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    Ingles Markets Sees Slower Sales, Improved Gross Profit in First Quarter

    ASHEVILLE, N.C. - Southeastern chain Ingles Markets Inc. on Monday reported a slight decline in comparable store sales for the first quarter, but said it achieved an improved gross margin and gross profit.

    ASHEVILLE, N.C. - Southeastern chain Ingles Markets Inc. on Monday reported a slight decline in comparable store sales for the first quarter, but said it achieved an improved gross margin by focusing on our higher margin perishable departments combined with loss control initiatives and procurement improvements. In addition, its gross profit increased 1.7 percent.

    Net sales for the first quarter ended Dec. 28, 2002, were $495.1 million, a 0.9 percent decrease from the first quarter of fiscal 2002. Ingles operated 199 stores in the 2002 quarter compared to 203 stores last year. Comparable store sales decreased 0.4 percent for the same period.

    Gross profit increased 1.7 percent to 26.3 percent of sales this year compared to 25.6 percent of sales in the 2001 quarter. Operating and administrative expenses grew 0.7 percent to 23.3 percent of sales vs. 22.9 percent of sales last year. Income from operations increased 7.1 percent to 3.4 percent of sales in the December 2002 quarter compared to 3.2 percent of sales in the December 2001 quarter, due primarily to the improved gross profit.

    Net income for the December 2002 quarter was $3.2 million, or $0.14 per diluted share compared to $4.1 million, or $0.18 per diluted share for the December 2001 quarter.

    "We believe the slight decline in comparable store sales this quarter is a reflection of weak economic conditions. However, we have been able to not only maintain, but improve our gross margin by focusing on our higher margin perishable departments, by loss control initiatives and by procurement improvements," said chairman and CEO Robert P. Ingle.

    "Soft sales had an effect on operating and administrative expenses, as a percentage of sales, particularly in the fixed occupancy costs of stores. The costs of accepting debit and credit cards continue to escalate, not just from increased usage but the fees charged by the networks. Adjustments made to our self-insured health care plan in April 2002 and a focus on risk management in the general liability area helped to decrease insurance costs as a percentage of sales in spite of increased premiums charged by insurers. We continued to benefit from reduced labor costs from the prior year's implementation of new labor standards and scheduling.

    "We are optimistic about the future and our focus is on increasing sales by operating quality stores, remaining competitive in our pricing and selection, exploring ways to improve procurement and containing operating costs. We continue to improve our store base to better serve today's customers."

    For the balance of the fiscal year, Ingles expects to open three new stores, complete three major remodels and open one replacement store. Asheville, N.C.-based Ingles Markets operates 199 supermarkets in six southeastern states. In conjunction with its supermarket operations, the company also operates 77 neighborhood shopping centers, all but 17 of which contain an Ingles supermarket.

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