Natural Grocers by Vitamin Cottage Announces First Quarter Fiscal 2024 Results

Sample article from our Retail & Omnichannel

February 9, 2024 (press release) –

Raises Fiscal 2024 Outlook

LAKEWOOD, Colo., Feb. 8, 2024 /PRNewswire / -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its first quarter of fiscal 2024 ended December 31, 2023.

Highlights for First Quarter Fiscal 2024 Compared to First Quarter Fiscal 2023

  • Net sales increased 7.6% to $301.8 million;
  • Daily average comparable store sales increased 6.2%;
  • Net income was $7.8 million, with diluted earnings per share of $0.34;
  • Adjusted EBITDA was $18.8 million; and
  • Opened two new stores and relocated one store.

"Our strong first quarter results reflect a continuation of the positive trends we experienced in recent quarters," said Kemper Isely, Co-President. "Net sales grew 7.6% year-over-year to $301.8 million, driven by a 6.2% increase in daily average comparable store sales which included a 3.4% increase in transaction count. Sales strength continued to be broad-based across categories. Our differentiated offering of carefully vetted natural and organic products, and compelling value proposition, continue to resonate with today's health-conscious consumers and distinguish us in the marketplace. Diluted earnings per share increased 78.9% to $0.34, reflecting strong sales growth, effective pricing and promotions, and expense leverage."

Mr. Isely continued, "We are encouraged by our first quarter results, which have prompted us to raise our fiscal 2024 outlook for daily average comparable store sales growth and diluted earnings per share. We believe we are well positioned to leverage our momentum throughout the balance of the fiscal year."

In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) in conformity with U.S. generally accepted accounting principles (GAAP), the Company is also presenting EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. The reconciliation from GAAP to these non-GAAP financial measures is provided at the end of this earnings release.

Operating Results — First Quarter Fiscal 2024 Compared to First Quarter Fiscal 2023

During the first quarter of fiscal 2024, net sales increased $21.3 million, or 7.6%, to $301.8 million, compared to the first quarter of fiscal 2023, due to a $17.3 million increase in comparable store sales and a $5.5 million increase in new store sales, partially offset by a $1.5 million decrease in net sales related to closed stores. Daily average comparable store sales increased 6.2% in the first quarter of fiscal 2024, comprised of a 3.4% increase in daily average transaction count and a 2.7% increase in daily average transaction size. The increase in net sales was driven by transaction count, retail price increases, new store sales, and marketing initiatives, including market-specific campaigns and {N}power® rewards program offers that drove customer engagement.

Gross profit during the first quarter of fiscal 2024 increased $10.0 million, or 12.8%, to $88.8 million, compared to $78.7 million in the first quarter of fiscal 2023. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased 130 basis points to 29.4% during the first quarter of fiscal 2024, compared to 28.1% in the first quarter of fiscal 2023. The increase in gross margin was driven by higher product margin attributed to effective pricing and promotions, and store occupancy cost leverage.

Store expenses during the first quarter of fiscal 2024 increased 6.9% to $68.0 million, primarily driven by higher compensation expense. Store expenses as a percentage of net sales were 22.5% during the first quarter of fiscal 2024, down from 22.7% in the first quarter of fiscal 2023. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Administrative expenses during the first quarter of fiscal 2024 increased 14.0% to $9.4 million, driven by higher compensation expense. Administrative expenses as a percentage of net sales were 3.1% in the first quarter of fiscal 2024, up from 2.9% in the first quarter of fiscal 2023.

Operating income for the first quarter of fiscal 2024 was $10.8 million, compared to $6.4 million in the first quarter of fiscal 2023. Operating margin during the first quarter of fiscal 2024 was 3.6%, compared to 2.3% in the first quarter of fiscal 2023.

Net income for the first quarter of fiscal 2024 was $7.8 million, or $0.34 diluted earnings per share, compared to net income of $4.4 million, or $0.19 diluted earnings per share, for the first quarter of fiscal 2023.

Adjusted EBITDA for the first quarter of fiscal 2024 was $18.8 million, compared to $13.8 million in the first quarter of fiscal 2023.

Balance Sheet and Cash Flow

As of December 31, 2023, the Company had $13.6 million in cash and cash equivalents, and $18.4 million in outstanding borrowings on its $75.0 million revolving credit facility.

During the first quarter of fiscal 2024, the Company generated $16.6 million in cash from operations and invested $11.8 million in net capital expenditures, primarily for new and relocated stores.

Dividend Announcement

Today, the Company announced the declaration of a quarterly cash dividend of $0.10 per common share. The dividend will be paid on March 20, 2024 to stockholders of record at the close of business on March 4, 2024.

Growth and Development

During the first quarter of fiscal 2024, the Company opened two stores and relocated one store, ending the quarter with a total of 167 stores in 21 states. Since December 31, 2023, the Company has opened one new store.

Fiscal 2024 Outlook

The Company is raising its fiscal 2024 outlook for daily average comparable store sales growth and diluted earnings per share. The Company now expects:

 

Fiscal
2024 Outlook

Number of new stores

4-6

Number of relocations/remodels

4-6

Daily average comparable store sales growth

3.0% to 5.0%

Diluted earnings per share

$1.02 to $1.12

   

Capital expenditures (in millions)

$30 to $39

Earnings Conference Call

The Company will host a conference call today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss this earnings release. The dial-in number is 1-888-347-6606 (US) or 1-412-902-4289 (International). The conference ID is "Natural Grocers Q1 FY 2024 Earnings Call." A simultaneous audio webcast will be available at http://Investors.NaturalGrocers.com and archived for a minimum of 20 days.

About Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is an expanding specialty retailer of natural and organic groceries, body care products and dietary supplements. The products sold by Natural Grocers must meet strict quality guidelines and may not contain artificial colors, flavors, preservatives or sweeteners, or partially hydrogenated or hydrogenated oils. The Company sells only USDA certified organic produce and exclusively pasture-raised, non-confinement dairy products, and free-range eggs. Natural Grocers' flexible smaller-store format allows it to offer affordable prices in a shopper-friendly, clean and convenient retail environment. The Company also provides extensive free science-based nutrition education programs to help customers make informed health and nutrition choices. The Company, founded in 1955, has 168 stores in 21 states.

Visit www.NaturalGrocers.com for more information and store locations.

Forward-Looking Statements

The following constitutes a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, statements in this release are "forward-looking statements" and are based on management's current expectations and are subject to uncertainty and changes in circumstances. All statements that are not statements of historical fact are forward-looking statements. Actual results could differ materially from these expectations due to changes in global, national, regional or local political, economic, inflationary, deflationary, recessionary, business, interest rate, labor market, competitive, market, regulatory and other factors, and other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the Form 10-K) and the Company's subsequent quarterly reports on Form 10-Q. The information contained herein speaks only as of the date of this release and the Company undertakes no obligation to publicly update forward-looking statements, except as may be required by the securities laws.

For further information regarding risks and uncertainties associated with the Company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Form 10-K and the Company's subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting Investor Relations at 303-986-4600 or by visiting the Company's website at http://Investors.NaturalGrocers.com .

Investor Contact:

Reed Anderson, ICR, 646-277-1260, reed.anderson@icrinc.com

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Consolidated Statements of Income

(Unaudited)

(Dollars in thousands, except per share data)

 
   

Three months ended
December 31,

 
   

2023

 

2022

 

Net sales

 

$

301,750

 

280,457

 

Cost of goods sold and occupancy costs

 

212,990

 

201,738

 

Gross profit

 

88,760

 

78,719

 

Store expenses

 

68,012

 

63,596

 

Administrative expenses

 

9,407

 

8,253

 

Pre-opening expenses

 

538

 

453

 

Operating income

 

10,803

 

6,417

 

Interest expense, net

 

(894)

 

(796)

 

Income before income taxes

 

9,909

 

5,621

 

Provision for income taxes

 

(2,154)

 

(1,214)

 

Net income

 

$

7,755

 

4,407

 
           

Net income per share of common stock:

         

Basic

 

$

0.34

 

0.19

 

Diluted

 

$

0.34

 

0.19

 

Weighted average number of shares of common stock outstanding:

         

Basic

 

22,751,524

 

22,708,644

 

Diluted

 

22,979,744

 

22,801,450

 

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Consolidated Balance Sheets 

(Unaudited)

(Dollars in thousands, except per share data)

 
   

December 31,

2023

 

September 30,
2023

 

Assets

         

Current assets:

         

Cash and cash equivalents

 

$

13,620

 

18,342

 

Accounts receivable, net

 

9,324

 

10,797

 

Merchandise inventory

 

116,077

 

119,260

 

Prepaid expenses and other current assets

 

4,238

 

4,151

 

Total current assets

 

143,259

 

152,550

 

Property and equipment, net

 

177,277

 

169,060

 

Other assets:

         

Operating lease assets, net

 

284,212

 

287,941

 

Finance lease assets, net

 

43,980

 

45,110

 

Deposits and other assets

 

377

 

395

 

Goodwill and other intangible assets, net

 

14,052

 

14,129

 

Total other assets

 

342,621

 

347,575

 

Total assets

 

$

663,157

 

669,185

 
           

Liabilities and Stockholders' Equity

         

Current liabilities:

         

Accounts payable

 

$

81,587

 

80,675

 

Accrued expenses

 

31,989

 

33,064

 

Term loan facility, current portion

 

5,688

 

1,750

 

Operating lease obligations, current portion

 

35,840

 

34,850

 

Finance lease obligations, current portion

 

3,762

 

3,690

 

Total current liabilities

 

158,866

 

154,029

 

Long-term liabilities:

         

Term loan facility, net of current portion

 

 

5,938

 

Revolving facility

 

18,400

 

 

Operating lease obligations, net of current portion

 

271,832

 

276,808

 

Finance lease obligations, net of current portion

 

46,203

 

47,142

 

Deferred income tax liabilities, net

 

13,996

 

14,427

 

Total long-term liabilities

 

350,431

 

344,315

 

Total liabilities

 

509,297

 

498,344

 

Stockholders' equity:

         

Common stock, $0.001 par value, 50,000,000 shares authorized, and 22,752,413 and 
     22,745,412 shares issued at December 31, 2023 and September 30, 2023, and 22,752,413
     and 22,738,915 shares outstanding at December 31, 2023 and September 30, 2023,
     respectively

 

23

 

23

 

Additional paid-in capital

 

59,275

 

59,013

 

Retained earnings

 

94,562

 

111,871

 

Common stock in treasury at cost, 6,497 shares at September 30, 2023

 

 

(66)

 

Total stockholders' equity

 

153,860

 

170,841

 

Total liabilities and stockholders' equity

 

$

663,157

 

669,185

 

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 
   

Three months ended

December 31,

 
   

2023

 

2022

 

Operating activities:

         

Net income

 

$

7,755

 

4,407

 

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization

 

7,451

 

7,062

 

Impairment of long-lived assets

 

90

 

 

Loss on disposal of property and equipment

 

30

 

3

 

Share-based compensation

 

406

 

357

 

Deferred income tax (benefit) expense

 

(430)

 

218

 

Non-cash interest expense

 

4

 

5

 

Changes in operating assets and liabilities:

         

Decrease (increase) in:

         

Accounts receivable, net

 

1,135

 

2,296

 

Merchandise inventory

 

3,183

 

2,381

 

Prepaid expenses and other assets

 

(319)

 

(7)

 

Income tax receivable

 

252

 

533

 

Operating lease assets

 

8,319

 

8,172

 

(Decrease) increase in:

         

Operating lease liabilities

 

(8,401)

 

(8,281)

 

Accounts payable

 

(1,776)

 

6,771

 

Accrued expenses

 

(1,075)

 

(2,710)

 

Net cash provided by operating activities

 

16,624

 

21,207

 

Investing activities:

         

Acquisition of property and equipment

 

(11,734)

 

(10,413)

 

Acquisition of other intangibles

 

(111)

 

(883)

 

Proceeds from sale of property and equipment

 

 

21

 

Proceeds from property insurance settlements

 

38

 

 

Net cash used in investing activities

 

(11,807)

 

(11,275)

 

Financing activities:

         

Borrowings under revolving facility

 

155,000

 

125,000

 

Repayments under revolving facility

 

(136,600)

 

(125,000)

 

Repayments under term loan facility

 

(2,000)

 

(2,000)

 

Finance lease obligation payments

 

(815)

 

(642)

 

Dividend to shareholders

 

(25,028)

 

(2,272)

 

Payments of deferred financing costs

 

(18)

 

 

Payments on withholding tax for restricted stock unit vesting

 

(78)

 

(118)

 

Net cash used in financing activities

 

(9,539)

 

(5,032)

 

Net (decrease) increase in cash and cash equivalents

 

(4,722)

 

4,900

 

Cash and cash equivalents, beginning of period

 

18,342

 

12,039

 

Cash and cash equivalents, end of period

 

$

13,620

 

16,939

 

Supplemental disclosures of cash flow information:

         

Cash paid for interest

 

$

441

 

272

 

Cash paid for interest on finance lease obligations, net of capitalized interest of $130
     and $78, respectively

 

455

 

490

 

Income taxes paid

 

5

 

2

 

Supplemental disclosures of non-cash investing and financing activities:

         

Acquisition of property and equipment not yet paid

 

$

8,514

 

4,295

 

Acquisition of other intangibles not yet paid

   

191

 

138

 

Property acquired through operating lease obligations

   

4,680

 

756

 

Property acquired through finance lease obligations

   

(52)

 

1,694

 

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Non-GAAP Financial Measures

(Unaudited)

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company's actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation and non-recurring items.

The following table reconciles net income to EBITDA and Adjusted EBITDA, dollars in thousands:

   

Three months ended
December 31,

   
   

2023

 

2022

   

Net income

 

$

7,755

 

4,407

   

Interest expense, net

 

894

 

796

   

Provision for income taxes

 

2,154

 

1,214

   

Depreciation and amortization

 

7,451

 

7,062

   

EBITDA

   

18,254

 

13,479

   

Impairment of long-lived assets          

   

90

 

   

Share-based compensation

   

406

 

357

   

Adjusted EBITDA

 

$

18,750

 

13,836

   

EBITDA increased 35.4% to $18.3 million for the three months ended December 31, 2023 compared to $13.5 million for the three months ended December 31, 2022. EBITDA as a percentage of net sales was 6.0% and 4.8% for the three months ended December 31, 2023 and 2022, respectively.

Adjusted EBITDA increased 35.5% to $18.8 million for the three months ended December 31, 2023 compared to $13.8 million for the three months ended December 31, 2022. Adjusted EBITDA as a percentage of net sales was 6.2% and 4.9% for the three months ended December 31, 2023 and 2022, respectively.

Management believes some investors' understanding of our performance is enhanced by including EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe EBITDA and Adjusted EBITDA provide additional information about: (i) our operating performance, because they assist us in comparing the operating performance of our stores on a consistent basis, as they remove the impact of non-cash depreciation and amortization expense as well as items not directly resulting from our core operations, such as interest expense and income taxes and (ii) our performance and the effectiveness of our operational strategies. Additionally, EBITDA is a component of a measure in our financial covenants under our credit facility.

Furthermore, management believes some investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry. Management believes that some investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. By providing these non-GAAP financial measures, together with a reconciliation from net income, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.

Our competitors may define EBITDA and Adjusted EBITDA differently, and as a result, our measures of EBITDA and Adjusted EBITDA may not be directly comparable to EBITDA and Adjusted EBITDA of other companies. Items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. EBITDA and Adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered in isolation or as an alternative to, or substitute for, net income or other financial statement data presented in the consolidated financial statements as indicators of financial performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

  • EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
  • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
  • EBITDA and Adjusted EBITDA do not reflect any depreciation or interest expense for leases classified as finance leases;
  • EBITDA and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
  • Adjusted EBITDA does not reflect share-based compensation, impairment charges, and store closing costs;
  • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; and
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements.

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA as supplemental information.

SOURCE Natural Grocers by Vitamin Cottage, Inc.

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