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For Natural Grocers, positive sales streak continues

Growth of private label products and rewards program continues to pay off

Continuing a streak of positive, daily average comparable-store sales growth for 16 consecutive years, Natural Grocers by Vitamin Cottage on Thursday reported gains in its fourth quarter and fiscal 2019 earnings.

Net sales increased 4.5% to $227.2 million for the fourth quarter of 2019, which ended Sept. 30. Higher average basket size drove the sales increase, as transaction numbers were steady compared with Q4 2018, according to CFO Todd Dissinger. For the fiscal year, net sales totaled $903.6 million, an increase of 6.4% from 2018.

Co-President Kemper Isely and his siblings purchased the Lakewood, Colo.-based natural products company from their parents in 1998, when it had just 11 stores in Colorado. It ended fiscal 2019 with 153 stores in 19 states, compared with 148 stores in the same number of states at the end of fiscal 2018l Grocers

The expanded line of private label products continues to be a strong point for Natural Grocers. After introducing 47 products in 2019, the company will add 70 new products next year. The biggest successes of the new products have been chocolate and coffee. The new private label products will include household items such as paper towels and laundry detergent, as well as “bottled” water that will be in aluminum cans and pizzas — “a variety of product that will drive the line,” Isely said in an earnings call with analysts Thursday.


CBD products have also performed well in the 117 stores that carry them. Some states’ regulations still prohibit their sale, Isely added.

The company’s rewards program, Npower, has enrolled its 1 millionth customer. About 38% of Natural Grocers customers belong to the program, but they account for 67% of its total sales, Isely said. They shop more often and purchase more; the average basket for an Npower member is in the mid-$40 range, while the average basket overall is in the mid-$30 range, he explained.

The bottom line

Natural Grocers by Vitamin Cottage will issue a dividend of 7 cents per share next month, the first quarterly dividend in the company's history, Isely announced.

"This announcement reflects our continuing growth, profit performance and confidence in our business, along with our strong financial position and cash flow," Isely said during the call.

The dividend will be paid on Dec. 17 to stockholders of record as of Dec. 2. The company has extended its $50 million credit facility to 2024 to pay the dividend and provide more cash-flow flexibility, said Dissinger.

Nearly all of the company's fourth-quarter results were positive:

• Net sales increased $9.7 million, driven by sales increases of $4.0 million in comparable stores and $6.5 million in new stores.

• Daily comparable store sales increased 1.8%, with a 1.8% increase in basket size and stable transaction count. In the fourth quarter of 2018, daily comparable store sales increased 6.3% compared to 2017.

• Gross profit rose 2.9% to $59 million.

• Gross margin was 26% of sales, compared with 26.3% in 2018; the decline was due to a change in sales mix toward lower-margin products.

• Operating income decreased to $2.8 million, down 19.7% from 2018.

• Net income was $1.4 million, compared with $2.1 million in Q4 2018.

Natural Grocers' fiscal year also ended on a high note:

• Net sales increased $54.5 million, driven by a $26.3 million increase in comparable store sales and $30.8 million increase in new store sales.

• Daily comparable store sales rose 3.1%, with a 2.9% increase in basket size and a 0.2% increase in transaction count. In 2018, comparable store sales increased 5.8% over the previous year.

• Gross profit rose 5.8% to $238.9 million.

• Gross margin was 26.4% of sales, slightly lower than the 26.6% margin in 2018.

• Operating income increased 11.4% to $16.8 million.

• Net income was $9.4 million, compared with $12.7 million in 2018, a decrease of 25.9%. The decrease was driven by deferred tax assets in 2017. Adjusted net income was $8.3 million.

During the fourth quarter, Natural Grocers opened one new store and relocated one store. Already in the first fiscal quarter of 2020, a new store has opened in Louisiana — the company's first in that state, Dissinger said. For the fiscal year 2019, the company opened six new stores and relocated five stores. Another store is expected to open this quarter, with two more in the second quarter and two in the last half of the year. Leases have been signed for five locations and property acquired for two more that will be located in Colorado, New Mexico, Oregon, Utah and Washington during fiscal 2020 or later.


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

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