NGVC - Earnings call transcript Q3 2018 | Natural Grocers by Vitamin Cottage, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Natural Grocers Third Quarter Fiscal Year 2018 Earnings Conference Call. At this time, participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

As a reminder, today's call is being recorded. And now, I would like to turn the conference over to Mr. and Natural President Vice Colson, Treasurer Grocers. for David Mr. you may begin. Colson,

David Colson

XXXX for everyone, Cottage for year and afternoon, joining third conference thank fiscal Vitamin Good by you us call. Grocers the quarter earnings Natural

call Dissinger, Financial Todd the Co-President; Chief with Kemper Officer. are On Isely, today and me

Actual As a a assumptions available based are variety and uncertainties. website company's this XX-K. in from the the a and risks on on expectations Today's to this detailed and XX-Q made statements are most materially conference undertakes company statements in statements. no subject than and statements other reminder, obligation due All could company's will the website, of fact, historical the on forward-looking all factors, of be including that those available to forward-looking of the are The update at to recording on differ call, Forms results forward-looking is statements. recently current described call release filed Investors.NaturalGrocers.com. forward-looking risks statements press

I over the Kemper. call to turn Now, will

Kemper Isely

you, It pleasure strong everyone. our discuss with is quarter and David, results to today. third good you my Thank afternoon,

reflects both efforts. We our have and and performance improve profit worked margins, trends sales hard to those

quarter of sales, third marks fifth mature daily X.X%. our The comps average comparable up quarter store up comps positive consecutive with store and X.X%

improved expense drove decreased strategies we third As leverage our share. in margins quarter. strong anticipated, the earnings year-over-year during per the significantly store along investment and promotional and gross pricing margin This higher with operating

our our by is share We values I our driven our end and are the efforts competition. coupled fiscal us resonate marketing, per unwavering increasing that from discuss differentiate the is XXXX our outlook. core our most core moment, of our of with our and focus guidance our a investments, and that raising being with believe We it customers sales we values. on promotional success price believe As comp low firmly momentum will in earnings

have have turn successfully affordable while promotions financial product enhanced discuss me to and and that, call we results. delivered deliver marketing at industry We the of the will moderating leading margin Todd positive momentum, developed gross standards to emphasized let With Our formula profitability. our leading to price. over continue the to impact an believe sales our

Todd Dissinger

very you afternoon, Thank everyone. and much, Kemper, good

in strong as sequentially. declined supplements lower been product was XX.X% promotional opening in in to promotional higher pricing our moderated. and focused fiscal of point points approximately and expenses margin The during to gross the mix XXX our and point comp no and as has impacted and good store During prior-year the increase compared in decline opened third ability in fiscal margin margin. declines to sales improve quarter period XXX led sales Kemper strong number to new consistent of expenses two more the ask we the the due grocery, $XXX,XXX in X.X% expenses Recall and timing that margin. expenses third efforts in comparable five last third count gross came third quarter's of The margin points mix sales $XXX.X fiscal mentioned, the second a to and of year. prior-year XX approximately third to store by quarter due transaction quarters And quarter, our the increase relocation retain Preopening quarter year-over-year with also margin year-over-year by percentage we the margin by X.X% improvement basis third comp to the XX openings, and our XXX decline transaction and reduced XXXX, point XXXX, sales a of primarily in first driven daily moderated margin in our margin. generate comp respectively. grocery XX decline quarter gross average new increase of and and to quarter. The a primarily average grocery, gross openings initiatives. relocations. X.X%. gross confirms fiscal net daily our The compared increased and gains both Product compares investment the basis given on XXXX. basis to the increased well in basis new to one second pricing than the basket our Store with increase decline during operating a during profit of average have and on comp Gross body a a in incremental in and moderating the preopening basis The and to X.X% remained challenging comp a care leverage gross quarter sales of and million. sales relocation while our was impacted investments relocations stores the a while comparison traffic We and We period. as reduced The stacked declined sales. XXXX the comp despite store thus during size. as continued investments two-year stores the began the percentage which compared On basis, incremental was driven XX.X% relocated store points quarter believe leverage promotional basis when store in on a expenses quarter third to third of this declined margin along

and of state with to tax to corporate of fiscal diluted the federal XX.X% effective to fiscal in XXXX. federal the compares earnings third XXXX, reflecting fiscal rate. XXXX, per quarter to third of which million million XXXX $X XXX% fiscal income tax quarter year. quarter rate $X.XX of XX.X% $XX.X new third XX.X%, in in income of Net the the third the XXXX million, compared last share quarter quarter fiscal third was was the compared the $X.XX of in quarter third income up of increased Our EBITDA taxes for in for $X.X

XXXX, nine we first $XX.X generated invested capital the $XX.X fiscal and million months from operations in million During of expenditures. cash of

In addition store credit fiscal our the million balance growth, by our the and of we have million the first $X.X outstanding new revolving quarter the third by during to facility during nine reduced of months $XX.X supporting XXXX. reduced balance

development discuss Now, Kemper call I unit to will turn guidance. back the to and

Kemper Isely

Thank you, Todd.

new one fiscal During XXXX, stores in quarter store quarter, Colorado. two far we relocated have the the third store. during relocated one Thus of fourth and opened we

and new open beyond. for leases signed to additional stores have We seven fiscal in XXXX

performance remain comfortable our targeted new store We store with openings. monitor and continue to

per noted, store are guidance. for sales As we and daily low of XXXX our raising I outlook fiscal our increasing earnings average end growth share comparable the

of been in to $XX of capital During open tax the expect to achieve share store we daily $X.XX deferred new of X.X% diluted of of each range million. quarter. during average of XXXX range fiscal net increased to low between first for growth X.XX% income growth; recognized expenditures or to achieve stores; outlook X.X%; million ranges eight comparable in XXXX, expect of exclusive end to: resulting unit to $X.XX X% and $X.XX has compared benefit these nine fiscal four X.X% prior between to margin achieve to to stores sales $X.XX. the growth, The X.X% our the X.X% earnings three by we relocate of $X.XX And for a per $XX

we their stores. products not our every uphold aspect so for simply they our to to value excited a commitment believe from We our year's shareholders. and our for and Vendors to executing improvement: us and momentum. make on GoodXU healthy focus sales valued remain drive this progress We and values the they our forward. earnings do to Our sell year and pride are products founding going fourth are our and provide this are our focus. competition quarter they We of in continue growth to health. drive continue our and our our very both sell, that ourselves because vigilant decisions to into principles intend can We Crews about create pleased with and five and choices that set business our to reason, We These apart standards our the quality led customers informed sell formula just has be customers. with

like the I lines Now, to you. open up would for questions. Thank

Operator

Oppenheimer. our from from Rupesh And Please Parikh ahead. go question first comes

Rupesh Parikh

afternoon, Good congrats taking my for question, on and and quarter. thanks a nice

Kemper Isely

Thanks, Rupesh.

Rupesh Parikh

is, you're seeing we my color terms look first a as there at So, comp you what is of question provide perspective? performance can any from quarter-to-date, in your

Kemper Isely

mean You quarter? for this

Rupesh Parikh

Yes.

Kemper Isely

trending be. to as Similar we We're to... expected

Rupesh Parikh

Okay.

Kemper Isely

Yeah. (XX:XX:XX). Go ahead.

Rupesh Parikh

direct the this on expense much the then, lower a store leverage with And better saw we quarter line, comp QX. in even Okay.

versus sequentially in what's that saw curious driving leverage was QX. I So what we incremental

Kemper Isely

answer Todd, do want you to that?

Todd Dissinger

Yeah.

in expense expenses down. marketing the lower we So, Depreciation was had category. store

Some about down Store labor year-over-year. was other were expenses flat.

Rupesh Parikh

believe you can some that continue these into Okay. of QX? improvements do And

Todd Dissinger

Yes.

Rupesh Parikh

so Okay. I the obviously related the Foods with that also their maybe Whole standards other is the they dissent in Foods don't at non-Prime clearly discounts, their seeing quarter, And impact Prime I Amazon guess, more there was and of of and members some customers I'm rollouts then, aggressive efforts? now lower their, are any that with you curious, – during Prime guess new some front, your guess some from on have the And of market, some like within to competitive I stores. Whole some

at benefit if Foods. some from the curious Whole that any So happening I'm also of you're are seeing changes

Kemper Isely

Well, to initiatives. we're significant Prime, effect because our on regards of in any seeing their really not Prime sales

customers, hard for issue. really dissatisfaction quantitate far would it their with As that be to as us

Rupesh Parikh

Thank great. you. Okay,

Operator

Barclays. And Gilligan our next Ryan from from go question comes ahead. Please

Ryan Gilligan

Hi. taking questions. Thanks for the

out decline, price break margin gross how how investment? the was can On much much that and you was of mix

Kemper Isely

half It so... was mix, over

Ryan Gilligan

it. Got

Kemper Isely

(XX:XX:XX).

Ryan Gilligan

just inning comfortable terms think And where further pricing a need of make before in in helpful. investment perspective? do investments, you guess with That's you price are are – like in? feel and we you price you from Okay. where what you do to much I are How then

Kemper Isely

and lower well I pretty compared in have positive next margin the effect cut a the And we in be similar of a – the amount probably next in of mean, bit quarter. ago quarter, think really year then, a to little I year. quarter last first we of are maybe probably we'll we'll the

Ryan Gilligan

it I thoughts then I you just stores helpful. to confirm at the also, can was stores if guess over they immaterial, small of now, comps many on and And in Thanks. wine, then on That's in but get beer time? amount think can your a just how and impact was what it's

Kemper Isely

I Oregon pretty Well, six at the mean, moment out to I rolled it immaterial. think stores July. in was it's

really So, of have last beer wine. – was on our didn't and we much the really in quarter there no impact a comp of because

Ryan Gilligan

it. Got

Kemper Isely

is is an It as goes. that as and we'll far markets, that analyze desirable future investment see As for what as as into far us category.

Ryan Gilligan

you it. Got very Thank much.

Operator

ahead. go question from next comes RBC from our Capital Please Kirk And Bill Markets.

William Kirk

the taking for you question. Thank Yes.

changed to On what beer to your start stores? and the adding wine topic, that to philosophically decide

Kemper Isely

very biologic. some it that's either we alcohol and Well, beers. to the added in cider And kombucha selling are local organic hard is then which content wines a The we're beers I some mean, or selling then, craft be that also with organic. limited have organic, we're basis.

there in markets regulations that that bit we So of organic our alcoholic and wine benefit a of selection offering local and curated high-quality beverages, had is by customers. favorable for beer quite beers wines demand and towards a would thought be to a craft

William Kirk

And it looks lowered was for year. this CapEx but the maybe for Okay. question, the full a Todd, different is like

So that perspective? on from needs changed maybe what highlight your you spending could

Todd Dissinger

Sure.

one So, less new guidance. there in is our store

William Kirk

Okay.

Todd Dissinger

did last year some have (XX:XX:XX). CapEx funding versus And substantially we might was year We thought some be contingency we so our our and built delayed lower. were this projects, into CapEx

point. the So of into visibility have that we out, year cushion we that this was rest at the took so good –

William Kirk

from now. That's me it Okay. for

Kemper Isely

Thanks. right. All

Operator

question from next Wolfe Please our go ahead. Mushkin And comes Scott Research. from

Scott A. Mushkin

(XX:XX:XX) was on wage that's us your thought how going I you give it a pretty happen. that experiencing expenses please. little I guys costs, think insight follow-up, that kind inflation, on (XX:XX:XX) have And flat to Hey, that say you some a line wanted specifically of was that and some can labor of to markets Then into if year-over-year significant bit wondering SG&A in so dollars. labor I more touch the (XX:XX:XX)

Kemper Isely

labor budgets our we some and higher watch the labor we in Well, our markets. get costs to higher labor very productivity our believe that we carefully of from can stores offset

Scott A. Mushkin

gross the (XX:XX:XX) (XX:XX:XX) margin?

Kemper Isely

labor label. in comes quite the mean, at comp mean, the productivity then And our I the nice our it's helps a also comp off when that – as to in we level, why I just bit. – think... that's Yeah, regards a of

Scott A. Mushkin

was absolutely. wondering dollar. dollars, yeah, was Oh, you I (XX:XX:XX). get how just (XX:XX:XX) it seems just I flat curious

Todd Dissinger

as all question, the to just about percent dollars. a talked Well, we the expenses earlier clarification that of for were not sales,

Kemper Isely

Yeah.

Scott A. Mushkin

Thanks okay. just the clarification. Oh, for That's perfect. (XX:XX:XX)

Todd Dissinger

asking for you Thank that.

Scott A. Mushkin

looking Whole And significant market's some and you Foods, I that? margin. pricing – of that we just back particularly they're time? you business, (XX:XX:XX) and discount Prime but if at wondering at think have be to that what just just looking for fresh. from continue guys the What your members was good the Not at is roll-backs to information going stepping have that you market vitamins. in (XX:XX:XX) week think over seen running next in on gross the reaction pretty pretty XX%

wanted to your think Thanks. the forward the move and Just develops pressures as thought you the in (XX:XX:XX) processes market time get we market how over (XX:XX:XX)?

Kemper Isely

off on they at normal supplements. I Well, for be week, price XX% a mean, our will about at

deals {N}power we members charge little (XX:XX:XX) So, and of our We that good program. bit be to them. a but too, {N}power give own our I people luck on don't bid extra for run

interesting. it's through to fresh they've at off that far years join that what as price been last pricing XX% in business. about said, where down goes, grocery XX for the their we comes are So that overpriced we've our – is. I about they as time that's so wars everyday But long it's Then, been like the their

Scott A. Mushkin

Okay. I the Thanks, appreciate guys. questions.

Todd Dissinger

Sure, thanks.

Operator

comes from And next question Please the ahead. go Citi. Badishkanian Greg from

Garrett Klumpar

Hey, for Thanks it's taking question. Greg. for actually the Garrett on

inflation, get are of the to second that's thoughts your kind still what on inflation and you expecting quarter? And seeing by wanted flat category changed Just since year? materially for you're if then,

Kemper Isely

pretty been has year. inflation (XX:XX:XX) far the for So same

higher inflation, way the its through it's is imports the higher now costs fuel with of there of working a higher market right and certain and think costs. steel amount material the costs I

year. so start this And up that showing probably the of will towards end

Garrett Klumpar

sequentially? color gears And you then comps the switching delivery, give any that's to Instacart the locations are around then an could just and on how Okay, Instacart, progressing helpful. offering updated us just number

Todd Dissinger

Sure.

is XXX adding so Instacart to make to the so volume stores prior driver material And in So that hard are be a our a of with a And it's ramping supported just that stores been we the up. everything's year-over-year comp. years, comparison end by Instacart have quarter. the we've as of of just terms many basis over not on

Kemper Isely

length The have a about of stores that been in are time on for sales. flat

Garrett Klumpar

Okay, Thank you. that's helpful.

Operator

And is follow-up our go Rupesh from ahead. from next Parikh question a Oppenheimer. Please

Rupesh Parikh

Thanks. Thanks.

follow-ups. quick two Just

a issue Natural bigger label (XX:XX:XX) I know private front, the that's on So been at an Grocers.

where and think about adding just label, you I forward? was going guess So, curious, with I how you guys it are private

Kemper Isely

Natural We're it we're steadily We're a adding pretty campaign. with in launch month private good by at brand we're September the new officially label. it going label, private SKUs actually brand. And not the marketing calling to calling Grocers the really

Rupesh Parikh

then program, think Okay, continue I your I gain question to great. – And {N}power to second appears was the traction. it

the bigger So see of program the curious going with you're just what and forward. seeing opportunities some you

Kemper Isely

higher up definitely marketing the is for our members over the substantially than our about XX,XXX to customers. ticket drive our helping members customer I and we're average to right ticket now. The And {N}power Yeah. for regular adding mean, we're is month us XXX-and-some-thousand sales. to {N}power per XX,XXX members average

Rupesh Parikh

you. Thank great. Okay,

Operator

the back to And concludes now our management session. I this like turn question-and-answer any would remarks. conference closing over for to

Kemper Isely

next look much party very you XXXX. forward We on us for our Please results. great stores, We with third like Celebration discuss Thank our our joining speaking of quarter our call. any look XXrd a you. on to XXX visit Anniversary it's day. forward you August Thank XX. to to Have

Operator

Thank presentation. The conference has for attending now concluded. you today's

may disconnect. now You

Natural Grocers by Vitamin Cottage (NGVC) 2 Aug 182018 Q3 Earnings call transcript