Fiscal Year Net Down At Ingles.
Net income for the 52 weeks ended September 24 declined 8.7% to $54.2 million, despite a 120-basis-point drop in the effective income tax rate to 36%.
Net sales for the year edged up 0.4% to $3.79 billion, although the company's 10-K states that total core grocery sales (excluding gasoline) rose 2.7% to $3.22 billion. Management noted that gasoline volume increased, but the average sales price was 13% lower than fiscal 2015. According to the company's 10-K report, gasoline sales consequently slid 12.6% to $435.6 million.
Breaking down the core supermarket business by major department, grocery (which includes grocery, dairy and frozen food) sales edged up 0.4% to $1.39 billion, while perishables rose 3.1% to $1.01 billion. Nonfoods (which encompasses alcoholic beverages, tobacco, pharmacy, health and video), meanwhile, gained 6.2% to $817.2 million.
Excluding gasoline, comparable-store grocery sales for the year grew 2%, driven by a 1.5% hike in customer traffic and a 1.1% gain in the average transaction.
Operating income for the year decreased 7.6% to $128.6 million, as a 72-basis-point increase in gross margin to 24.36% was countered by a 92-basis-point rise in operating and administrative expense to 20.94% of sales. Factoring out the fuel business, gross margin for the core grocery segment grew 16 basis points, while operating and administrative expense rose approximately 60 basis points to an adjusted 23.5% of sales.
The biggest growth driver in operating expenses was salaries and wages, which added $24.7 million, largely due to additional labor hours required for the increase in supermarket sales and a more competitive labor market. Additionally, depreciation and amortization expense expanded 3.6% to $106.6 million, driven by the company's capital expenditures program.
The drop in operating income also reflects a $1.21 million loss on the disposal of assets compared with a gain of $2.19 million in fiscal 2015. The company notes that in fiscal 2016 it demolished and wrote off certain buildings in advance of constructing new stores in the future.
Other income, meanwhile, advanced 3.5% to $2.36 million, while interest expense dipped 1.4% to $46.3 million. With that, pretax income fell 10.5% to $84.6 million.
The bottom line for the 13week fourth quarter slid 12.6% to $14.2 million, although net sales gained 1% to $962.4 million, reflecting significantly lower retail gas prices year over year. Comparable-store sales excluding gasoline grew 1.6%.
Fourth quarter gross margin expanded 72 basis points to 24.65%, while operating and administrative expense escalated 104 basis points to 21.3% of sales. Factoring in a $274,000 loss on asset sales compared with a year-ago gain of $1.87 million, operating income tumbled 13.3% to $32 million.
The decline in net income was slightly slower than operating profit, thanks to other income that surged 12.2% to $710,000, a 6.9% reduction of interest expense to $11.9 million, and a 260-basis-point drop in the effective tax rate to 31.7%.
During fiscal 2016, Ingles opened two stores and closed one that will be rebuilt, leaving it with 201 supermarkets in six Southeastern states as of September 24.