Natural Grocers Cites Sales Gains, Plans New Stores

LAKEWOOD, Colo. — Natural Grocers by Vitamin Cottage posted double-digit gains in same-store sales for both its fiscal fourth quarter and year, and pledged to ramp up growth in fiscal 2013.

The fast-growing chain, which specializes in natural and organic product, said comps rose 13% for the fourth quarter and 11.6% for the fiscal year, which ended Sept. 30.

“We believe the strength of our financial results and positive industry trends have positioned us well for new store growth heading into fiscal 2013,” said Kemper Isely, chairman and co-president of the company, in the company’s first year-end conference call as a public company last month.

Natural Grocers opened 10 new stores in fiscal 2012, ending the year with 59 stores in 12 states. In fiscal 2013, the company said it plans to open 12 new stores, including one that opened in October in Missoula, Mont.

The company has signed leases for six additional locations slated to open in the current fiscal year — in Helena and Kalispell, Mont.; Denton and Lubbock, Texas; Omaha, Neb.; and Medford, Ore.

“We believe we are well positioned to fund our accelerated growth and support it for solid execution,” Isely said. “We continue to be very pleased with how well our new stores are performing.”

He noted that the company is planning up-front capital investments of about $2.3 million per store, vs. historic levels of about $1.9 million per store. The new stores are projected to record “higher than average” first-year sales, Isely added.

Sean Naughton, an analyst at Minneapolis-based Piper Jaffray, said the higher cost and revenue projections are due to “more desirable site selection.”

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In addition, he said he calculated that productivity of new stores improved to 63.4% in the fourth quarter, vs. 56.2% in the year-ago period.

Natural Grocers projects that it takes four years to recoup its initial cash investment in new stores, and expects “approximately 35% cash on cash returns by the end of the fifth year.”

New stores include full demo kitchens and lecture and community rooms, Isely said. Natural Grocers boasts of offering free nutrition education, including a nutritional health coach in every store.

Total capital expenditures are projected to be between $25 million and $30 million, which the company said would be funded by existing cash and from cash generated through operations.