Shares in Ingles Markets dropped 8% today (3 February) after the US retailer reported lower earnings for its first quarter.

Net income fell 17.6% to US$9.5m for the three months to 28 December. 

Net sales were up 1.1% finishing at $945.1m. However, Ingles said grocery segment comparable-store sales dropped 0.8%, as, despite an increase in weekly customer visits, the average transaction amount decreased.

Sales came under pressure as the retailer lowered prices, a tactic defended by CEO Robert Ingle.

He said: "We wanted to keep prices low for our customers throughout the holiday season. We believe these actions strengthened ties with our customers and will benefit us in the long run."

At the end of last year, the company booked an increase in annual sales and underlying profit. Net sales were up 0.5% and comparable store sales were up 1.8%.

For the full unaudited results, click here.

Show the press release

ASHEVILLE, N.C. (February 3, 2014) -- Ingles Markets, Incorporated (NASDAQ: IMKTA) today reported net sales of $945.1 million for its first fiscal quarter ended December 28, 2013, 1.1% higher than last year's first fiscal quarter. Net income totaled $9.5 million for the December 2013 quarter compared with net income of $11.6 million for the quarter ended December 2012.

Commenting on the results, Chief Executive Officer Robert P. Ingle II said, "We wanted to keep prices low for our customers throughout the holiday season. We believe these actions strengthened ties with our customers and will benefit us in the long run."

Financial Results Net sales totaled $945.1 million for the quarter ended December 28, 2013, compared with $935.0 million for the quarter ended December 29, 2012. For the comparable December 2013 and 2012 quarters and excluding gasoline sales, grocery segment comparable store sales decreased 0.8%, weekly customer visits increased slightly and the average transaction amount decreased slightly.

Gross profit for the first quarter of fiscal 2014 totaled $203.5 million, a decrease of $4.7 million, or 2.3%, compared with the first quarter of fiscal 2013. Gross profit as a percentage of sales was 21.5% for the first quarter of fiscal 2014 compared with 22.3% for the first quarter of fiscal 2013.

Total operating expenses were $177.4 million for the first quarter of fiscal 2014 compared with $174.8 million for the comparable fiscal 2013 quarter. Operating and administrative expenses as a percentage of sales, excluding gasoline sales and associated operating expenses, were 21.9% and 21.6% for the three months ended December 28, 2013, and December 29, 2012, respectively.

Interest expense decreased $3.8 million for the three-month period ended December 28, 2013, to $11.8 million from $15.6 million for the three-month period ended December 29, 2012. Total debt at December 28, 2013, was $925.1 million compared with $877.0 million at December 29, 2012. Interest expense decreased despite the increase in total debt due to the lower rate on Senior Notes issued in June 2013 compared with the debt that was repaid. The Company currently has a line of credit totaling $175.0 million with $14.4 million borrowed and $10.3 million of unused letters of credit issued at December 28, 2013. 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.

Income tax expense as a percentage of pre-tax income was 37.5% in the December 2013 quarter, virtually unchanged from 37.4% in the December 2012 quarter.

Net income for the December 2013 quarter totaled $9.5 million compared with net income of $11.6 million for the December 2012 quarter. Basic and diluted earnings per share for the Company's publicly traded Class A common stock were $0.44 and $0.42 per share, respectively, for the December 2013 quarter compared with $0.50 and $0.48 per share, respectively, for the December 2012 quarter.

Capital expenditures totaled $30.8 million for the three-month period ended December 28, 2013. Most of these capital expenditures were related to remodeling projects in a number of the Company's stores and to new store construction. Capital expenditures totaled $28.1 million for the three-month period ended December 29, 2012.

Ingles' capital expenditure plans for fiscal year 2014 include investments of approximately $100 million to $140 million.

For the full unaudited results, click here.

Original source: Ingles Markets