Natural Grocers by Vitamin Cottage, Inc. Q1 FY2025 earnings call

Key Points

• Strong start to fiscal year with broad-based growth across product categories and regions.
• NPower Rewards program penetration was 81% in the first quarter, up from 78% a year ago.
• Launched 23 new Natural Grocers brand items in the first quarter.
• Relocated two stores, closed two, and opened one new store in Brownsville, Texas.
• Focus on new store development, existing store productivity, and alignment with consumer trends towards health and sustainability.

Net sales increased 9.4% to $330.2 million for the first quarter. Daily average comparable store sales rose 8.9% and 15.1% on a two-year basis. Strong-performing product categories included dairy, meat, produce, and dietary supplements. Branded products accounted for 8.9% of total sales, up from 8.5% the prior year. Comparable store sales growth was balanced across transaction counts, transaction size, and items per basket.

Fiscal Year 2025 Guidance

• Plan to open 4 to 6 new stores and relocate or remodel 2 to 4 stores.
• Revised daily average comparable store sales growth range: 5% to 7% (previously 4% to 6%).
• Diluted earnings per share outlook: $1.57 to $1.65 (previously $1.52 to $1.60).
• Capital expenditures expected to be $36 to $44 million.
• Anticipate sales comps to moderate in the second half of the year, modest inflation throughout the year, and store expenses as a percentage of sales to be flat to slightly lower.

• Uncertainty regarding the impact of possible tariffs on product costs.
• Impact of store unit growth on margin expansion potential.

Q: How will gross margin be relatively flat as the year progresses?

A: Todd mentions less benefit from store occupancy leverage in the second half due to cycling strong prior-year comps and uncertainty in the tariff environment.

Q: What's the reason for free cash flow timing?

A: Todd states it's predominantly due to timing of accounts payable and payment for goods/services.

Q: Long-term operating margin potential?

A: Todd says sales leverage should continue to expand margins, though unit growth may dampen some expansion.

Q: Store expansion in Florida?

A: Kemper mentions Florida is not part of the current expansion path.