Natural Grocers Reports ‘Very Strong’ Q3 Results

Citing strong sales driven by the COVID-19 pandemic, Natural Grocers by Vitamin Cottage reports its net sales increased $40.7 million (18.1%) to $265.1 million for Q3 fiscal 2020, ending June 30. The Lakewood, Colo.-based grocer’s net income increased 134.8% to $4.7 million for the period, and daily average comparable store sales increased 15.5%.

“We generated another quarter of very strong results with daily average comparable store sales increasing 15.5% and net sales increasing 18.1%, which continues to reflect the ongoing impact of the COVID-19 pandemic and government mandates, and the related growth of eating at home,” Co-President Kemper Isely said in a press release based on an August 6 earnings call.

Isely continued by thanking the company’s team members for their work in difficult times, and customers for their continued loyalty. “I am proud of the organization’s ability to respond to a multitude of challenges, including evolving safety measures, supply chain effectiveness and supporting our customers during these unprecedented times,” he added.

Natural Grocers finds its $40.7 million net sales increase in Q3 of fiscal 2020 was driven by a $34.7 million increase in comparable store sales and a $6.0 million increase in new store sales. The company opened two new stores, resulting in a 4.6% new store growth rate for the 12-month period ending June 30, 2020. It ended the quarter with a total store count of 159 stores in 20 states.

An uptick in daily average comparable store sales, the result of a 31.5% increase in daily average transaction size, was partially offset by a 12.2% decrease in daily average transaction count—a  reflection of shoppers’ pandemic purchasing habits, which saw customers going to the store less frequently, but stocking up on each visit.

Daily average mature store sales increased 12.5% in Q3 of fiscal 2020 compared to a 1.7% increase in Q3 of fiscal 2019. Natural Grocers attributes its increase in comparable store sales to a combination of its customers’ response to COVID-19 pandemic, as well as marketing initiatives, a moderated level of promotional pricing and increased membership and usage of its customer loyalty program.

Reflecting earnings after product and occupancy costs, gross profit increased $14.0 million, or 23.9%, to $72.4 million for the three months ended June 30, 2020 compared to $58.4 million for the three months ended June 30, 2019.

Gross margin also increased to 27.3% for those months in 2020, as compared to 26.0% for the same period in 2019. Natural Grocers says the increase in gross margin for the three months ended June 30, 2020 was primarily driven by a decrease in store occupancy expense, as a percentage of sales, and an improved product margin.

COVID-19-related labor expenses drove up store expenses during Q3 fiscal 2020 to $58.6 million, a 21.0% increase compared to the same period in fiscal 2019. Store expenses during the first nine months of fiscal 2020 increased $19.2 million, or 13.0%, to $166.9 million, which the company also attributes to labor-related expenses.

Natural Grocers by Vitamin Cottage has already set its sights on expansion. As of Aug. 6, 2020, the company had signed leases for two new stores and acquired the property for one additional new store. The new stores, which will be located in Missouri, New Mexico and Oregon, are slated to open during fiscal 2020 and beyond.