Natural Grocers off to strong start in fiscal 2022

Natural Grocers by Vitamin Cottage might have found the formula for success in natural foods retail: have high standards and affordable products; provide an attractive loyalty program to customers; and offer a quality line of private label products that boost both the top and bottom lines.

Consistently over several years, those are the factors behind increased sales and improved gross margins that co-president Kemper Isely cites during quarterly earnings calls. Thursday's call, regarding the company's first-quarter financial report, was no different. The first quarter ended Dec. 31, 2021.

Net sales were $277.3 million, an increase of 4.6% or $12.2 million compared with Q1 of fiscal 2021. Comparable store sales increased 3.8% or $10.1 million; new stores sales totaled $2.1 million.

In comparable stores, daily average transaction count increased 3.0%, while daily average transaction size increased 0.8%.

On a two-year stack basis, daily average comparable store sales increased 16.5% in the first quarter.

In other Q1 highlights for the Lakewood, Colo.-based natural retailer:

• Gross profit was $78.4 million, a 7.8% increase from a year ago, driven by increased sales.

• Gross margin was 28.4% in the first quarter, compared with 27.6% in Q1 of fiscal 2021.

Related:Natural Grocers sets another record with fiscal 2021 net sales

• Net income was $8.9 million or $0.39 diluted earnings per share; in the first quarter of fiscal 2021, net income was $3.6 million, $0.16 diluted earnings per share.

• Adjusted EBITDA reached $19.5 million, an increase of 44.7% compared with $13.5 million a year ago.

"Our unwavering commitment to our founding principles remains a key element in our success,” said Isely. “We provide a differentiated offering of natural and organic products at always affordable prices, coupled with free science-based nutrition education, which continues to resonate with consumers who are prioritizing health and wellness more than ever.”

Membership in Natural Grocers’ loyalty program, called Npower, grew 20% during the past year to reach 1.6 million customers at the end of the first quarter. Those members accounted for 73% of Natural Grocers' sales, compared with 72% in the fourth quarter and 69% in the first quarter of 2020, he said.

Supplement sales continue to drive sales as well. This was the third consecutive quarter in which the supplements category's growth exceeded the overall company's average growth, Isely said. Unlike previous years, neither Isely nor Chief Financial Officer Tod Dissinger provided the percentage increase of supplements sales.

Related:Natural Grocers enacts wage increase

Natural Grocers added 13 products, including frozen side dishes and more supplements, to its private label line during the first quarter. Natural Grocers-branded products made up 7.5% of total sales compared with 7.1% in the fourth quarter of fiscal 2021.

The company relocated one store in the first quarter and ended the quarter with 162 stores in 20 states. On Feb. 1, Natural Grocers announced that a store in Salt Lake City will close by March 31. It will not be replaced, as another store already exists just 3.1 miles away from the location.

As of Thursday, the company has signed leases or acquired property for six new stores that are expected to open in 2022 or later. Isely said during the call that delays in construction and in obtaining equipment to operate the stores continues.

"Like many companies, we face risks and uncertainties related to the COVID-19 pandemic, labor availability and the supply chain,” said Isely. “Our response to these challenges and the strong start to fiscal 2022 give us confidence in our outlook, and we expect they will position us to deliver enhanced value for all stakeholders."

Earlier in the week, Natural Grocers released its inaugural Environmental, Social and Governance (ESG) report.

“Natural Grocers was founded by my parents in 1955, who were inspired by core values that many would recognize today as sustainability principles,” said Isely. “The company was built on and remains committed to our five founding principles — quality; natural and organic products; always affordable pricing; nutrition education; crew and community. These principles continue to guide our business practices, focusing on the health and well-being of our communities and the planet. Our crew’s dedication to these principles ensures our stores’ operations and supply chain reflect these values. Since its founding, Natural Grocers has embraced practices intended to make our food system more just, sustainable and equitable.”

This article originally appeared on New Hope Network, a Supermarket News sister website.