LAKEWOOD, Colo. — Natural Grocers by Vitamin Cottage here posted double-digit comparable-store sales in the recently ended fourth quarter, but noted that increasing sales of grocery products were pressuring margins.

The company, which operates 74 small-format stores specializing in vitamins, supplements and organic grocery products, said comps for the fourth quarter rose 10.7% on a daily average basis, and were up 11.1% for the full fiscal year.

Net income was up 129% in the fourth quarter, to $2.2 million, on a 28.1% increase in sales, to $115.2 million. For the year net income was up 58.7%, to $10.6 million, on a 28% increase in sales, to $430.7 million.


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Gross margin for the year, which ended Sept. 30, was 29.2% of sales, vs. 29.4% the preceding fiscal year. The company attributed the decrease to a shift in sales mix toward products with lower margins, offset by purchasing improvements. In addition, margins decreased for bulk products due to increased production costs as a result of the relocation to a larger bulk food repackaging and distribution center in September of last year.

“We continue to see a shift in sales mix toward grocery products and the shift has helped drive customer traffic, which in the long-term, will help drive our sales in other departments,” said Sanda M. Buffa, chief financial officer, ina conference call with analysts Thursday.

She said the company recorded a 5.9% increase in daily average transaction count and a 4.9% increase in average transaction size for the year.

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“We're pleased with the financial strength and solid execution we have experienced over the past fiscal year,” said Kemper Isely, chairman and co-president.

In the fourth quarter, Natural Grocers opened stores in Omaha, Neb.; Beaverton and Bend, Ore.; and Topeka, Kan. It has since opened two additional stores in Tulsa, Okla., and Idaho Falls, Idaho.

The company has signed leases for 10 additional stores scheduled to open in fiscal 2014 in Colorado, Idaho, Kansas, New Mexico, Oregon, Texas, Utah and Washington.

The company projected it would open 15 new stores in fiscal 2014, and achieve daily average comparable-store sales growth of 8.5% to 9.5%, with EBITDA margins of 7.8% to 8%, net income margins of 2.4% to 2.6%, and diluted earnings per share of between 58 cents and 63 cents. Capital expenditures are projected between $35 million and $37 million.

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