Ingles tries to restock pre-recession earnings.

• Position: Western

At first glance, Black Mountain-based Ingles Markets Inc. seems to be sitting on top of the world. The grocery chain, with 202 stores in Georgia, North Carolina, South Carolina, Tennessee, Virginia and Alabama, produced net sales of $3.4 billion in the fiscal year that ended in September--its 46th straight annual increase. Net income totaled $31.7 million, up 10% from the year before. That looks great until you compare it with 2007, when it netted $58.6 million, or the $52.1 million it made in 2008. So what happened?

In a few words: The economy weakened, and the competition stiffened. Ingles goes toe-to-toe with discount retailers such as Aldi, Bi-Lo, Food City, Food Lion, Kroger, Publix, Target and Wal-Mart. It has had to slash prices--and its profit margin--to boost sales and retain market share. Meanwhile, expenses have gone up from $564 million in 2007 to $653.7 million last year. Salaries and wages made up the biggest part of the increase. Ingles now has about 18,800 employees, compared with about 17,000 in 2007. The company closed three stores and opened eight during that time, with the average store size increasing from 49,382 square feet in 2007 to 53,524 in 2010.

Company executives don't discuss much about their operations, but Chief Financial Officer Ron Freeman told analysts during a recent conference call that Ingles plans to continue its expansion by building or remodeling five stores in 2011 and adding six gas stations either at...