On August 8, 2024, Ingles Markets Inc (IMKTA, Financial) released its 8-K filing reporting financial results for the third quarter and first nine months of fiscal 2024. The company, a leading supermarket chain in the southeastern United States, faced a challenging period marked by declining net sales and increased operating expenses.
Company Overview
Ingles Markets Inc is a U.S.-based company principally engaged in operating a supermarket chain. The company operates in the southeastern United States, mainly in Georgia, North Carolina, South Carolina, and Tennessee, with a few stores in Virginia and Alabama. Ingles Markets Inc locates its stores primarily in suburban areas, small towns, and neighborhood areas, offering a broad range of goods including food products, pharmacies, health and beauty care products, and general merchandise. The retail business contributes the majority of the company's revenue, and its real estate ownership of a material portion of total stores enables it to generate rental income.
Third Quarter Performance
For the quarter ended June 29, 2024, Ingles Markets Inc reported net sales of $1.39 billion, a decrease from $1.43 billion in the same quarter of the previous year. Gross profit for the third quarter was $329.8 million, or 23.7% of sales, compared to $338.1 million, or 23.6% of sales, in the third quarter of fiscal 2023. Operating and administrative expenses rose to $286.3 million from $270.9 million in the prior year.
Net income for the third quarter was $31.7 million, a significant decline from $48.3 million in the same period last year. Basic and diluted earnings per share for Class A Common Stock were $1.71 and $1.67, respectively, compared to $2.60 and $2.54 in the previous year. Basic and diluted earnings per share for Class B Common Stock were each $1.55, down from $2.36 in the prior year.
Nine-Month Performance
For the nine months ended June 29, 2024, net sales totaled $4.24 billion, a slight decrease from $4.31 billion in the same period of the previous year. Gross profit for the nine months was $1.00 billion, or 23.6% of sales, compared to $1.04 billion, or 24.0% of sales, in the prior year. Operating and administrative expenses increased to $860.8 million from $816.0 million in the previous year.
Net income for the nine-month period was $107.0 million, down from $158.2 million in the same period last year. Basic and diluted earnings per share for Class A Common Stock were $5.76 and $5.63, respectively, compared to $8.51 and $8.33 in the previous year. Basic and diluted earnings per share for Class B Common Stock were each $5.23, down from $7.74 in the prior year.
Financial Highlights
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Sales | $1.39 billion | $1.43 billion | $4.24 billion | $4.31 billion |
| Gross Profit | $329.8 million | $338.1 million | $1.00 billion | $1.04 billion |
| Operating Expenses | $286.3 million | $270.9 million | $860.8 million | $816.0 million |
| Net Income | $31.7 million | $48.3 million | $107.0 million | $158.2 million |
| EPS (Class A) | $1.71 | $2.60 | $5.76 | $8.51 |
| EPS (Class B) | $1.55 | $2.36 | $5.23 | $7.74 |
Commentary and Analysis
Robert P. Ingle II, Chairman of the Board, stated, “We continue to stay focused on our goal of providing excellent customer service and products at affordable prices. We would like to thank all our associates for their hard work and dedication.”
The decline in net sales and net income, coupled with rising operating expenses, highlights the challenges faced by Ingles Markets Inc in maintaining profitability. The increase in operating and administrative expenses, despite a decrease in sales, suggests that the company is grappling with higher costs, which could be attributed to inflationary pressures and increased labor costs.
Despite these challenges, Ingles Markets Inc's financial position remains robust, with no outstanding borrowings under its $150.0 million line of credit. The company’s capital expenditures for the nine-month period totaled $143.0 million, up from $137.1 million in the previous year, indicating ongoing investments in store improvements and expansions.
In conclusion, while Ingles Markets Inc has faced a challenging fiscal period, its strong financial resources and continued focus on customer service and product quality position it well for future growth. Investors will be keen to see how the company navigates these challenges in the coming quarters.
Explore the complete 8-K earnings release (here) from Ingles Markets Inc for further details.
