Natural Grocers’ Q2 Aided by Positive Comps

“Driven by continued positive trends in comparable-store sales and consistent year-on-year gross margin performance,” in the words of Natural Grocers by Vitamin Cottage Inc. Co-President Kemper Isely, the specialty food retailer’s second quarter of fiscal 2019, ended March 31, saw a 6.7 percent net sales increase to $230.4 million; a 2.9 percent daily average comparable-store sales rise; 8.4 percent operating income growth to $6.1 million; and a 13.4 percent net income leap to $3.9 million, with diluted earnings per share of 17 cents.

“As a result of our year-to-date performance, our outlook for fiscal 2019 daily average comparable-store sales growth remains in line with expectations, and we are raising our fiscal 2019 diluted earnings per share outlook,” added Isely.

The company attributed the Q2 fiscal 2019 net sales increase of $14.5 million from the same period in fiscal 2018 to a $6.2 million rise in comps and a $9.1 million uptick in new store sales, partly offset by a $0.7 million decline in sales from one store that closed during Q1 fiscal 2019.

According to Natural Grocers, the daily average comps increase during Q2 was due to a 3.5 percent increase in daily average transaction size, partly offset by a 0.6 percent decrease in daily average transaction count. Severe winter weather across several of the retailer’s markets affected performance during Q2 fiscal 2019 compared with the year-ago period, including adversely affecting transaction count.

Natural Grocers’ gross profit during Q2 fiscal 2019 rose 6.7 percent over the same period in fiscal 2018, to $62.2 million, while its gross margin was 27 percent of sales for the quarter, consistent with Q2 fiscal 2018, as a result of lower occupancy costs as a percentage of sales, offset by a lower product margin caused by a shift in sales mix to lower-margin products.

For the first half of fiscal 2019, the company’s net sales increased $33.6 million, or 8 percent, to $452 million versus last year, mainly because of a $17.3 million rise in comps and a $17.4 million uptick in new store sales, partly offset by a $1.2 million sales decline from the aforementioned store that closed during Q1 fiscal 2019.

Natural Grocers’ daily average comps grew 4.2 percent in the first half of fiscal 2019, compared with a 5.9 percent increase in the year-ago period. The daily average comps rise during the first half of fiscal 2019 reflected a 3.3 percent increase in average transaction size and a 0.8 percent rise increase in daily average transaction count, the company noted.

Gross profit during the first half of fiscal 2019 was up 8.9 percent over last year, to $121.4 million, and gross margin was 26.9 percent of sales, versus 26.6 percent for the first half of fiscal 2018. The company attributed this increase in gross margin mainly to improved product margin resulting from more focused promotional pricing campaigns, and lower occupancy costs as a percentage of sales, partly offset by a shift in sales mix to lower-margin products.

Natural Grocer’s net income for the first half of fiscal 2019 was $6.1 million, or 27 cents of diluted earnings per share, versus $8.6 million, or 38 cents of diluted earnings per share, for the year-ago period. According to the retailer, this decrease in net income was due to the impact of the $4.3 million noncash remeasurement of its deferred income tax assets and liabilities as a result of the enactment of the Tax Cuts and Jobs Act.

Since April 1, Natural Grocers has signed leases for five new stores, and purchased the land and building for one additional new location. The stores will be in Colorado, Louisiana, North Dakota and Oregon, and are slated to open during fiscal 2019 and beyond.

Lakewood, Colo.-based Natural Grocers has 152 stores in 19 states.