Ingles' Profits Down, Comps Up

ASHEVILLE, N.C. — Ingles Markets here said last week that costs associated with a new bond issue hurt the company's third-quarter profits, although the company posted gains in same-store sales, excluding gasoline.

For the three-month period that ended June 27, net income totaled $4.7 million, vs. $16 million in the year-ago quarter. The results included $10.2 million of prepayment penalties and loan-cost write-offs related to the issuance of $575 million in bonds in May.

“We are pleased to have secured our financing for the next few years,” said Robert P. Ingle, chief executive officer, in a prepared statement. “The credit markets have been substantially closed for the past couple of years and could continue to be difficult for the foreseeable future. A window of opportunity opened in May, and we took advantage of favorable conditions to implement this refinancing.”

In a conference call with analysts discussing the third-quarter results, Ron Freeman, chief financial officer, said the company repaid $349.5 million of subordinated notes due 2011, repaid $45.3 million outstanding on its lines of credit, and repaid about $77.7 million of secured debt.

“Now, we have sufficient funding to execute our store redevelopment strategy, when conditions warrant, and have extended the average maturity of our various pieces of debt,” Freeman said.

Ingles, which operates 201 supermarkets in the Southeast, said total sales declined slightly for the quarter, to $826.8 million, vs. $835.3 million in the year-ago period. Same-store grocery sales, adjusted for the decline in the price of gasoline and the Easter shift, were up 1.9%.

“Comp sales have not increased as much as previous quarters, reflecting general economic conditions, customers trading down and the substantial elimination of food inflation,” Freeman explained. “Given those circumstances, we're pleased the number of customer transactions excluding gasoline increased 7.8%. We believe we are competing well in a difficult environment.”

He said the average transaction size, excluding gasoline, decreased by about 1.3% in the quarter. The average retail price of gasoline declined by about $1.50 per gallon compared with the third quarter of the previous fiscal year, the company said.

Private-label sales as a percent of total sales were also up in the quarter, which Freeman said helped maintain the company's margins, although he declined to disclose what the percentage of private-label sales was.

Through three quarters, net income totaled $23.6 million, compared with $41.7 million in the year-ago period. Sales were up about 1%, to $2.42 billion, vs. the year-ago, nine-month span, and comp-store sales were up 3.9%.

Q3
RESULTS

* EXCLUDING GASOLINE AND ADJUSTED FOR EASTER.