ASHEVILLE, N.C. — Ingles Markets said here last week that it will probably have to raise its retail prices on produce following last month's freeze in the U. S. Southwest that destroyed what has been estimated at nearly $1 billion worth of crops.
“We are seeing pressures on citrus and produce just about across the board,” said Ronald Freeman, chief financial officer, in a conference call discussing the company's results for the fiscal first quarter. “We will probably have to increase some prices, but so far we have absorbed some of the increases and taken lower margins.”
Overall, Ingles said it continued to see strong sales gains in the first quarter, which ended Dec. 30. Comparable-store sales, excluding gasoline, rose 7.4% from the first quarter of a year ago. The company said its comp-store grocery sales rose 10.4% in the period.
Net income for the first quarter was up 43.7% to $11.2 million, on a sales increase of 10% to $685.7 million.
The company projected capital expenditures of $100 million for the full year, and remaining initiatives include three new or replacement stores, three remodels and the addition of fuel centers at 13 existing stores. The company said it added 11 fuel centers last year. Cap-ex totaled $19.2 million in the first quarter.
Asked by an analyst whether Ingles' new-store development will be concentrated in its existing market area, Freeman said most new stores in development will be in the Carolinas, but “we do have some additional activity in Georgia and Tennessee coming up.”
Bryan Hunt, a debt analyst at Wachovia Securities, Charlotte, N.C., said he expects competitive conditions to improve for Ingles.
“We believe recent store closures from competitors such as Bi-Lo, Southern Family Markets and Food Lion should continue to benefit the company,” Hunt said. “After two years of comparable-store sales growth in excess of 6%, we conservatively anticipate Ingles' comparable-store sales to slightly moderate to 4%-5% into fiscal year 2007 (excluding fuel).”
