Tuesday, March 4, 2014

Seeking Alpha: Ingles Markets An Okay Supermarket, Sweetened With Real Estate

On the whole, food retailing is not a particularly attractive business in developed markets like the U.S.. Same-store sales growth is typically lackluster, competition is fierce, and margins are thin. New concepts can certainly distinguish themselves, but it is all in all a tough business in which to earn strong returns on capital.

Ingles Markets (IMKTA) is not exactly a tremendous exception. While the company's sales per square foot and margins hold up pretty well relative to the likes Harris Teeter, they definite lag those of Kroger (KR) (which now owns Harris Teeter) or Safeway (SWY), same-store sales growth has been sluggish, and the company's free cash flow generation is not all that impressive. Add in the value of the company's real estate, though, and the picture brightens. The shares currently trade above my "base case" value estimate, but there is upside if commercial real estate prices improve further and/or another supermarket chain looks at Ingles as an incremental growth opportunity.

Follow this link to read more:
Ingles Markets An Okay Supermarket, Sweetened With Real Estate

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