Competition has continued to slow Natural Grocers by Vitamin Cottage, which on Thursday reported its second consecutive quarter of negative comparable store sales growth.
Net sales grew 9.4 percent during the first fiscal quarter to $183.6 million, driven by five new store openings. But comparable store sales declined 0.6 percent over the same quarter last year, driven by a drop in average transaction count but partially offset by an increase in average transaction size, said Co-president Kemper Isely.
Gross margin also declined approximately 40 basis points to 28.4 percent, but Isely noted that increased occupancy costs as a percentage of sales were partially offset by a favorable mix-shift toward the higher-margin categories of supplements and body care. He said he believes the boost in supplement sales mix was because of the work the retail chain’s staff has been doing to educate customers in-store.
As for what’s on tap for the rest of the 2017 fiscal year, we can expect to see fewer new stores than in 2016 and continued work on cost initiatives and improved store labor rates. Isely said Natural Grocers will test a new store prototype later this year, with the first store opening in the third quarter. He’s also expects to have between 100 and 200 new grocery items in the store’s private label line within the next six to 12 months.
Efforts to bring shoppers into the store will include more aggressive promotional pricing for certain items, Isely said, with five to 10 products being offered at a deep discount for at least three days a month. Plans also include ramping up its marketing plan in the second and third quarters of the year as the retailer continues to expand outdoor advertising and digital and social media campaigns to attract new customers.
Isely also implied that ecommerce efforts might grow in the near future. Natural Grocers dipped its toes into online sales in October, when it launched an ecommerce site to allow customers to pre-order Thanksgiving turkeys.
Company leadership reiterated its previous guidance for the year, which calls for comparable store sales growth of negative 1 percent to 1 percent. "We continue to face competitive pressure from both our competitors and the entrance of non-traditional competitors into the natural and organic food segment," Isely said. "While we still have work to do driving traffic and improving operating margins, I’m confident in our positioning and operational capabilities to execute our strategies."