Natural Grocers ‘On Track’ for Growth

Natural Grocers by Vitamin Cottage is “on track” to meet its 2020 guidance for comps, new stores, margins and earnings per share, said Chairman and co-President Kemper Isely during the Lakewood, Colo.-based grocer’s first-quarter fiscal year 2020 earnings conference call Feb. 6.

“We are pleased to report another quarter of continued daily average comparable-store sales growth, reflecting our ongoing focus on our customer service and marketing initiatives while staying true to our founding principles,” Isely said.

At a time when other natural food grocers are hemorrhaging stores, Natural Grocers continues to expand, opening its first store in Louisiana this year. It now operates in 20 states.

“We have steadily maintained store growth, bringing our count at the end of the quarter to 155 stores,” Isely added. “We saw gains across most product categories during the first quarter, including a 3.4% daily average comparable-store sales increase in supplements accelerating from the fourth quarter.”

Natural Grocers sees the supplement product category as an opportunity and an area of focus in fiscal 2020. It attributes the comp gain in supplements to several initiatives in its in-store nutritional education programs, as well as its Npower program, designed to drive customer loyalty.

As of the first quarter, Npower enrollment increased by 37% year over year, and sales penetration increased to 69% of total sales, Isely reported. “Our newly implemented personalized Npower promotions continue to prove effective, adding to our efforts to leverage Npower to enhance the customer experience with personalized offers, recipes and coupons,” he said.

While Natural Grocers reported a decline in gross margin on a year-over-year basis—triggered by a sales mix and higher expenses—Isely sees “a meaningful improvement in gross margin trends” in 2020. “We continue to see a relatively stable competitive market and remain confident in our price positioning,” he said.

Isley said Natural Grocers would focus on driving growth through new store openings in both existing and new markets; driving consistent comp store sales growth; and controlling costs to deliver enhanced profitability and cash flow.

In the quarter, Natural Grocers’ net sales increased 3.8% to $230 million. Daily average comp-store sales increased by 1.9%, and mature store comp increased by 0.8%. The first quarter comp increase was driven by a 2.5% increase in average transaction size, partially offset by a 0.6% decrease in daily average transaction count compared with the first quarter of last year, said CFO Todd Dissinger.

“While traffic was down modestly in the quarter, note that traffic was up 1.7% on a two-year stack basis, as we were comparing to a strong first quarter a year ago,” he said.

Natural Grocers’ net income was $1.9 million with diluted earnings per share of 8 cents in the first quarter, compared to net income of $2.2 million or 10 cents a year ago. It declared a quarterly cash dividend of 7 cents per share.

During fiscal 2020, Natural Grocers expects to open five or six new stores and relocate one to two stores.