10-Q: Ingles Markets Reports Lower Q1 2025 Earnings Due to Hurricane Impact

Ingles Markets' first quarter earnings for fiscal year 2025 decreased compared to the previous year, primarily due to the impact of Hurricane Helene.

Summary

• Ingles Markets reported net sales of $1.29 billion for the three months ended December 28, 2024, a decrease of 13.0% compared to $1.48 billion for the three months ended December 30, 2023.
• Comparable store sales decreased by 9.4% excluding fuel sales.
• Net income for the quarter was $16.6 million, down from $43.4 million in the same period last year.
• The company estimates a loss of $55 to $65 million in revenue due to Hurricane Helene.
• Three stores remain closed due to hurricane damage, with reopening expected in 2025.
• Capital expenditures for the quarter totaled $37.8 million.
• The company anticipates capital expenditures between $120 and $160 million for fiscal year 2025.
• Basic earnings per share for Class A Common Stock were $0.89, compared to $2.33 in the prior year.
• Basic earnings per share for Class B Common Stock were $0.81, compared to $2.12 in the prior year.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant impact of Hurricane Helene on the company's financial results. While the company is taking steps to recover, the short-term outlook is challenging.

Positives

• Operating and administrative expenses decreased by $9.1 million, or 3.1%, to $280.7 million for the three months ended December 28, 2024, as compared to $289.8 million for the three months ended December 30, 2023.
• The company received $1.0 million of insurance proceeds related to property loss due to Hurricane Helene.
• The distribution center returned to full operation within two weeks following Hurricane Helene.

Negatives

• Net sales decreased by $193.0 million, or 13.0%, to $1.29 billion for the three months ended December 28, 2024 compared with $1.48 billion for the three months ended December 30, 2023.
• Net income for the first quarter of fiscal 2025 totaled $16.6 million, compared with net income of $43.4 million for the first quarter of fiscal 2024.
• The Company estimates that approximately $55 to $65 million of revenue was lost during the three-week period immediately following the storm due to road and power outages which prevented some stores from opening or maintaining normal store hours, as well as due to electronic payment disruptions as a result of Hurricane Helene.
• Three stores damaged by Hurricane Helene remained closed at December 28, 2024.
• Comparable store sales decreased by 9.4% excluding fuel sales.

Risks

• The impact of Hurricane Helene on operations and financial results.
• Potential for future adverse climatic conditions affecting food production and delivery.
• Increased competition and pricing pressures.
• Changes in regional and national economic conditions.
• Disruptions in the efficient distribution of food products.
• The resurgence of the COVID-19 pandemic or variants of the virus on our business and economic conditions generally in the Company's operating area.

Future Outlook

The company expects to reopen the three remaining stores damaged by Hurricane Helene during 2025 and anticipates capital expenditures between $120 and $160 million for fiscal year 2025.

Industry Context

The grocery industry is highly competitive and susceptible to economic conditions, weather-related events, and changing consumer preferences. Ingles Markets' performance reflects the challenges of operating in this environment, particularly when faced with unforeseen events like Hurricane Helene.

Comparison to Industry Standards

• Without specific competitor data for the same period, it's difficult to provide a direct comparison.
• However, major grocery chains like Kroger and Publix also face similar challenges related to supply chain disruptions, inflation, and regional economic factors.
• Ingles' focus on private label items and prepared foods aligns with industry trends aimed at increasing margins and attracting customers.
• The company's capital expenditure plans are consistent with the need to maintain a modern store base and invest in technology to remain competitive.

Related Party Transactions

• The Company will from time to time make short-term non-interest bearing loans to the Company's Investment/Profit Sharing Plan to allow the plan to meet distribution obligations during a time when the plan is prohibited from selling shares of the Company's Class A Common Stock.
• During the three months ended December 28, 2024, no such loans were made, repaid or outstanding.

Stakeholder Impact

• Shareholders: Lower earnings and potential impact on stock price.
• Employees: Temporary reduction in workforce due to store closures.
• Customers: Disruption in service due to store closures and payment disruptions.
• Suppliers: Potential impact on sales volume due to store closures.

Next Steps

• Reopening the three stores damaged by Hurricane Helene during 2025.
• Continued investment in store base, technology improvements, and equipment upgrades.
• Monitoring the claims process related to inventory loss claims from Hurricane Helene.

Key Dates