Ingles Markets received a boost from hurricane-related sales in the fourth fiscal quarter, which helped the company drive higher revenues from fewer stores in fiscal 2017, the company said in its 2017 annual report last week.
The Asheville, N.C.-based chain reported comparable-store sales gains of 3.6% for the fourth quarter and 1.5% for the full fiscal year, which ended Sept. 30. Both results exclude gasoline sales, which were also higher in the most recent year.
In addition to an unspecified boost from the storms that hit the Southeast in September, Ingles attributed the sales gains in part to the introduction of new products, improved product presentation and effective promotions.
Although the closely held company did not make specific predictions for its 2018 performance, it said it expected non-gasoline sales would increase in fiscal 2018 from the addition of “one or more” new stores, interior improvements to some existing locations and the addition of fuel centers.
Ingles said it has improved the layout and product offerings in several stores during the past three fiscal years.
“Economic conditions have improved to the point that the company has accelerated the increase and improvement of its total retail square footage,” Ingles said in its 10-K filing with the Securities and Exchange Commission.
In fiscal 2017, Ingles opened two new stores, excluding relocations, and closed closed four, including one that is slated to reopen this month. It increased its average store size by about 1.5%, to 56,146 square feet, and also increased its total square footage and average square feet of selling space. The company also increased its average sales per square foot of selling space, to $494, compared with $471 in fiscal 2016.
The company ended fiscal 2017 with 199 locations, vs. 201 at the end of fiscal 2016.
“Our company achieved strong results due to the hard work and dedication of our associates,” Robert P. Ingle II, chairman of the company, said in a statement. “We will continue to bring our customers products they desire and flawless service in our stores.”
Net income for the year declined less than 1%, to $53.9 million, despite an extra week in fiscal 2017 that helped drive a 4.2% increase in gross profits, to $963.6 million, compared with fiscal 2016 results. Gross profit totaled 24.1% of sales in fiscal 2017, vs. 24.4% in the preceding year. The company said the decrease in gross profit margin was primarily due to “competitive factors,” which offset a favorable change in the product mix.
Operating expenses as a percent of sales totaled 20.9% for both fiscal 2017 and fiscal 2016.
Ingles also said labor continued to tighten in the markets where it operates. The company said salaries and wages increased by $27.4 million, or 0.68% of sales, in the most recent year, compared with fiscal 2016, as it added labor to accommodate increased sales and changes to the sales mix.
Total fiscal 2017 sales of $4 billion increased 5.5% over fiscal 2016 levels.
For the fiscal 2017 fourth quarter, which also included an extra week, Ingles said net income increased 36.6%, to $19.4 million, on a 13.3% increase in sales, to $1.09 billion. Operating and administrative expenses totaled 20.2% for the fourth quarter of fiscal 2017, vs. 21.3% of sales for the fourth quarter of a year ago.
Ingles said it plans to invest between $100 million and $140 million in capital expenditures in fiscal 2018, after spending $127.7 million in fiscal 2017.
According to a Seeking Alpha report from Lighthouse Research, Ingles’ $4 billion in sales for the year exceeded analyst expectations by 2.8%, while EBITDA of $238 million exceeded expectations by 3.9%.
“Following the publication of annual results, we are even more convinced on the positive prospects for Ingles Markets and, as the result, on creating value for bondholders,” Lighthouse said in its report.
As previously reported, one of Ingles’ longtime investors, GAMCO Asset Management, said it would nominate two independent directors — Justyn R. Putnam and John “Jack” R. Lowden — at Ingles’ 2018 annual shareholder meeting.