Natural Grocers posts 1.1% sales gain in Q1

Natural Grocers by Vitamin Cottage said its fiscal first-quarter sales were up 1.1%, but costs pressured its gross margins in the period.

The Lakewood, Colo.-based natural and organic retailer said sales in the quarter, which ended Dec. 31, reached $280.5 million. Comparable-store sales were up 0.5%. That figure reflected a $1.7% increase in daily average transaction size, primarily driven by inflation, and a 1.2% decrease in daily average transaction count.

Internal cost inflation for the first quarter was 8%, and the company said it expected similar inflation for the second quarter as well.

Net income for the first quarter was down 50.6%, to $4.4 million.

The company said its gross margins as a percent of sales decreased 30 basis points to 28.1% in the first quarter, relative to a year ago. It attributed the decline primarily to lower product margins because of higher shrink, freight, and distribution expenses. In addition, store expenses as a percent of sales in the first quarter increased 130 basis points, primarily driven by increased wage rates.

The company said it continued to see gains in its loyalty program and in private label, two important components of its efforts to provide value for cusotmers.

The retailer’s {N}power loyalty program grew 18% to more than 1.8 million members by the end of the first quarter, and {N}power net sales penetration reached 76%, up from 73% a year ago, said Kemper Isely, co-president, Natural Grocers.

In addition, Natural-Grocers-brand products accounted for 7.9% of total sales in the first quarter, up from 7.5% a year ago. During the first quarter, the retailer launched eight new Natural Grocers-brand products.

The company said its strongest-performing departments in the quarter were dairy, meat and grocery, while comp-store sales in the supplements category were down in the low single digits. The decline was due to cycling high pandemic-driven demand in the year-ago period, said Todd Dissinger, chief financial officer.

The company said it is on track to open four to six new stores and relocate one to two stores in fiscal 2023.

“Over the next several years, we expect to return to opening between six and eight new stores per year as we anticipate improving construction and supply chain conditions,” said Isely.