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Supplements, private label products drive Natural Grocers' sales growth

Per-share dividends will be paid out on March 16.

Victoria A.F. Camron

February 4, 2022

3 Min Read
Natural Grocers by Vitamin Cottage continues to see sales growth

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.

"Our unwavering commitment to our founding principles remains a key element in our success. 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," Isely said.

Membership in the 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' FY2021 net sales set another record

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, Utah, will close by March 31. It will not be replaced, as another store already exists just 3.1 miles away from the store that is closing.

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.

Year-over-year comparisons

Natural Grocers released these Q1 financial details on Thursday:

  • 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%.

  • 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.

  • 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.

Related:Natural Grocers' Q1 sales, profit increase again

The board of directors authorized a cash dividend of $0.10 per common share, to be paid on March 16 to shareholders of record on Feb. 28. Dividends traditionally were $0.07 per share until Q4 of fiscal 2021, when the board raised the dividend to $0.10 per share.

About the Author(s)

Victoria A.F. Camron

Digital content specialist, New Hope Network

Victoria A.F. Camron was a freelance writer and editor contracted with New Hope Network from 2015 until April 2022, when she was hired as New Hope Network's digital content specialist—otherwise known as the web editor.

As she continues the work she has done for years—covering the natural products industry for NewHope.com and Natural Foods Merchandiser; writing up earnings calls and other corporate news; and curating roundups of trends and information for the website—she is thrilled to be an official part of the New Hope team. (She doesn't mind having paid holidays and vacations again, though!) Victoria also compiled and edited newsletters, and served as interim content director for Delicious Living in 2016.

Before working as a freelancer, she spent 17 years in community newspapers in Longmont, Colorado, and St. Charles and Wheaton, Illinois. Victoria is a Colorado native and a graduate of Metropolitan State College of Denver.

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