ASHEVILLE, N.C. — A brisk slate of store openings and remodels — and their associated costs in a sputtering economy — is draining profits for Ingles Markets here, the company acknowledged Tuesday.
The retailer said higher personnel, depreciation and occupancy costs from new and expanded stores were primary factors in a 40% decrease in net income for the second quarter, which ended March 28. In addition, unfavorable economic conditions are extending the time needed for new and remodeled stores to reach targeted levels of sales and profitability.
Officials in a conference call, however, defended the building spree as a sound long-term strategy and said they expected new store profits would improve as the economy improves.
Ingles reported net income of $7.8 million on sales of $789.2 million for the period. Sales improved by 8.3% and included increases in all categories except for gasoline and fluid dairy, each of which experienced deflation during the quarter. Comparable-store sales increased by 4.9% excluding gasoline and the effect of the Easter holiday, which fell in the second quarter in 2008 but in the third quarter this year. Expenses were 10.2% higher than the same period last year and sharp price competition drove a slight decrease in gross margins, excluding milk and gasoline.
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