Item 7. Management’s Discussion and Analysis
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Ingles is a leading supermarket chain in the Southeast United States and operates a total of 198 supermarkets in North Carolina (75), Georgia (65), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1). Ingles supermarkets offer customers a wide variety of nationally advertised food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Non-food products include fuel centers, pharmacies, health/beauty/cosmetic products and general merchandise. The Company offers quality private label items in most of its departments. In addition, the Company focuses on selling products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections. As of September 28, 2024, the Company operated 115 in-store pharmacies and 108 fuel stations. Ingles also operates a fluid dairy and earns shopping center rentals.
Recent Developments
On September 27, 2024, Hurricane Helene severely impacted western North Carolina, including where the Company’s headquarters are located, resulting in catastrophic flooding and destruction, power and communication outages, water outages and ban on usage, major road closures and loss of life. The storm caused damage to certain of the Company’s properties and temporarily impacted the ability of the Company’s stores to report information to the Company’s headquarters. The distribution center sustained damage but returned to full operation within two weeks following the storm. During the first two weeks immediately following the storm, the Company’s headquarters experienced communication loss and some stores remained without power and communication. Four stores sustained damage that required that they be temporarily closed. One store has now reopened and the Company expects the remaining three stores will reopen in 2025. Among other impacts from the storm, the Company sustained approximately $30.4 million in lost inventory, of which approximately $10 million is expected to be covered by insurance. Real property and equipment damage was approximately $4.5 million. Real property and equipment repair expenses at the distribution center, including anticipated future expenses, of approximately $1.5 million were insured.
Critical Accounting Policies and Estimates
Critical accounting policies are those accounting policies that management believes are important to the presentation of Ingles’ financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain. Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management estimates, by their nature, involve judgments regarding future uncertainties, and actual results may therefore differ materially from these estimates.
Self-Insurance
The Company is self-insured for workers’ compensation, general liability, and group medical and dental benefits. Risks and uncertainties are associated with self-insurance; however, the Company has limited its exposure by maintaining excess liability coverage of $1,000,000 per occurrence for workers’ compensation and for general liability, and $500,000 per covered person for medical care benefits for a policy year. Self-insurance liabilities are established based on claims filed and estimates of claims incurred but not reported. The estimates are based on data provided by the respective claims administrators which is then applied to appropriate actuarial methods. These estimates can fluctuate if historical trends are not predictive of the future. The majority of the Company’s properties are self-insured for casualty losses and business interruption; however, liability coverage is maintained. The Company’s self-insurance reserves totaled $35.9 million and $32.9 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 28, 2024 and September 30, 2023, respectively. These amounts were inclusive of expected
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recoveries from excess cost insurance or other sources that are recorded as receivables of $4.1 million at September 28, 2024 and $4.3 million at September 30, 2023.
Asset Impairments
The Company accounts for the impairment of long-lived assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 360. Asset groups are primarily comprised of our individual store and shopping center properties. For assets to be held and used, the Company tests for impairment using undiscounted cash flows and calculates the amount of impairment using discounted cash flows. For assets held for sale, impairment is recognized based on the excess of remaining book value over expected recovery value. The recovery value is the fair value as determined by independent quotes or expected sales prices developed by internal associates, net of costs to sell. Estimates of future cash flows and expected sales prices are judgments based upon the Company’s experience and knowledge of local operations and cash flows that are projected for several years into the future. These estimates can fluctuate significantly due to changes in real estate market conditions, the economic environment, capital spending decisions and inflation. The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred. For the year ended September 28, 2024, the Company recognized a property and equipment impairment loss of $4.5 million pertaining to Hurricane Helene.
Vendor Allowances
The Company receives funds for a variety of merchandising activities from the many vendors whose products the Company buys for resale in its stores. These incentives and allowances are primarily composed of volume or purchase based incentives, advertising allowances, slotting fees, and promotional discounts. The purpose of these incentives and allowances is generally to help defray the costs incurred by the Company for stocking, advertising, promoting and selling the applicable vendor’s products. These allowances generally relate to short term arrangements with vendors, often relating to a period of one month or less and are negotiated on a purchase-by-purchase or transaction-by-transaction basis. Whenever practical, vendor discounts and allowances that relate to buying and merchandising activities are recorded as a reduction of item cost in inventory and recognized in merchandise costs when the item is sold. Due to the use of the retail method for store inventory and the nature of certain allowances, it is sometimes not practicable to apply allowances to the item cost of inventory. In those instances, the allowances are applied as a reduction of merchandise costs using a rational and systematic methodology, which results in the recognition of these incentives when the inventory related to the vendor consideration received is sold. Vendor allowances applied as a reduction of merchandise costs totaled $146.9 million, $128.9 million and $110.6 million for the fiscal years ended September 28, 2024, September 30, 2023, and September 24, 2022, respectively. Vendor advertising allowances that represent a reimbursement of specific identifiable incremental costs of advertising the vendor’s specific products are recorded as a reduction to the related expense in the period that the related expense is incurred. Vendor advertising allowances recorded as a reduction of advertising expense totaled $8.9 million, $8.5 million, and $7.1 million for the fiscal years ended September 28, 2024, September 30, 2023, and September 24, 2022, respectively.
If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.
Similarly, the Company is not able to assess the impact of vendor advertising allowances on creating additional revenue, as such allowances do not directly generate revenue for the Company’s stores.
Results of Operations
Fiscal Year
Ingles operates on a 52- or 53-week fiscal year ending on the last Saturday in September. The consolidated statements of income for the fiscal years ended September 28, 2024 and September 24, 2022 each consisted of 52 weeks of operations. The consolidated statements of income for the fiscal year ended September 30, 2023 consisted of 53 weeks.
The period-to-period comparisons of our results of operations contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation have been prepared using the Company’s audited consolidated financial statements and the notes thereto, and the following discussion should be read in conjunction with such audited annual consolidated financial statements and related notes contained elsewhere in this Annual Report on Form 10-K.
Comparable Store Sales
Comparable store sales are defined as sales by grocery stores in operation for five full fiscal quarters. The Company has an ongoing renovation and expansion plan to modernize the appearance and layout of its existing stores. Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date of completion of the replacement, remodel or addition. A replacement store is a newly opened store that replaces an existing nearby store that is closed. A major remodel entails substantial remodeling of an existing store and may include additional retail square footage. Comparable store sales for the fiscal years ended September 28, 2024 and September 30, 2023 included 198 stores. Since the impacts
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of Hurricane Helene occurred during the last two days of the fiscal year ended September 28, 2024, comparable store sales included all 198 stores.
During the last two days of the fiscal year ended September 28, 2024, Hurricane Helene caused power outages at approximately 80 stores, some of which were without power for only several hours, and others were without power for up to 13 days. Due to the disruption of internet connectivity at the headquarters and the Western North Carolina area, all of the Company’s stores were unable to process credit or debit cards and could only accept cash for various periods of time. The internet connection outage was restored at the headquarters several days after the storm but remained inconsistent for our stores for approximately two weeks. Due to the foregoing disruptions, the Company estimates that it lost approximately $14.0 million in sales for the last two days of the fiscal year ended September 28, 2024. The disruptions to internet connectivity and water continued into quarter one of fiscal year 2025. Stores that were closed during the last two days of the fiscal year ended September 28, 2024 as a result of Hurricane Helene were included in comparable store sales.
The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.
Fiscal Year Ended September
September 28,
September 30,
September 24,
2024
2023
2022
Net sales
100.0%
100.0%
100.0%
Gross profit
23.0
23.8
24.9
Operating and administrative expenses
20.6
18.9
18.3
Gain from sale or disposal of assets
0.2
0.1
—
Income from operations
2.6
5.0
6.6
Other income, net
0.3
0.2
—
Interest expense
0.4
0.4
0.4
Income before income taxes
2.5
4.8
6.4
Income tax expense
0.6
1.2
1.6
Net income
1.9
3.6
4.8
Fiscal Year Ended September 28, 2024 Compared to the Fiscal Year Ended September 30, 2023
Net income for the fiscal year ended September 28, 2024 was $105.5 million, compared with net income of $210.8 million for the fiscal year ended September 30, 2023. Comparisons of fiscal year 2024 to fiscal year 2023 are affected by the difference in the number of weeks in each year. Fiscal year 2024 had 52 weeks and fiscal year 2023 had 53 weeks. Net income as a percentage of sales was 1.9% for fiscal year 2024 compared with 3.6% for fiscal year 2023. Inflation in the cost of goods and increases in operating expenses due to increased labor market competition contributed to this decrease.
Net Sales . Net sales for the fiscal year ended September 28, 2024 totaled $5.64 billion, compared with $5.89 billion for the fiscal year ended September 30, 2023. In addition to the stores closed due to damage and power outages caused by Hurricane Helene, the Company’s headquarters lost connectivity to the internet which disrupted the Company’s ability to accept credit and debit cards. As described above under “Comparable Store Sales”, the Company estimates that it lost approximately $14.0 million in sales for the last two days of the fiscal year ended September 28, 2024 due to the disruptions caused by Hurricane Helene. Store closures and power outages as a result of Hurricane Helene will have an impact on net sales for the first quarter and full fiscal year of 2025. In addition, the lack of water and subsequent ban on water usage, will have an impact on the fluid dairy operations for the first quarter of fiscal year 2025.
Management analyzes comparable stores sales for the 52 weeks of fiscal year 2024 with the corresponding 52 calendar weeks of the 53 week fiscal year 2023. On this basis, retail grocery comparable store sales excluding fuel decreased 1.7% for fiscal year 2024 compared to fiscal year 2023. The number of transactions (excluding fuel) decreased 0.3% while the average transaction size (excluding fuel) decreased by 1.4%. Comparing fiscal year 2024 with 2023, fuel gallons sold decreased 5.5% and per gallon fuel prices decreased 3.3%.
Sales by product category for the fiscal years ended September 28, 2024 and September 30, 2023 were as follows:
(dollars in thousands)
2024
2023
Grocery
$
1,983,198
$
2,062,416
Non-foods
1,273,324
1,326,907
Perishables
1,441,039
1,482,089
Fuel
724,230
792,524
Total retail grocery
$
5,421,791
$
5,663,936
The “Grocery” category includes grocery, dairy and frozen foods.
The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products.
The “Perishables” category includes meat, produce, deli and bakery.
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Changes in retail grocery sales for the fiscal year ended September 28, 2024 are summarized as follows (in thousands):
Total retail grocery sales for the fiscal year ended September 30, 2023
$
5,663,936
Comparable store sales decrease
(130,873)
Effect of 53rd week in fiscal year 2023
(106,715)
Other
(4,557)
Total retail grocery sales for the fiscal year ended September 28, 2024
$
5,421,791
Gross Profit. Gross profit for the fiscal year ended September 28, 2024 decreased $105.1 million, or 7.5%, to $1.3 billion compared with $1.4 billion for the fiscal year ended September 30, 2023. As a percentage of sales, gross profit totaled 23.0% for the fiscal year ended September 28, 2024 as compared to 23.8% for the fiscal year ended September 30, 2023. The decrease in gross profit resulted primarily from the $30.4 million in inventory loss due to Hurricane Helene.
Retail grocery gross profit as a percentage of total sales (excluding fuel) decreased 0.9 basis points in fiscal year 2024, compared with fiscal year 2023. The gross margin decrease was primarily due to the inventory impairment loss of $30.4 million as a result of Hurricane Helene.
Operating and Administrative Expenses. Operating and administrative expenses increased $46.4 million, or 4.2%, to $1.2 billion for the fiscal year ended September 28, 2024 from $1.1 billion for the fiscal year ended September 30, 2023. As a percentage of sales, operating and administrative expenses were 20.6% and 18.9% for fiscal years 2024 and 2023, respectively. Excluding fuel, which does not have significant direct operating expenses, the ratio of operating expenses to sales was 23.4% for fiscal year 2024 compared with 21.7% for fiscal year 2023. Included in the operating expenses is the asset impairment write off of $4.5 million, due to Hurricane Helene. The costs of clean up and repairs will impact operating and administrative expenses for the first quarter and full fiscal year of 2025.
A breakdown of the primary increases in operating and administrative expenses is as follows.
Increase
Increase
as a % of
(in millions)
sales
Insurance
$
16.9
0.30
%
Salaries and wages
$
13.0
0.23
%
Taxes and licenses
$
5.4
0.10
%
Miscellaneous
$
4.5
0.08
%
Insurance expense increased primarily due to higher claim volume for the Company’s self-insured employee benefit plans.
Salaries and wages increased due to increased labor market competition, which has increased the Company’s cost to attract and retain associates in the Company’s market area.
Taxes and licenses expenses increases were noted in both payroll taxes and in property taxes.
Miscellaneous expense increased due to the asset impairment loss of $4.5 million as a result of Hurricane Helene.
Gain from Sale or Disposal of Assets. Gains on sale or disposal of assets totaled $9.1 million for fiscal year 2024 and $2.8 million for fiscal year 2023. The increase was primarily related to the swap of shopping center properties that occurred in January 2024.
Other Income, Net. Other income, net totaled $14.2 million and $8.3 million for the fiscal years ended September 28, 2024 and September 30, 2023, respectively. Other income consists primarily of interest earned, which increased for the 2024 fiscal year due to a combination of higher deposits in interest bearing accounts and higher rates of interest earned on the Company’s cash balances.
Interest Expense. Interest expense totaled $21.9 million for the fiscal year ended September 28, 2024 and $22.1 million for the fiscal year ended September 30, 2023. Total debt was $532.6 million at the end of fiscal year 2024 compared with $550.2 million at the end of fiscal year 2023.
Income Taxes. Income tax expense totaled $34.0 million for fiscal year 2024, reflecting an effective tax rate of 24.3%. This compares with an income tax expense totaling $67.7 million and an effective tax rate of 24.3% for fiscal year 2023.
Net Income. Net income totaled $105.5 million for the fiscal year ended September 28, 2024 compared with net income of $210.8 million for the fiscal year ended September 30, 2023. Basic and diluted earnings per share for Class A Common Stock were $5.68 and $5.56, respectively, for the fiscal year ended September 28, 2024 compared with $11.35 and $11.10, respectively, for the fiscal year ended September 30, 2023. Basic and diluted earnings per share for Class B Common Stock were each $5.16 for the fiscal year ended September 28, 2024 compared with $10.32 of basic and diluted earnings per share for the fiscal year ended September 30, 2023.
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Fiscal Year Ended September 30, 2023 Compared to the Fiscal Year Ended September 24, 2022
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Ingles Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on November 29, 2023, for a discussion of the year ended September 30, 2023 as compared to September 24, 2022.
Liquidity and Capital Resources
Capital Expenditures
The Company believes that a key to its ability to continue to increase sales and develop a loyal customer base is providing conveniently located, clean and modern stores that provide customers with good service and an increasingly diverse selection of competitively priced products. As such, the Company has invested and plans to continue to invest significant amounts of capital toward the modernization of its store base. The Company’s modernization program includes the opening of new stores, the completion of major remodels and expansion of selected existing stores, and the relocation of selected existing stores to larger, more convenient locations.
Capital expenditures totaled $210.9 million and $173.6 million for fiscal years 2024 and 2023, respectively, with the increase driven primarily by the purchase of new sites and land parcels. Major capital expenditures included the following:
2024
2023
New stores
0
0
Store sites/land parcels purchased
16
15
New fuel stations added
0
1
Capital expenditures include upgrading and replacing store equipment, technology investments, those related to the Company’s distribution operation and its milk processing plant, and expenditures for stores to open in subsequent fiscal years.
Ingles’ capital expenditure plans for fiscal year 2025 include investments of approximately $120 to $160 million. The Company currently plans to dedicate the majority of its fiscal 2025 capital expenditures to continued improvement of its store base, as well as technology improvements, upgrading and replacing existing store, warehouse and transportation equipment and improvements to the Company’s milk processing plant.
The Company currently expects that its net annual capital expenditures will be in the range of approximately $100 to $160 million going forward in order to maintain a modern store base. Among other things, planned expenditures for any given future fiscal year will be affected by the availability of financing, which can affect both the number of projects pursued at any given time and aggregate investment by the Company in those projects. The number of projects may also fluctuate due to the types of projects pursued including new stores, major store remodels/expansions, and build-out of tenant space under the long-term leases. The Company makes decisions on the allocation of capital expenditure dollars based on many factors including the competitive environment, other Company capital initiatives, material costs and its financial condition.
In general, the Company finances its capital expenditures to the extent possible from cash on hand and cash flow from operations. Additional financing sources for capital expenditures could include borrowings under the Company’s $150 million committed line of credit (described below), other borrowings that could be collateralized by unencumbered real property and equipment with a net book value of approximately $1.5 billion, and the public debt or equity markets. The Company has used each of these to finance past capital expenditures and expects to have them available in the future.
The Company does not generally enter into commitments for capital expenditures other than on a store-by-store basis at the time it begins construction on a new store or begins a major or minor remodeling project. Construction commitments at September 28, 2024 totaled $6.2 million.
Liquidity
The Company generated $262.5 million of cash from operations in fiscal 2024 compared with $266.4 million for fiscal year 2023.
Cash used by investing activities for fiscal year 2024 totaled $206.2 million compared with $170.1 million for fiscal year 2023. The increase in cash used in investing activities was primarily due to capital expenditures, which increased by $37.3 in fiscal year 2024 as compared to fiscal year 2023.
The Company’s cash used by net financing activities totaled $31.2 million and $35.0 million for fiscal years 2024 and 2023, respectively.
The U.S. Dollar LIBOR panel ceased following June 30, 2023, and the Company’s debt agreements and interest rate swaps that utilized LIBOR discontinued the use of LIBOR and adopted the Secured Overnight Financing Rate (“SOFR”).
In June 2021, the Company issued at par $350.0 million aggregate principal amount of 4.00% senior notes due 2031 (the “Notes”).
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The Company has a $150.0 million unsecured senior line of credit (the “Line”) that matures in June 2026. The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or SOFR. The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at September 28, 2024. The Company is not required to maintain compensating balances in connection with the Line. At September 28, 2024, the Company had no borrowings outstanding under the Line.
In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for the construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”). The Project was completed in 2012, and the final maturity date of the Bonds is January 1, 2036.
Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, such financial institutions hold the Bonds until December 2029, subject to certain events. Mandatory redemption of the Bonds by the Company in the annual amount of $4.5 million began on January 1, 2014. The outstanding aggregate principal amount of the Bonds was $49.9 million at September 28, 2024. The Company may redeem the Bonds without penalty or premium at any time prior to December 17, 2029.
In September 2017, the Company refinanced approximately $60 million of secured borrowing obligations with a SOFR-based amortizing floating rate loan secured by real estate, which matures in October 2027. The Company has an interest rate swap agreement for a current notional amount of $18.5 million at a fixed rate of 3.962%. Under this agreement, the Company pays monthly the fixed rate of 3.962% and receives the one-month SOFR plus 1.75%. The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.5 million and mature October 1, 2027.
In December 2019, the Company closed a $155 million SOFR-based amortizing floating rate loan secured by real estate, which matures in January 2030. The Company has an interest rate swap agreement for a current notional amount of $116.9 million at a fixed rate of 2.998%. Under this agreement, the Company pays monthly the fixed rate of 2.998% and receives the one-month SOFR plus 1.60%. The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.65 million and mature in fiscal year 2030.
The fair market value of the interest rate swaps is measured quarterly with adjustments recorded in other comprehensive income.
The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Company’s Line, Bonds and the Notes indenture in the event of default under any one instrument.
The Bonds and the Line contain provisions that under certain circumstances would permit the acceleration of the indebtedness under such instruments or would otherwise permit lending institutions to terminate or withdraw their respective extensions of credit to the Company. Included among the triggering factors permitting the termination or withdrawal of the Bonds and the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents. As of September 28, 2024, the Company was in compliance with these covenants. Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $945.5 million of additional borrowings (including borrowings under the Line) as of September 28, 2024.
The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term debt financing. The Company believes, based on its current results of operations and financial condition, that its financial resources, including cash balances, the existing Line, short- and long-term financing expected to be available to it and internally generated funds, will be sufficient to meet planned capital expenditures and working capital requirements for the foreseeable future, including any debt service requirements of additional borrowings. However, there can be no assurance that any such sources of financing will be available to the Company when needed on acceptable terms, or at all.
It is possible that, in the future, the Company’s results of operations and financial condition will be different from that described in this Annual Report on Form 10-K based on a number of intangible factors. These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery and changing demographics as well as the additional factors discussed above and elsewhere under “Item 1A. Risk Factors.” It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this Annual Report on Form 10-K.
Quarterly Cash Dividends
Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 per share on its Class A Common Stock and $0.15 per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.
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The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors periodically reconsiders the declaration of dividends. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments, the amount of such dividends, and the form in which the dividends are paid (cash or stock) depends upon the Company’s results of operations, and financial condition, as well as other factors that the Board of Directors deems relevant.
Certain of the Company’s long-term debt agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios. These covenants have the effect of restricting certain types of transactions, including the payment of cash dividends generally and in excess of current quarterly per share amounts.
New Accounting Pronouncements
For new accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Outlook and Trends in the Company’s Markets
The Company continually assesses and modifies its business model to meet the changing needs and expectations of its customers. In connection with this review, the Company assesses the trends present in the markets in which it competes. Generally, it is difficult to predict whether a trend will continue for a sustained period of time and it is possible that new trends will develop that will affect an existing trend. The Company believes that the following trends are likely to continue for at least the next fiscal year:
The impact of Hurricane Helene due to physical damage to stores, water outage and ban and connectivity issues, will impact the 2025 first quarter and fiscal year 2025 results.
The supermarket industry will remain highly competitive and will be characterized by industry consolidation, fragmented food retail platforms, and continued competition from super centers and other non-supermarket operators.
Traditional supermarket products will be acquired by customers in new and diverse ways, including online ordering, home delivery and pre-picked for customer pickup.
Economic conditions will continue to affect customer behavior. Economic conditions may affect purchasing patterns with regard to meal replacement items, private label purchases, promotions and product variety.
The Company and its customers will continue to become more environmentally aware, evidenced by the Company’s transition to more energy efficient lighting and refrigerants, increased recycled waste paper and pallets, and customers’ increased usage of reusable shopping bags.
Volatile petroleum costs will impact utility and distribution costs, plastic supplies cost and may change customer shopping and dining behavior.
Retail fuel costs and retail prices will continue to be volatile, affecting the Company’s fuel sales and gross margin.
The Company plans to continue to focus on balancing sales growth and gross margin maintenance (excluding the effect of fuel sales) and will carefully monitor its product mix and customer trends.