ASHEVILLE, N.C. -- Ingles Markets here said sales increased 7% during its fiscal second quarter, but gross profits were under pressure due to increased promotions and rising gasoline prices.
Ingles, which operates 195 stores in six Southeastern states, said sales totaled $557 million during the three months ended March 26, and comparable-store sales grew by 6.3%. Ingles said a portion of the increase was due to the shift of the Easter holiday to the second quarter this year. Without accounting for Easter sales, Ingles estimated comps at around 5.7%.
Net earnings of $5.5 million, or 23 cents a share, fell 22.5%, vs. the second quarter of a year ago. The year-ago period included a $3.8 million gain as the result of selling a shopping center.
Gross profit as a percentage of sales fell to 25.5% from 26.3% during the same period last year. This resulted from heavy promotional activity and lower margins in sales of pharmacy and gasoline, Ingles said. Pharmacy margins decreased due to tightened rates with third-party insurers, said Ronald B. Freeman, Ingles' chief financial officer, in a conference call.
Gas margins fell as Ingles tried to stay cost-competitive while prices hit new highs.
Gas "is a very competitive part of the industry. In order to be aggressive with our sales, we just follow the market," said Freeman.
He added that Ingles has been aggressive with promotions inside the store and expects the trend will continue. "We will continue our focus on pushing sales. That is what our whole team's objectives are."
Over the six-month period, sales of $1.1 billion increased 5.8%, with comps improving by 5.6%. Ingles opened one new store, completed one major remodel, purchased three future store sites, and closed two stores over the period.
