Ingles Markets Inc (IMKTA)
F1Q10 (Qtr End 12/26/09) Earnings Call
January 29, 2010 9:00 am ET
Ron Freeman - CFO
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Thank you and good morning. Welcome to Ingles Markets fiscal 2010 first quarter conference call. With me today are Robert Ingle, Founder of the 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 Harbors created by Federal Securities laws. Words such as expect, anticipate, intend, plan, likely, goal, seek, 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 does not undertake and declines any obligations and 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 26, 2009. In accordance with the long standing company policy and in recognition of the extremely competitive nature of our industry this call will not address individual competitors or Ingles Marketing strategies other than what is included in the company’s public filings.
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 plan to file our 10-Q for the quarter this afternoon. It will be available on our website as well. Net sales totaled $841 million for the quarter ended December 26, 2009 compared with $804.9 million for the comparable quarter ended December 2008. That represents a 4.5% increase in total consolidated sales. Grocery segment comparable store sales increased $26.5 million or 3.4%. Excluding gasoline sales, comparable store sales increased $5.6 million or 0.8%. The difference in comparable store sales growth with and without gasoline is attributable to gasoline prices that were approximately 14% higher this quarter versus the same quarter last year.
Outside of gasoline, price deflation in many staple items and the continued recession has affected our sales growth. Our fluid dairy segment also experienced volume growth but lower sales dollars due to lower raw milk cost.
Given the extended recession and intensified competition for a smaller amount of consumer dollars, we are pleased with our sales growth and the increase in our average customer visits. Our long-term objectives remain focused on driving top line sales to product offerings, customer satisfaction and expanded store offerings.
Although, this focus contemporarily depress operating profits, we believe that it's important to maintain customer royalty during these difficult economic times. We believe we have been successful on this regard as evidenced by this quarters 11.6% increase in average weekly customer visits compared with the first quarter of last year. That’s the best indicator that Ingles is delivering value to our customers.
Our sales and customer visits increased even though the average purchased amount decreased 9.8% when comparing the December 2009 and December 2008 quarters. Gross profit for the three-month period ended December 26, 2009 decreased $0.3 million to $185.3 million or 22% of sales compared to $185.6 million or 23.1% of sales for the three-month period ended December 27, 2008.
The primary reason for the decline in gross margin and gross profit since last year was lower gasoline margins. Excluding gasoline sales, grocery segment gross profit as a percentage of sales was relatively constant at 25% for the three months ended December 26, 2009 compared with 24.9% for the three months ended December 27, 2008.
We are pleased that we are able to report relatively stable grocery segment gross margins in light of competitive factors and price deflation on a number of key items. Total operating expenses were $160.6 million for the first quarter of fiscal 2010, compared with $156.3 million for the comparable fiscal 2009 quarter. The dollar growth in operating expenses was comprised primarily of increases in depreciation, insurance and payroll arising from stores opened or remodeled since the first quarter of last year.
As these stores mature, we expect additional improvement in our ratio of operating expenses to sales. Excluding gasoline sales on associated operating expenses, operating and administrative expenses as a percentage of sales were 21.7% and 21.5% for the three months ended December 26, 2009 and December 27, 2008 respectively.
Net rental income, losses on asset disposals and other income totaled $900,000 for the first quarter of fiscal 2010, compared with $1.9 million for the 2009 first fiscal quarter, primarily due to the lower rental income and lower income from sales of scrap part cardboard and packaging materials. Asset disposal transactions were insignificant for the comparable fiscal quarters.