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Regional Report Western February 2011


Ingles tries to restock pre-recession earnings

At first glance, Black Mountain-based Ingles Markets Inc. seems to be sitting on top of the world. The grocery chain, with 202 stores in Georgia, North Carolina, South Carolina, Tennessee, Virginia and Alabama, produced net sales of $3.4 billion in the fiscal year that ended in September — its 46th straight annual increase. Net income totaled $31.7 million, up 10% from the year before. That looks great until you compare it with 2007, when it netted $58.6 million, or the $52.1 million it made in 2008. So what happened?

In a few words: The economy weakened, and the competition stiffened. Ingles goes toe-to-toe with discount retailers such as Aldi, Bi-Lo, Food City, Food Lion, Kroger, Publix, Target and Wal-Mart. It has had to slash prices — and its profit margin — to boost sales and retain market share. Meanwhile, expenses have gone up from $564 million in 2007 to $653.7 million last year. Salaries and wages made up the biggest part of the increase. Ingles now has about 18,800 employees, compared with about 17,000 in 2007. The company closed three stores and opened eight during that time, with the average store size increasing from 49,382 square feet in 2007 to 53,524 in 2010.

Company executives don’t discuss much about their operations, but Chief Financial Officer Ron Freeman told analysts during a recent conference call that Ingles plans to continue its expansion by building or remodeling five stores in 2011 and adding six gas stations either at those new stores or other locations. In all, he says, the company will spend between $100 million and $140 million — more than the $92 million it spent in 2010.

He says the company hopes to continue to improve sales in all four of its categories — groceries, which includes canned, frozen and dairy products; nonfoods, which encompasses alcoholic beverages, tobacco and pharmacy items; perishables such as meats, produce and delicatessen and bakery goods; and gasoline. Customers made 5.4% more trips to the stores last year but spent less per trip.

Meanwhile, investors are paying less for the company’s stock than they did in 2007. Shares closed at $18.85 in the first week of January, down 29% from the corresponding week four years ago but up more than 32% from the first week of January 2010.

Freeman expects the company’s fortunes to continue to get better as consumers gain more confidence in the economy and return to pre-recession spending. “Overall, they’re feeling a little better, but like most things in the economy these days, it’s going to be a slow, incremental move forward,” he told analysts. “You hope that it continues to be a move forward.”

WEAVERVILLEArvato Digital Services, part of Germany-based Bertelsmann, plans to spend $2 million within three years to build a call center and add 408 jobs, giving it nearly 1,000 locally. The company makes compact discs and DVDs.

ARDENAlliance-Carolina shut down two factories, putting about 80 people out of work. It made plastic parts and molds used to make parts. Chief Financial Officer Richard Stokes blamed the poor economy and the loss of a key contract.

ASHEVILLEMills Manufacturing, which makes parachutes and related components, won a contract to make cargo-parachute assemblies for the Army. It began adding 30 jobs in January. That will bring the total to about 255.

ASHEVILLE — Carolyn Ward replaced Houck Medford as CEO of the Blue Ridge Parkway Foundation, a non-profit that has raised millions for the parkway. Ward will run the foundation from here, though its offices will remain in Winston-Salem, where Medford helped start it 12 years ago.

WEST JEFFERSON — The state is weighing whether to close Mount Jefferson State Natural Area to cut costs. It also is considering closing most state parks on Tuesdays, Wednesdays and Thursdays.

Mission Hospital fired three employees who failed to get flu shots. A new policy required all of the hospital’s 6,300 employees to be vaccinated.

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