Ingles’ discount sale
Investors in grocery stocks have grown nervous in recent months, fearful that expansions by German grocers Lidl and Aldi and Amazon’s acquisition of Whole Foods will squeeze the traditional operators.
Few are more old school or have more at stake than the Ingle family, which controls more than 75% of the voting power at Black Mountain-based Ingles Markets. With the sale of Harris Teeter to Kroger in 2014, it become the largest North Carolina-based grocer with annual sales of about $3.9 billion and 201 stores in six states. More than 60 are in North Carolina as far east as Albemarle but skirting Charlotte and the Triad. (HT had 212 stores when it sold, mostly in bigger cities.)
Some Ingles still have exterior signs reading, “American owned,” which originally targeted the Belgian buyers of Salisbury-based Food Lion, but now could apply to the German rivals.
Ingles shares declined by a third in the three months through July 11 and now trade at their lowest level since 2014. It was the sharpest decline of 11 peer companies in an analysis by Thomson Reuters. The company earned $23 million in the first half of its 2017 fiscal year, a 16% decline from a year earlier.
But Ingles still has lots to offer. It remains profitable, and has decades of industry experience and many seasoned store operators. The late Robert Ingle started the business in 1963, while his son Robert, 48, has been CEO since 2011 and controls shares valued at more than $300 million. Daughter Laura, 59, holds a 1.9% stake of voting power, according to the company proxy. (Yes, the private label Laura Lynn is named after her.)
Over the last five years, shares have returned 82%, despite the recent decline. New and remodeled Ingles stores are bright and well appointed with big bakeries and fresh-food areas, more akin to Harris Teeter than the discounters. Many of its markets are in smaller towns that aren’t growing as fast as bigger cities, and therefore may be less attractive to new entrants.
Ingles’ price to earnings ratio of 12 is much lower than its peer group and it pays a 2.2% dividend. Its long term debt is also lower than average, while its profit margin is in the middle of the pack, Thomson Reuters notes. New York investor Mario Gabelli has held a 3% stake in Ingles for several years.
Given the flux in supermarkets, it’s no surprise that rumors frequently pop up regarding a possible sale of Ingles. Our hope is that the company can remain independent for many years to come.
(A call to the company’s investor relations team was not returned.)