Ingles Reports Higher Sales, Income For 2Q And FY13’s First Half

Ingles Reports Higher Sales, Income For 2Q And FY13’s First Half
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Ingles Markets Inc. on Monday reported higher sales and net income for the three and six months ended March 30. Second quarter net sales rose $36.9 million to $918.6 million and net income increased to $8.1 million, compared with net income of $6.5 million for the prior year’s second quarter. For the first six months of fiscal 2013, net sales rose $51.5 million to $1.85 billion and net income increased 14.9 percent to $19.7 million, compared with the first six months of fiscal 2012.

CEO Robert P. Ingle II said, “We celebrated the 50th anniversary of the first Ingles store this quarter. These results are a fine tribute to our customers and associates who are the reason for our success over five decades.”

Second quarter results

Net sales increased by 4.2 percent to $918.6 million for the three months ended March 30, from $881.7 million for the three months ended March 24, 2012. The growth in sales was affected by the Easter holiday, which occurred in the second quarter of fiscal 2013 and the third quarter of fiscal 2012. Comparable store sales, excluding gasoline and extra Easter sales, increased 2.7 percent over the comparable quarters. The number of customer transactions (excluding gasoline) increased 3.3 percent, while the comparable average transaction size (excluding gasoline) increased 1.9 percent compared with the same quarter last year. Ingles operated 203 stores containing a total of approximately 11.0 million s.f. at March 30, 2013, and at March 24, 2012.

Gross profit for the March 2013 quarter increased 3.1 percent to $198.3 million, compared with $192.4 million for the second quarter of last fiscal year. Gross profit, as a percentage of sales, was 21.6 percent for the March 2013 quarter compared with 21.8 percent for the March 2012 quarter. Gross profit contributed by gasoline sales was lower this quarter. Excluding gasoline sales, grocery segment gross profit as a percentage of sales decreased 32 basis points comparing the three months ended March 30, with the same quarter of last fiscal year.

Operating and administrative expenses for the March 2013 quarter totaled $175.0 million, an increase of $5.9 million, or 3.5 percent over the March 2012 quarter. Excluding gasoline sales and associated operating expenses (primarily payroll), operating and administrative expenses as a percentage of sales were 22.1 percent and 22.4 percent for the three months ended March 30, 2013, and the three months ended March 24, 2012, respectively.

During the current quarter, the Asheville, N.C.-based company sold a former store property for $7.5 million and recognized a pre-tax gain of $3.9 million. There was no comparable sale in the prior year’s second quarter.

Interest expense increased $0.8 million for the three-month period ended March 30, to $15.7 million from $14.9 million for the three-month period ended March 24, 2012. Total debt at March 30 was $860.0 million compared with $833.5 million at March 24, 2012. Interest expense increased due to higher total debt. Last year’s interest expense did not include interest costs associated with the new distribution facility since interest expense for the facility was capitalized prior to its opening in mid-2012. For the three months ended March 30, the comparable interest costs for the new distribution facility were expensed.

Net income totaled $8.1 million for the three-month period ended March 30, compared with $6.5 million for the three-month period ended March 24, 2012. Net income, as a percentage of sales, was 0.9 percent for the quarter ended March 30, compared with 0.7 percent for the quarter ended March 24, 2012. Basic and diluted earnings per share for Class A Common Stock were $0.35 and $0.33, respectively, for the quarter ended March 30, 2013, compared to $0.28 and $0.27, respectively, for the quarter ended March 24, 2012. Basic and diluted earnings per share for Class B Common Stock were each $0.32 for the quarter ended March 30, compared to $0.26 of basic and diluted earnings per share for the quarter ended March 24, 2012.

First half results

Net sales increased $51.5 million to $1.85 billion for the six months ended March 30, from $1.80 billion for the six months ended March 24, 2012. Excluding gasoline and extra Easter 2013 sales, grocery segment comparable store sales increased 2.4 percent. Comparing the six-month fiscal 2013 and 2012 periods, gasoline gallons sold increased 4.3 percent, customer transactions (excluding gasoline) increased 2.3 percent, and the comparable average transaction size (excluding gasoline) increased 0.6 percent.

Gross profit for the six months ended March 30 increased 3.1 percent to $406.2 million, an increase of $12.0 million compared with the first six months of last fiscal year. Gross profit, as a percentage of sales, was 21.9 percent for both the March 2013 and 2012 six-month periods. Excluding gasoline sales, grocery segment gross profit as a percentage of sales increased eight basis points for the six months ended March 30, compared with the same period of last fiscal year.

Operating and administrative expenses increased $8.9 million, or 2.6 percent, to $349.8 million for the six months ended March 30, from $340.9 million for the six months ended March 24, 2012. As a percentage of sales (excluding gasoline), operating and administrative expenses were level at 22.0 percent for the six-month period ended March 30, compared with 21.9 percent for the six-month period ended March 24, 2012. Operating expense dollar increases were driven by store development activities, and higher insurance expense.

Interest expense totaled $31.3 million for the six-month period ended March 30, compared with $30.0 million for the six-month period ended March 24, 2012. Net new debt, including line of credit advances, totaled $24.8 million during the March 2013 six-month period.

Net income totaled $19.7 million for the six-month period ended March 30, compared with $17.1 million for the six-month period ended March 24, 2012. Net income, as a percentage of sales, was 1.1 percent for the six months ended March 30, and 1.0 percent for the six months ended March 24, 2012. Basic and diluted earnings per share for Class A Common Stock were $0.85 and $0.81, respectively, for the six months ended March 30, 2013, compared to $0.73 and $0.70, respectively, for the six months ended March 24, 2012. Basic and diluted earnings per share for Class B Common Stock were each $0.77 for the six months ended March 30, compared to $0.67 of basic and diluted earnings per share for the six months ended March 24, 2012.

Capital expenditures for the March 2013 six-month period totaled $47.0 million, compared with $103.5 million for the March 2012 six-month period. The decrease is attributable to the construction of the new distribution center that opened in mid-2012. Capital expenditures for the entire fiscal year are expected to be approximately $100 million to $130 million, including expenditures for stores to open in fiscal 2013 and 2014, as well as for the company’s ongoing remodeling program to multiple stores.

The company currently has lines of credit totaling $175.0 million with $62.0 million borrowed and $8.2 million of issued but unused letters of credit at March 30. The company believes its financial resources, including these lines of credit and other internal and anticipated external sources of funds, will be sufficient to meet planned capital expenditures, debt service and working capital requirements for the foreseeable future. The company’s $575 million of senior notes with a yield of 9.5 percent become callable at a price of 104.438 percent of par on May 15. The company currently is evaluating refinancing options for these notes and for certain other financing arrangements.

 

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