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Price and promotions add up for Natural Grocers

Natural Grocers by Vitamin Cottage appears to have reversed disappointing sales as it attracts customers with promos. Here's what the numbers look like.

Focusing on price and promotion, particularly with staple goods, led to the fourth consecutive quarter of comparable store sales growth for Natural Grocers by Vitamin Cottage.

Daily average comparable store sales grew 7.1 percent in the second fiscal quarter ending March 31, company leaders reported during a May 3 earnings call. Comparable store sales were negative 1.7 percent in 2017.

Transactions count and size grew, too—5 percent and 2 percent, respectively.

Daily average mature store sales increased 4.3 percent in the second quarter of fiscal 2018 compared to a 3.1 percent decrease in the second quarter of fiscal 2017. Mature stores are those that opened during or before fiscal 2013.

Since suffering such declines, Natural Grocers has ramped up promos through its customer loyalty program. The company further invested in online and social promotions in the last quarter.

The success drove an overall net sales increase of 12.3 percent over the second quarter of 2017 to $215.9 million, but the company saw gross margin fall from 28.2 percent in Q2 2017 to 27 percent in 2018.

“We fine-tuned our pricing and promotional investments during the second quarter, resulting in an improved gross margin relative to the first quarter while delivering enhanced value to our customers,” Kemper Isely, co-president, said via press release. “Our strong sales growth and prudent new store expansion strategy enabled us to leverage expenses to support improved earnings.”

Additional highlights for second quarter fiscal 2018 include:

  • Net income increased 13.6 percent to $3.4 million with diluted earnings per share of 15 cents.
  • EBITDA increased 1.7 percent to $13.1 million.
  • Gross profit increased 7.6 percent over the same period in fiscal 2017 to $58.3 million.
  • Store expenses increased $4.1 million, or 9.6 percent, to $46.5 million.
  • Store expenses as a percentage of sales decreased to 21.5 percent during the second quarter of fiscal 2018 compared to 22.1 percent in the second quarter of fiscal 2017.

Natural Grocers opened three stores in the second quarter, bringing total store count to 145 stores in 19 states.

The company raised its fiscal 2018 outlook for daily average comparable stores sales growth to 3.5 percent to 4.5 percent and narrowed its fiscal 2018 diluted earnings per share outlook to 43 cents to 50 cents. The board of directors also authorized a two-year extension on its $10 million share repurchase program.

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