Dive Brief:

• Longtime Ingles Market investor Gamco Asset Management, a hedge fund based in Rye, New York, has increased its company stock ownership and has called for a shakeup of the retailer's board, according to Winsight Grocery Business. Last month, Gamco nominated Justyn R. Putnam and John "Jack" R. Lowden to serve on Ingles' board.
• In a filing with the Securities and Exchange Commission, Gamco expressed concern that only three out of Ingles' eight board members are listed as independent, and that one of those members is a former chief financial officer for the company. The hedge fund also claimed the Ingles board does not communicate effectively with shareholders, noting the retailer's decision to discontinue quarterly conference calls with shareholders last year.

• Ingles' shares are divided into Class A, which are publicly traded, and Class B, which are not. Chairman Robert Ingle and his family control 76% of the company's voting power and 28% of company stock. Ingles allows Class A shareholders to elect two board members each year.

Dive Insight:

At a time when activist investors are shaking up the boardrooms of retailers and manufacturers, Gamco hopes to send the message to Ingles Market directors that they need increased oversight and better relations with shareholders.

Last month, the hedge fund increased its stock ownership to 8.98%, or 1.26 million shares, and named two individuals with investment backgrounds as nominees to the company's board of directors, which holds elections during Ingles annual meeting in February. In the SEC filing, according to Winsight Grocery Business, Gamco noted it had increased its stock ownership to 16.5%, and called for improvements from the company's board.  

It's not clear what, if any, changes Gamco hopes to make beyond the company boardroom. Ingles operates 199 stores in a very competitive southeastern market that has seen expansion from Publix, discounters Aldi and Lidl, and Walmart. As a traditional retailer, Ingles is vulnerable to the incursion of low-price, differentiated formats.

But Ingles operates in many rural and suburban communities where it has built a loyal customer base, and is still the preferred one-stop shop. Ingles also owns most of its real estate, including numerous shopping malls where its stores appear. The company's real estate holdings and solid financials have made it one of the regional chains often mentioned as a target for acquisition.

The grocer, which operates 199 stores in six southeastern, logged total sales of $4 billion in fiscal year 2017 and comparable store sales up 1.5% over last year. Gross profit grew $39.2 million, or 4.2%, to $963.6 million.