding fuel. 

Ingles noted that the coronavirus crisis “has had a significant impact on the company’s operations” since the World Health Organization (WHO) declared COVID-19 a global pandemic on March 11, 2020. The United States followed two days later by declaring the virus a national emergency.

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“We continue to be pleased with our results and wish to thank all our associates for their dedication and hard work,” Ingles Markets Chairman Robert Ingle II said in a statement yesterday.

Grocery sales (including center-store groceries, dairy and frozen foods) inched up 0.6% to $427.2 million in the fiscal 2021 second quarter, while sales of perishables (meat, produce, deli and bakery) rose 5.4% to $320.5 million, according to the SEC filing. Nonfood sales (alcoholic beverages, tobacco, pharmacy, and health and beauty aids) gained 3% to $268.8 million. Fuel sales grew 7.2% to $130.7 million.

In the fiscal 2021 first half, net sales totaled $2.37 billion, up 6.8% from $2.22 billion a year ago. Excluding fuel, grocery retail comp-store sales rose 8.6% year over year, with the average basket size up 12.9% and transaction count down 5.3% for the six-month period. By category, 2021 first-half sales rose 8.3% for grocery, 9.7% for perishables and 8.2% for nonfoods, while gas sales decreased 7.6%.

On the earnings side, Ingles posted second-quarter 2021 net income of $52.2 million, or  $2.65 per share ($2.58 diluted), compared with $40.3 million, or $2.04 per share ($1.99 diluted), a year earlier. The per-share figures represent Class A common stock. For the first half, net earnings came in at $106 million, or $5.38 per share ($5.24 diluted), versus $58 million, or $2.94 per share ($2.86 diluted), in the year-ago period.

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Class B common shares were $2.41 (basic and diluted) for the second quarter and $4.89 for the first half in 2021 versus $1.86 and $2.68, respectively, in the 2020 periods.

Gross profit climbed by 6.5% to $310.5 million (26.2% of sales) in the 2021 second quarter and by 13.8% to $624.7 million (26.3% of sales) in the half.

Operating and administrative expenses were up 3.7% to $236.9 million for the second quarter and 5.5% for the half, primarily due to COVID-19 safety measures and higher labor costs related to the pandemic, Ingles said.

Ingles totaled $69.4 million in capital expenditures during the 2021 first half, compared with $56.8 million a year earlier. The retailer opened one store and closed one store in the 12 months ended March 27, finishing the period with 198 supermarkets in North Carolina, Georgia, South Carolina, Tennessee, Virginia and Alabama.