Ingles turns in second-quarter sales, earnings gains

Lower federal tax rate boosts bottom line for first half

Ingles Markets Inc. saw sales climb in its fiscal 2018 second quarter and first half, driven in part by higher fuel sales and a calendar shift for the Easter holiday. Earnings also benefited from federal tax reform.

Revenue for the quarter ended March 31 rose 4.1% to $984.6 from $946.2 million a year earlier, Ingles said Thursday. Retail grocery same-store sales edged up 1.7% year over year, excluding the impact of gasoline sales and the extra shopping day from the Easter calendar shift.

This year, Easter occurred in March, during Ingles’ second quarter, whereas in 2017 the holiday occurred in April, during the company’s third quarter. That had an 0.7% positive impact on sales for the second quarter.  

Among product categories, perishables led the way in the quarter with a 5.1% sales gain year over year, according to Ingles’ 10-Q report filed with the Securities and Exchange Commission. Sales grew 3.6% for nonfoods and 2% for grocery.

Fuel sales rose 15.6% for the quarter, reflecting a 13% increase in the average sales price per gallon, Ingles said. Gallons sold increased 3% versus a year ago.

The number of customer transactions inched up 0.7% in the second quarter, while the average transaction size grew 2.6%, according to Asheville, N.C.-based Ingles.    

Earnings at Ingles were virtually flat for the second quarter. Net income came in at $9.3 million, or 46 cents per diluted share for class A common stock (43 cents for class B), compared with nearly $9.2 million, or 45 cents per diluted class A share (42 cents for class B), in the 2017 quarter.

“Our strong sales performance benefited from improvements in our store base and from the variety of products we carry,” chairman Robert Ingle said in a statement. “We listen to our customers and to our associates to ensure we are always focused on improvement.”

For the first half, sales advanced 3% to $2 billion from $1.93 billion in the prior-year period. Retail grocery sales were positively impacted by 0.3% from the Easter calendar shift.

Excluding the effect of fuel sales and the extra shopping day for Easter, same-store sales were up 1.9% for the six-month period. The number of customer transactions (excluding gas) were flat, while the average basket size (excluding fuel) grew 2.6%.

Net earnings were $54.4 million, or $2.69 per diluted class A share ($2.51 for class B), in the fiscal 2018 first half versus $23 million, or $1.13 per diluted class A share ($1.06 for class B), in the 2017 period.

Ingles noted that first-half 2018 net income reflects a $26.7 million positive impact from the Tax Cuts and Jobs Act, enacted last December. The company said its effective tax rate was 23.8% for the March 2018 quarter versus 35.1% in the year-ago quarter.

For fiscal 2018, Ingles projects capital expenditures of about $140 million to $160 million. The retailer said capital spending will focus on stores already opened this fiscal year and on locations slated open later this year, as well as on improvements to the current store base.

As of March 31, Ingles operated 201 supermarkets in the South, including 72 in North Carolina, 70 in Georgia, 36 in South Carolina, 21 in Tennessee, and one each in Virginia and Alabama. The locations include 106 in-store pharmacies and 101 fuel centers. The company reported that over the last 12 months it opened four stores and closed four stores.

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