Ingles Markets, Incorporated (IMKTA)
Q1 2009 Earnings Call Transcript
February 05, 2009 at 9:00 am ET
Ron Freeman - Chief Financial Officer
Robert Ingle - Founder Chief Executive Officer
Robert Ingle II - Chairman of the Board
Jim Lanning - President
Tom Outlaw - Vice President of Sales and Marketing
Analyst for Bryan Hunt - Wachovia
Emily Shanks - Barclays Capital
Analyst for Wayne Harris - Semaphore Management
Previous Statements by IMKTA
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Thank you. Good morning. Welcome to Ingles Markets Fiscal 2009 First Quarter Conference Call. With me today are Robert Ingle, Founder of our Company and Chief Executive Officer, Robert Ingle II, Chairman of the Board, Jim Lanning, President, and Tom Outlaw, Vice President of Sales and Marketing.
Statements made on this call include forward looking statements as defined by and subject to the Safe Harbor as created by Federal Securities laws. Words such as expect, anticipate, intend, plan, believe, and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed on this call.
Ingles Markets, Incorporated does not undertake to update publicly any forward looking statements, whether as a result of new information, future events or otherwise. For a description of factors that could cause actual results to differ materially from that anticipated by forward-looking statements, you are referred to the Company's public filings, including the Form 10-K for the fiscal year ended September 27, 2008.
In accordance with the long standing Company policy and in recognition of the extremely competitive nature of our industry this call will not address competitive issues or Ingles Marketing strategies other than what is included in the Company’s public filing.
This morning, I will provide you with a summary of our first quarter results followed by additional comments. After that, we will be pleased to take your questions. Our press release issued this morning is available on our website at www.Ingles-Markets.com. We filed our Form 10-K for the quarter yesterday afternoon. It is available via our website as well.
Net income for the December 2008 quarter totaled $11.1 million compared with net income of $12.7 million for the December 2007 quarter. Predominant factors affecting comparative net income include higher costs related to the Company’s accelerated pace of store expansions in fiscal year 2008 and the first quarter of Fiscal year 2009.
Our long term focus has been and will continue to be driving top line sales through product offerings, customer satisfaction and expanded store offerings. This long time sales and customer focus as well as the recessionary economy contemporarily depressed operating results but we believe that it is important to maintain customer loyalty.
Net sales increased 3.6% to $804.9 million for the quarter ended December 27, 2008 from $777.1 million for the December 2007 quarter. The retail price of gasoline declined substantially during the current quarter resulting in the lower total gasoline sales dollars over the comparative quarters even though total gallons sold increased.
Excluding gasoline sales, grocery segment comparable store sales growth rose 5.4%. We are pleased with our sales growth during a recessionary time when consumer spending has declined. Both average weekly customer visits and the average purchase amount excluding gasoline increased over the comparative first quarters. We operated 199 stores and approximately 10.4 million square feet of retail space at the end of December 2008 compared with 197 stores and 9.9 million square feet at the end of December 2007.
Gross profit for the first quarter of fiscal 2009 totaled $197.1 million, an increase of $16.4 million or 9.1% compared with the first quarter of fiscal 2008. Gross profit as a percentage of sales was 24.5% for the first quarter of fiscal 2009 compared with 23.3% for the first quarter of fiscal 2008. Excluding lower margin gasoline sales, grocery segment gross profit as a percentage of sales was relatively constant at 26.5% for the first fiscal quarter of 2009 compared with 26.4% for the comparable fiscal 2008 quarter.
The consumer price index for food and beverages increased 6% for the 12 months ended September 2008 but increased only 1.7% for the 3 months ended December 2008. As noted earlier retail gasoline prices declined during the quarter as did milk prices. We were pleased to pass these price decreases to our customers and still achieved sales growth and level gross margins.
Total operating expenses were $167.9 million for the first quarter fiscal year 2009 compared with $150.3 million for the comparable fiscal year 2008 quarter. The growth in operating expenses was due in part to 11 stores that were opened or remodeled during the past 9 months. Bringing a larger number of stores online in a short period often results in higher personnel costs and promotional expenses to ensure a successful start for new and remodeled stores.
Additions to and remodeling of retail square footage also resulted in higher depreciation, distribution, utility and supply expenses. Increases in these line items accounted for approximately 85% of the dollar increase for the comparative fiscal 2009 and fiscal 2008 first quarters. Operating expenses as a percentage of sales were 20.9% for the three months ended December 2008 compared with 19.4% for the three months ended December 2007.