Strong Q3 for Natural Grocers

Natural Grocers by Vitamin Cottage, Inc., announced results for its third quarter of fiscal 2023 ended June 30 and raised its outlook for fiscal 2023.

Highlights included:

"We delivered strong results in the third quarter reflecting continued top-line momentum as comparable store sales accelerated to 4.4% including a 1.9% increase in daily average transaction count. Moreover, strength was broad-based across categories," said Kemper Isely, co-president. "Growth continues to be driven by a loyal and resilient customer base that prioritizes our offering of high-quality natural and organic products at Always Affordable prices. We believe the enduring strength of our business model is further reflected in the 19.1% increase in daily average comparable store sales compared to the third quarter of 2019. 

"We are confident in our execution and the trajectory of our business. We are increasing our outlook for comparable store sales and diluted earnings per share for fiscal year 2023 to reflect the strong results in the third quarter."

During the third quarter of fiscal 2023, net sales increased $15.5 million, or 5.8%, to $281.8 million, compared to the third quarter of fiscal 2022, due to an $11.7 million increase in comparable store sales and a $3.8 million increase in new store sales. Daily average comparable store sales increased 4.4% in the third quarter of fiscal 2023, comprised of a 2.4% increase in daily average transaction size and a 1.9% increase in daily average transaction count. The increase in net sales was driven by transaction count, retail price increases, new store sales, and marketing initiatives including market-specific campaigns and {N}power loyalty program offers that drove customer engagement.

Gross profit during the third quarter of fiscal 2023 increased $7.8 million, or 10.6%, to $81.4 million, compared to $73.6 million in the third quarter of fiscal 2022. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased 130 basis points to 28.9% during the third quarter of fiscal 2023, compared to 27.6% in the third quarter of fiscal 2022. The increase in gross margin was driven by higher product margin attributed to effective pricing and promotions.

Store expenses during the third quarter of fiscal 2023 increased $2.5 million, or 4.2%, to $62.6 million. Store expenses as a percentage of net sales were 22.2% during the third quarter of fiscal 2023, down from 22.6% in the third quarter of fiscal 2022. The decrease in store expenses as a percentage of net sales was primarily driven by expense leverage on sales, partially offset by higher labor expense as a result of increased wage rates.

Net income for the third quarter of fiscal 2023 was $7.1 million, or $0.31 diluted earnings per share, compared to net income of $3.9 million, or $0.17 diluted earnings per share, for the third quarter of fiscal 2022.

Adjusted EBITDA for the third quarter of fiscal 2023 increased 28.2% to $16.7 million, compared to $13.0 million in the third quarter of fiscal 2022.

During the first nine months of fiscal 2023, net sales increased $30.1 million, or 3.7%, to $845.5 million, compared to the first nine months of fiscal 2022, due to a $20.4 million increase in comparable store sales and an $11.5 million increase in new store sales, partially offset by a $1.8 million decrease in net sales related to store closures. Daily average comparable store sales increased 2.5% in the first nine months of fiscal 2023, and was comprised of a 1.4% increase in daily average transaction size and a 1.1% increase in daily average transaction count. The increase in net sales was primarily driven by transaction count, retail price increases, new store sales and marketing initiatives, partially offset by a moderation of the pandemic trends experienced in the first six months of fiscal 2022.

Gross profit during the first nine months of fiscal 2023 increased $13.5 million, or 5.9%, to $242.6 million. Gross profit reflects earnings after product and occupancy expenses. Gross margin increased to 28.7% during the first nine months of fiscal 2023, compared to 28.1% in the first nine months of fiscal 2022. The increase in gross margin was driven by higher product margin partially offset by higher shrink expense.

Store expenses during the first nine months of fiscal 2023 increased $12.4 million, or 6.9%, to $191.4 million. Store expenses as a percentage of net sales were 22.6% during the first nine months of fiscal 2023, up from 22.0% in the first nine months of fiscal 2022. The increase in store expenses as a percentage of net sales reflects higher labor expense as a result of increased wage rates and an impairment charge related to a store closure.

Operating income for the first nine months of fiscal 2023 was $23.9 million, compared to $26.5 million in the first nine months of fiscal 2022. Operating margin during the first nine months of fiscal 2023 was 2.8%, compared to 3.3% in the first nine months of fiscal 2022.

Net income for the first nine months of fiscal 2023 was $17.4 million, or $0.76 diluted earnings per share, compared to net income of $19.2 million, or $0.84 diluted earnings per share for the first nine months of fiscal 2022.

Adjusted EBITDA for the first nine months of fiscal 2023 was $47.3 million, compared to $48.6 million in the first nine months of fiscal 2022.

The company is raising its fiscal 2023 outlook for comparable store sales and diluted earnings per share based upon year-to-date performance and current trends. The company is also refining its outlook for the number of new stores and relocations/remodels. The outlook reflects recent results, current operating trends, consumer trends, and the uncertainty of the economic environment, including inflationary factors.