Recession Hits Ingles' Q1 Net

ASHEVILLE, N.C. — Ingles Markets eked out a small gain in comparable-store sales, but net income fell by 45.6% in the fiscal first quarter that ended Dec. 26, the retailer here said last week. Price deflation, changing consumer buying habits and a slower ramp-up of new stores brought on by the economic downturn impacted results. Overall sales increased 4.5% to $841 million, and comps excluding gasoline increased by 0.8%. Net earnings fell from $11.1 million to $6 million.

“Given the extended recession and intensified competition for a smaller amount of consumer dollars, we're pleased with our sales growth and the increase in our average customer visits,” Ronald Freeman, Ingles' chief financial officer, said. “Our long-term objectives remain focused on driving top-line sales through product offerings, customer satisfaction and expanded store offerings. Although this focus can temporarily depress operating profits, we believe it is important to maintain customer loyalty during these difficult economic times.”

Ingles said customer visits for the period increased by 11.6% as compared with the same period last year — “the best indicator that Ingles is delivering value for our customers,” said Freeman — but the average purchase amount dropped by 9.8%.

Lower gasoline margins helped bring profit as a percentage of sales down a full percent to 22%. Excluding gasoline, grocery profit was consistent with last year at about 25%.

As detailed in its fourth-quarter report in December, Freeman noted that Ingles' binge on new stores over the prior two fiscal years is paying off more slowly than the company had initially expected as a result of the weak economy. Ingles has subsequently reduced its pace of new investments, and expects to spend about $120 million to $150 million this fiscal year.

Q1 RESULTS