Overview



Ingles, a leading supermarket chain in the Southeast, operates 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, as well as quality private label items. 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.
Coronavirus (COVID-19) Pandemic Impact
The effects of the COVID-19 pandemic, which began in March 2020, have eased
considerably over the six months ended March 25, 2023, but the earlier portion
of the pandemic substantially impacted supermarket operations, and some effects
have continued through the six months ended March 25, 2023. At the onset of the
COVID-19 pandemic, the Company implemented several enhanced cleaning and social
distancing protocols designed to keep our customers and our associates safe and
has continued to monitor and update its protocols as the pandemic has evolved.
Since March 2020, the Company's stores have experienced increased customer
traffic and occasional product shortages due to supply chain issues. The
currently tight labor market has impacted the Company's ability to attract and
retain qualified store personnel, but these impacts have not materially affected
our operations. Finally, as the economy continues to recover from the effects of
the pandemic, inflation has recently reached levels not seen in decades.
Inflation impacts product costs, labor costs and the cost of other goods used by
the Company, which could negatively impact our results of operation.
At the present time, we do not know how long and to what extent the ongoing
effects of the pandemic and inflation could impact our sales and financial
performance.
Critical Accounting Policies and Estimates

Critical accounting policies are those accounting policies that management believes are important to the presentation of the Company's 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


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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 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 $1.0 million per occurrence for workers' compensation and for general liability, and $475,000 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. 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, the Company maintains liability coverage. At March 25, 2023 the Company's self-insurance reserves totaled $31.1 million. This amount was inclusive of $4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

Asset Impairments

The Company accounts for the impairment of long-lived assets in accordance with FASB ASC Topic 360. 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. 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. There were no asset impairments during the six-month period ended March 25, 2023. 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 component of item cost in
inventory and recognized in merchandise costs when the item is sold. Due to the
use of the retail method of 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 $29.8 million and $26.2 million for the fiscal
quarters ended March 25, 2023 and March 26, 2022, respectively. For the
six-month periods ended March 25, 2023 and March 26, 2022, vendor allowances
applied as a reduction of merchandise costs totaled $64.6 million and $58.0
million, 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 in which the related expense is incurred. Vendor advertising
allowances recorded as a reduction of advertising expense totaled $1.9 million
and $1.7 million for the fiscal quarters ended March 25, 2023 and March 26,
2022, respectively. For the six-month periods ended March 25, 2023 and March 26,
2022, vendor advertising allowances recorded as a reduction of advertising
expense totaled $3.9 million and $3.7 million, respectively. Overall, vendor
allowances decreased significantly at the onset of the COVID-19 pandemic as
vendors reduced support for promotional activities. Vendor promotional support
subsequently increased, but has not returned to pre-pandemic levels.
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

Ingles operates on a 52 or 53-week fiscal year ending on the last Saturday in September. The Condensed Consolidated Statements of Income for the three and six month periods ended March 25, 2023 and March 26, 2022 both include 13 and 26 weeks of operations, respectively. Comparable store sales are defined as sales by retail stores in operation for five full fiscal quarters. Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales


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calculation from the date thereof. A replacement store is a newly-opened store that replaces an existing nearby store that has closed. A major remodel entails substantial remodeling of an existing store and includes additional retail square footage. For the three- and six-month periods ended March 25, 2023, comparable store sales included 198 stores. For the three- and six-month periods ended March 26, 2022, comparable store sales included 196 stores. The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales. For information regarding the various business' segments, see Note K "Segment Information" to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.



                                              Three Months Ended               Six Months Ended
                                         March 25,          March 26,     March 25,        March 26,
                                           2023               2022          2023             2022
Net sales                                  100.0 %            100.0 %       100.0 %          100.0 %
Gross profit                                23.6 %             25.3 %        24.3 %           25.3 %
Operating and administrative expenses       19.4 %             18.5 %        19.0 %           18.6 %
Gain from sale or disposal of assets           - %              0.1 %           - %              - %
Income from operations                       4.2 %              6.9 %         5.3 %            6.7 %
Other income, net                            0.1 %              0.1 %         0.1 %            0.1 %
Interest expense                             0.4 %              0.4 %         0.4 %            0.4 %
Income tax expense                           1.0 %              1.6 %         1.2 %            1.5 %
Net income                                   2.9 %              5.0 %         3.8 %            4.9 %

Three Months Ended March 25, 2023 Compared to the Three Months Ended March 26, 2022

Net income for the second quarter of fiscal 2023 totaled $40.5 million, compared with net income of $68.6 million for the second quarter of fiscal 2022. The decrease primarily resulted from significant inventory cost increases and higher costs to retain and keep associates. Net Sales. Net sales increased by $3.5 million, or 0.25%, to $1.381 billion for the three months ended March 25, 2023 compared with $1.377 billion for the three months ended March 26, 2022. Excluding fuel sales, total grocery comparable store sales increased 3.4% over the comparative fiscal quarter. Ingles operated 198 stores at both March 25, 2023 and March 26, 2022. Sales by product category (in thousands) were as follows:


                         Three Months Ended
                       March 25,    March 26,
                         2023         2022
Grocery               $   492,553  $   482,179
Non-foods                 308,684      289,419
Perishables               348,204      355,651
Fuel                      175,551      200,192
Total retail grocery  $ 1,324,992  $ 1,327,441

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. Changes in retail grocery sales for the quarter ended March 25, 2023 are summarized as follows (in thousands):

Total retail sales for the three months ended March 26, 2022 $ 1,327,441 Comparable store sales decrease (including fuel)

                   (2,635)
Other                                                                  186

Total retail sales for the three months ended March 25, 2023 $ 1,324,992

Gross Profit. Gross profit for the three-month period ended March 25, 2023 totaled $325.9 million, a decrease of $22.6 million, or 6.5%, compared with gross profit of $348.6 million for the three-month period ended March 26, 2022. Gross profit as a percentage of sales was 23.6% and 25.3% for the three months ended March 25, 2023 and March 26, 2022, respectively. The decrease in gross profit as a percentage of sales resulted primarily from inflation and raw material shortages, which have increased the cost of products. Operating and Administrative Expenses. Operating and administrative expenses increased $14.2 million, or 5.6%, to $268.9 million for the three months ended March 25, 2023, from $254.7 million for the three months ended March 26, 2022. As a percentage of sales, operating and administrative expenses were 19.5% and 18.5% for the March 2023 and March 2022 quarters, respectively. Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the second fiscal quarter of 2023 compared with 21.5% for the second fiscal quarter of 2022.


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A breakdown of the major changes in operating and administrative expenses is as
follows:
                             Increase        Increase
                            (Decrease)   (Decrease) as a
                           in millions      % of sales
Salaries and wages         $        8.8            0.64 %
Taxes and licenses         $        2.4            0.18 %
Repairs and maintenance    $        2.1            0.15 %
Advertising and promotion  $      (1.8)          (0.13) %



Salaries and wages increased in dollars 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 expense increased due to system improvements that provided us
the ability to separately account for use tax during invoice processing.
Repairs and maintenance increased due to higher refrigerant costs and the cost
of other supply items, as well as increased wear and tear on equipment to
accommodate sales volume.
Advertising and promotion costs decreased due to absorbing some of the activity
in-house and movement towards lower-cost types of advertising.
Gain from Sale or Disposal of Assets. Gain from the sale or disposal of assets
totaled $0.6 million for the three months ended March 25, 2023. Gain from the
sale or disposal of assets totaled $1.3 million for the three months ended March
26, 2022, primarily from the sale of rolling stock.
Interest Expense. Interest expense totaled $5.3 million for the three-month
period ended March 25, 2023 compared with $5.4 million for the three-month
period ended March 26, 2022. Total debt at March 2023 was $556.7 million
compared with $578.5 million at March 2022.
Income Taxes. Income tax expense totaled $13.5 million for the three months
ended March 25, 2023, reflecting an effective tax rate of 25.0% of pretax
income. Income tax expense totaled $22.4 million for the three months ended
March 26, 2022, reflecting an effective tax rate of 24.6% of pretax income.
Net Income. Net income totaled $40.5 million for the three-month period ended
March 25, 2023 compared with $68.6 million for the three-month period ended
March 26, 2022. Basic and diluted earnings per share for Class A Common Stock
were $2.18 and $2.13, respectively, for the March 2023 quarter, compared to
$3.70 and $3.61, respectively, for the March 2022 quarter. Basic and diluted
earnings per share for Class B Common Stock were each $1.98 for the March 2023
quarter compared with $3.36 for the March 2022 quarter.
Six Months Ended March 25, 2023 Compared to the Six Months Ended March 26, 2022

Net income for the first half of fiscal 2023 totaled $109.9 million, compared with net income of $134.8 million for the first half of fiscal 2022. Retail grocery sales increased, but inflation and the labor market increased salary and wage expense, resulting in lower pre-tax income. Net Sales. Net sales increased by $105.3 million, or 3.8%, to $2.87 billion for the six months ended March 25, 2023 compared with $2.77 billion for the six months ended March 26, 2022. Excluding fuel sales, total grocery comparable store sales increased 4.67% over the comparative six-month period. Sales by product category (in thousands) were as follows:


                           Six Months Ended
                        March 25,    March 26,
                          2023         2022
Grocery                $ 1,033,411  $   970,585
Non-foods                  636,040      594,091
Perishables                722,392      720,001
Fuel                       368,023      391,025
Total retail grocery   $ 2,759,866  $ 2,675,702


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Changes in retail grocery sales for the quarter ended March 25, 2023 are summarized as follows (in thousands):

Total retail sales for the six months ended March 26, 2022 $ 2,675,702 Comparable store sales increase (including fuel)

                  83,792
Other                                                                372

Total retail sales for the six months ended March 25, 2023 $ 2,759,866





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.
Gross Profit. Gross profit for the six-month period ended March 25, 2023 totaled
$697.1 million, a decrease of $2.0 million, or 0.3%, compared with gross profit
of $699.1 million for the six-month period ended March 26, 2022. Gross profit as
a percentage of sales was 24.3% and 25.3% for the six months ended March 25,
2023 and March 26, 2022, respectively. Inflation and supply chain pressures have
increased the cost of goods sold.
Operating and Administrative Expenses. Operating and administrative expenses
increased $30.3 million, or 5.9%, to $545.1 million for the six months ended
March 25, 2023, from $514.8 million for the six months ended March 26, 2022. As
a percentage of sales, operating and administrative expenses were 19.0% and
18.6% for the March 2023 and March 2022 six-month periods, respectively.
Excluding fuel sales and associated fuel operating expenses (primarily payroll),
operating expenses were 21.6% of sales for the first six months of 2023 compared
with 21.5% for the first six months of 2022.

A breakdown of the major changes in operating and administrative expenses is as
follows:

                                         Increase
                           Increase     as a % of
                          in millions     sales

Salaries and wages       $        21.8      0.76 %
Repairs and maintenance  $         4.9      0.17 %
Utilities and fuel       $         2.8      0.10 %
Store supplies           $         2.8      0.10 %



Salaries and wages increased in dollars due to additional labor hours required
for the increased sales volume and continued labor market pressures.
Repairs and maintenance expense increased due to higher refrigerant costs and
the cost of other supply items, as well as increased wear and tear on equipment
to accommodate sales volume.
Utilities and fuel expense increased due to higher costs of energy.
Store supplies are up for the year due to raw material shortages and inflation,
especially in packaging materials.
Gain from Sale or Disposal of Assets. Gain from the sale or disposal of assets
totaled $1.4 million for the six months ended March 25, 2023. For the six months
ended March 26, 2022, the gain from the sale or disposal of assets totaled $1.2
million.
Interest Expense. Interest expense totaled $10.7 million for the six-month
period ended March 25, 2023 compared with $10.8 million for the six-month period
ended March 26, 2022. Total debt at March 2023 was $556.7 million compared with
$578.5 million at March 2022.
Income Taxes. Income tax expense totaled $36.0 million for the six months ended
March 25, 2023, reflecting an effective tax rate of 24.7% of pretax income.
Income tax expense totaled $42.8 million for the six months ended March 26,
2022, reflecting an effective tax rate of 24.1% of pretax income.
Net Income. Net income totaled $109.9 million for the six-month period ended
March 25, 2023 compared with $134.8 million for the six-month period ended March
26, 2022. Basic and diluted earnings per share for Class A Common Stock were
$5.92 and $5.79, respectively, for the six months ended March 25, 2023, compared
to $7.26 and $7.10, respectively, for the six months ended March 26, 2022. Basic
and diluted earnings per share for Class B Common Stock were each $5.38 for the
six months ended March 25, 2023 compared with $6.60 for the six months ended
March 26, 2022.
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Liquidity and Capital Resources

Capital Expenditures

Capital expenditures totaled $91.4 million for the six-month period ended March 25, 2023. The Company's capital expenditures include the construction of new stores, the expansion and remodeling of existing stores, the acquisition of sites, new technology, and upgrades of the Company's transportation fleet and facilities.

The Company's capital expenditure plans for fiscal 2023 currently include investments of approximately $140 to $180 million. The Company currently plans to dedicate the majority of its fiscal 2023 capital expenditures to continued improvement of its store base and continued investment in one store expected to open in fiscal 2023, 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 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 the cost of those projects. The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and major remodel/expansions. The Company makes decisions on the allocation of capital expenditure dollars based on many factors including the competitive environment, other Company capital initiatives and its financial condition.

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.

Liquidity

The Company generated $94.4 million net cash from operations for the March 2023 six-month period compared with $155.5 million for the March 2022 six-month period. Cash from operations decreased by $61.1 million due to lower net income and more working capital needs during the March 2023 six-month period compared with the March 2022 six-month period. Cash used by investing activities for the six-month periods ended March 25, 2023 and March 26, 2022 totaled $89.6 million and $142.6 million, respectively, consisting primarily of capital expenditures and purchases of short term investments. Higher current year capital expenditures and no purchases of short term investments as compared to the prior year period accounted for the difference in investing activities between the two six-month periods.



Cash used by financing activities totaled $21.7 million for the six-month period
ended March 25, 2023, compared with $17.6 million for the six-month period ended
March 26, 2022. The increase was primarily related to principal payments on
long-term debt.
In June 2021, the Company issued $350.0 million aggregate principal amount of
senior notes due 2031 (the "Notes"). The Notes bear an interest rate of 4.00%
per annum and were issued at par.
The Company has a $150.0 million 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 LIBOR. The Line allows the
Company to issue up to $10.0 million in letters of credit, of which none were
issued at March 25, 2023. The Company is not required to maintain compensating
balances in connection with the Line. At March 25, 2023, the Company had no
borrowings outstanding under the Line.
In December 2010, the Company completed the funding of $99.7 million of 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 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, the
financial institutions would hold the Bonds until December 17, 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 balance of the
Bonds was $54.4 million as of March 25, 2023. 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 secured
borrowing obligations with a LIBOR-based amortizing floating rate loan secured
by real estate maturing in October 2027. The Company has an interest rate swap
agreement for a current notional amount of $27.5 million at a fixed rate of
3.92%. Under this agreement, the Company pays monthly the fixed rate of 3.92%
and receives the one-month LIBOR plus 1.65%. The interest rate swap effectively
hedges floating rate debt in the same amount as the current notional amount of
the interest rate 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 LIBOR-based amortizing
floating rate loan secured by real estate maturing in January 2030. The Company
has an interest rate swap agreement for a current notional amount of $128.5
million at a fixed rate of
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2.95%. Under this agreement, the Company pays monthly the fixed rate of 2.95% and receives the one-month LIBOR plus 1.50%. 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 are 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 Notes indenture in the event of default under any one instrument. The Company's long-term debt agreements generally contain provisions that under certain circumstances would 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 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 March 25, 2023, the Company was in compliance with these covenants. Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $2.2 billion of additional borrowings (including borrowings under the Line) as of March 25, 2023. 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 the 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 is 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 Quarterly Report on Form 10-Q based on a number of factors. These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery, changing demographics, as well as the additional factors discussed below under "Forward- Looking Statements." 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 Quarterly Report on Form 10-Q. Quarterly Cash Dividends

Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 (sixteen and one-half cents) per share on its Class A Common Stock and $0.15 (fifteen cents) per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.

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 results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant. In addition, the Notes, the Bonds, the Line, and other debt agreements contain provisions that, based on certain financial parameters, restrict the ability of the Company to pay additional cash dividends in excess of current quarterly per share amounts. Further, the Company is prevented from declaring dividends at any time that it is in default under the indenture governing the Notes.

Seasonality



Grocery sales are subject to a slight seasonal variance due to both holiday
related sales and sales in areas where seasonal homes are located. Sales are
traditionally higher in the Company's first fiscal quarter due to the inclusion
of sales related to Thanksgiving and Christmas. Unless Easter falls within the
quarter, the Company's second fiscal quarter traditionally has the lowest sales
of the year predominantly due to lower occupancy of seasonal homes. In the third
and fourth quarters, sales are usually positively affected by the return of
customers to seasonal homes in our market area.
Impact of Inflation
As the economy continues to recover from the impact of the COVID-19 pandemic,
inflation has reached levels not experienced in decades. Food costs remain high,
reflecting a tight labor market and supply chain transportation disruptions,
while energy costs have decreased.

The following table from the United States Bureau of Labor Statistics lists annualized changes in the Consumer Price Index that could have an effect on the Company's operations. One of the Company's significant costs is labor, which increases with general inflation. Inflation or deflation in energy costs affects the Company's fuel sales, distribution expenses and plastic supply costs. During the past twelve months, inflation has reached its highest level in a number of years, impacting food costs, transportation costs, and labor costs.





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                Twelve Months Ended
                     March 2023
All items                   5.0 %
Food at home                8.4 %
Energy                    (6.4) %

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The words "expect", "anticipate", "intend", "plan", "likely", "goal", "believe", "seek", "will", "may", "would", "should" and similar expressions are intended to identify forward-looking statements. While these forward-looking statements and the related assumptions are made in good faith and reflect the Company's current judgment regarding the direction of the Company's business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements. Such statements are based upon a number of assumptions and estimates which are inherently subject to significant risks and uncertainties many of which are beyond the Company's control. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company's results. Some important factors (but not necessarily all factors) that affect the Company's revenues, financial position, growth strategies, profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include the potential continued impact of the COVID-19 pandemic on our business and economic conditions generally in the Company's operating area; the Company's ability to successfully implement its expansion and operating strategies and to manage rapid expansion; pricing pressures and other competitive factors; reduction in per gallon retail fuel prices; the maturation of new and expanded stores; the Company's ability to reduce costs and achieve improvements in operating results; the availability and terms of financing; increases in labor and utility costs; success or failure in the ownership and development of real estate; changes in the laws and government regulations applicable to the Company; disruptions in the efficient distribution of food products; changes in accounting policies, standards, guidelines or principles as may be adopted by regulatory agencies as well as the Financial Accounting Standards Board; and those factors contained under the heading "Risk Factors" in Item 1A of Part I of our most recent Annual Report on Form 10-K for the year ended September 24, 2022, filed by the Company under the Exchange Act, on November 23, 2022.

Consequently, actual events affecting the Company and the impact of such events on the Company's operations may vary significantly from those described in this Quarterly Report on Form 10-Q or contemplated or implied by statements in this Quarterly Report on Form 10-Q. The Company does not undertake and specifically denies any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except to the extent required by applicable law.

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