Natural Grocers by Vitamin Cottage does not anticipate the need for any price investments in the face of increased competition, the company said during an investor conference call.
Despite an increase in regional competition — from 15% last year to approximately 51% during the first half of this year — “our pricing surveys show we are the best-priced natural food chain in each of our markets by 10% to 25%,” Kemper Isely, co-president, said, “so we don’t believe we need to invest in price.”
According to Isely, Natural Grocers is trying to improve its competitive position by boosting its standards, including new programs featuring only pasture-raised, non-confinement dairy products and non-GMO organic chickens.
Natural Grocers began rolling out the dairy program last month, with full implementation expected by next April, and it began transitioning the chicken program last month as well.
Net income for the second quarter, which ended March 31, rose 24.3% to $4 million, while sales jumped 22.4% to $130.3 million and comparable store sales rose 6.9%. For the half net income rose 24% to $6.9 million, with sales increasing 27.3% to $250.9 million and comps up 8.7%.
Isely said new competition impacted same-store sales by about 3%, “but we have had similar situations in other years and we have always bounced back quite well,” he noted.
“For stores that did not have new competition comps are actually up 13.7% for the quarter, so it’s a matter of getting through this period of extra competition “
He said he is confident the company can continue to generate sufficient cash at the lower comp rates “for an extended period of time, if necessary,” to fund its goal of expanding its store base by 20% a year.
Natural Grocers by Vitamin Cottage operates 83 stores in 13 states.
Isley said the company is on track to open 15 new stores this year, with five opened in the second quarter and two of the three stores planned for the third quarter already opened. The company has signed leases for the three stores it plans to open in the fourth quarter, he said, and four leases for stores planned to open next year, he added.
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