If you’re looking for the polar opposite of KR in the grocery sector, Ingles Markets (IMKTA) is pretty close. The company boasts 204 stores, all of which are located within 250 miles of its Asheville, NC distribution center.
On the face of it, IMKTA looks like the rare jewel in this sector — a fairly valued grocery stock. It has a price to earnings growth ratio of less than 1, and it trades at just 10.6 times forward earnings. The current dividend yield of 2.5% is among the highest in the sector.
But here’s where it starts to get challenging: Ingles’ profit margins are among the slimmest in the sector, and same-store sales growth for the third quarter was only 1.4%.
And IMKTA is saddled with a lot of debt. Although the company is aggressively paying down that debt, prepayment penalties pushed the chain to a $14.4 million net loss in the quarter. It doesn’t help matters that Kroger’s acquisition of Harris Teeter brings the grocery Goliath into its market as a more direct and daunting competitor.
Ingles, which began as a family-owned business some 50 years ago, is a lovely supermarket chain for consumers, many of whom are loyal to the quality store-brand items and dairy. But the chain risks being squeezed out by larger, more aggressive competitors.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.