Ingles Markets, Incorporated (NASDAQ: IMKTA) today reported an overall increase in sales of 3.8% to $872.8 million for its first fiscal quarter ended December 25, 2010. For the December 2010 quarter, net income rose to $7.7 million compared with net income of $6.0 million for the quarter ended December 2009.

Commenting on the results, Robert P. Ingle, chief executive officer, said, “We are off to a strong start for fiscal year 2011 with increased sales and profits for the quarter that included Thanksgiving and Christmas. Overall conditions are improving somewhat, but we continue to be cautious about the next few quarters.”

Financial Results

Net sales rose 3.8% to $872.8 million for the quarter ended December 25, 2010, compared with $841.0 million for the quarter ended December 26, 2009. Grocery segment comparable store sales increased 2.9%, both with and excluding gasoline sales. Average transaction size increased while weekly customer visits were about level with the comparable December 2009 quarter.

Gross profit for the first quarter of fiscal 2011 rose 4.4% to $193.5 million, an increase of $8.2 million compared with the first quarter of fiscal 2010. Gross profit as a percentage of sales increased to 22.2% for the first quarter of fiscal 2011 compared with 22.0% for the first quarter of fiscal 2010. Grocery segment gross margins, excluding gasoline, also increased from 25.0% in the first quarter of fiscal 2010 to 25.2% for the current-year quarter. The improvement in gross margin benefitted from changes in sales mix and vendor participation in pricing promotions during the very competitive holiday season.

Sales and gross profit dollars in the Company’s fluid dairy operations increased due to higher milk prices and a modest volume increase for the first quarter of fiscal 2011 compared with the comparable fiscal 2010 quarter.

Total operating expenses were $167.3 million for the first quarter of fiscal 2011 compared with $160.6 million for the comparable fiscal 2010 quarter. Operating and administrative expenses as a percentage of sales, excluding gasoline sales and associated operating expenses, were essentially unchanged at 21.8% and 21.7% for the three months ended December 25, 2010 and December 26, 2009, respectively. The growth in operating expenses was comprised primarily of increases in depreciation, insurance, bank charges, utilities and payroll arising from stores opened or remodeled since the first quarter of last year.