NGVC - Earnings call transcript Q2 2019 | Natural Grocers by Vitamin Cottage, Inc.

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Operator

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a 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. turn over to Mr. like now the to conference I'd Natural and David President for Grocers. Colson, Vice Treasurer Mr. Colson, you may begin.

David Colson

Second XXXX everyone, joining Natural Cottage us afternoon, for Fiscal Good and the Grocers thank by Conference Call. Earnings you for Quarter Year Vitamin

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

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

I'll to Kemper. over turn the Now call

Kemper Isely

competition continues had evolve created and a focused This an gross We positive Grocers, we environment leveraging afternoon, Natural The everyone. as sales second had to endeavors stable are position on strong their in Thank you, grocery values competitive with David, trends quarter our good and as differentiation. find evolution a margin. continued to and landscape. opportunity for our

our what to our communities differentiate well are initiatives. competition service nutrition drive to business with crew. commitment continue and affordable foundation are principles the our goodXu from These and standards, our founding prices, of and unsurpassed forward Our marketing education us and our principles quality always

X.X%. increased comp was quarter, mature store second and comp X.X% the During sales store up

and performance XXXX. continue quarter. refine the We year continuing see the up strategies that throughout margin and positive the fiscal promotional from implemented prior we efforts pricing The stability first to margin target our and with margin reflects with gross consistent to

somewhat prior compared X.X% it reflect moderated the performance light as comp in period. to quarters, year strong Although, our in of the increase recent comp

consumers We growth Npower, loyalty the our which percentage from remain a advertising building are this home differentiation advertising, leveraging and on range our our marketing and our Npower initiatives performing on of growing represents out through regard, campaigns. our are of including well. a further educating pleased brand television focused program, In social digital awareness results sales. all with efforts, We of of

number events. event, Day of the big During events, game Independence successful including a Texas quarter, Npower-only several and had our we in-store event

our me our discuss offerings, over began pleased the With the approximately new of financial product year. that, We since results. include Natural turn which SKUs, are Grocers-branded performance Todd to call rollout with now new let XX last the to

Todd Dissinger

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

increased X.X% daily as net The increase of During a XXXX, the by average Kemper $XXX.X sales size, second was and daily quarter a million, X.X% by sales average increase offset by transaction count. mentioned, slightly in by comparable comp X.X% driven average X.X%. store decrease transaction fiscal in to increased

our guidance within for comparison anniversaried are quarterly most We the range year. difficult prior performed performance. the The year comp with the the comp pleased and of

the Additionally, second a snow-related the period, during negatively in of significant transaction severe across prior resulted compared increase our count. weather winter quarter impact several in including to markets impacting year

stable grocery drive strong from efforts. comps occupancy, benefited continue we the leverage quarter pleased second our year-over-year particularly the was were on second gross continued to prior with we with shift, was year consistent promotional a during the as We basis. by Gross comp considering during continued on positive margin quarter profit offset the margins through but of sales Gross are hold the in sales impact margin able trends XX.X%. at mix to

dietary supplements the care grocery. grocery the in previous on comp calls, grocery. than saw noted improvement do in we As with we and generate strong along We in gross body margin margin we in higher an a

was one which and by million dietary on including during the $X.XX building second offset XX as opened of points the removal by XXXX. leverage store offset second depreciation However, to by expenses, share administrative We compared sales services or year new driven fiscal a fiscal expenses $XXX,XXX and approximately were to of pre-opening million of to compared in impacted snow percentage $X.X well XXXX, second and all sales. XXXX. $X.X in traffic quarter relocation the of higher the and diluted leverage attributable of expenses in diluted flu approximately of expenses one in increased store was marketing season of as earnings sales. compared of earnings XXXX and $X.XX sales, million year. modest fiscal a stores second up percentage partially XX.X% during three this basis in higher period. $XX.X supplement improvement higher quarter new a of quarter increase income income the fiscal was share per negatively in with diluted as of margin quarter maintenance all second million second $X.XX to relocated operating in percentage of quarter the share quarter second store to on opening in mild the expenses per X.X% labor-related net margin approximately per compared $XXX,XXX store We year-over-year. the last a year. $XX.X Net significantly fiscal Pre-opening of XXXX realized and by decreased quarter EBITDA expenses, expense The percentage of to were Store as increases expenses, prior a expenses of primarily as partially the as sales and

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

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

Kemper Isely

Thank you, Todd.

opened quarter, second and we one store the relocated During one new store.

beyond. new we XXXX, signed of XXXX stores building for have have fiscal and open These quarter and We additional one and will stores relocated land third acquired the additional the one for during currently new in store. have five store. far So fiscal leases

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

Now review which guidance our me our to initial share compared outlook. an let outlook, our reflects diluted increase per earnings XXXX in XXXX

$X.XX, net range expenditures million. diluted to expect During X% fiscal in in eight new growth stores, of of comparable income of of per to to relocate seven store expect to earnings capital achieve open X.X% and margin for $XX we X.X% resulting we fiscal $X.XX XXXX, achieve of between X.X%, unit average the XXXX daily share million stores, achieve sales and five growth to X%, $XX to X%,

with and performance margin first the momentum half continued of fiscal We our through sales XXXX. are pleased

believe our continues communities characteristics to performance from that us competition. It unsurpassed these affordable our continues appealing Our again. education to prices, commitment We make commitment and it always drive our time quality be is our to is defining driven to our crew. apart the founding for and goodXu and set and it our customers these principles standards, that our by business return nutrition to time

We are shareholders. objectives working our delivering hard for to and achieve all value profitability while of our enhancing

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

Operator

question of Barclays. first our Basanta will Renato from And come Instructions] [Operator

Renato Basanta

related intensity in for in inflation competitive Congrats particularly has Hi, price you're is you've, competitive passing of, about Foods And the nice far in of taking about clear the talk performance of you or there? first produce. through difficulty as environment. to, had have as made this a I'm so you seems intensity morning good in quarter. your just any competitive sort My thanks sort XQ to what evening. perishables. step-up in that. really that as far? out And drops my But seeing And steered noticed suggest of, But much on Whole curious, [indiscernible] environment headlines the question questions. its

Kemper Isely

business I and always the grocery say most of competitive would is area Well, that been. the it has perhaps retail,

quarter any to to that this think or next year. don't the from changed another I year it's quarter So this from

that As very far have along we be cognizant that able leader always - pricing concept margins are same we increases, our to along price maintain of the we're At pass we our - to and them and have in to competitors an we're have always other able at how - aggressive and pricing, - price are when making categories. our place increases, in think, price affordable as we're aware are pass I and the still time, being that sure along. pass how very we

As and items, far supposed Whole Food as they didn't price prices down. sale their those and those goes decreases, were keep really mainly

decreased have organic essentially our So on pricing produce somewhat stores. a from we Foods - that our we over right Whole produce still still double-digit but was has essentially price where it it's advantage before, on at the did notice now - differential

Renato Basanta

and traffic as talked weather the shift April Was that call else to can that little then color could out mean such provide would may then have on Okay. there Easter, bit you And the calendar impacted be a I about cadence bit. the sales regards just also if you about That's talk of traffic? trends, anything with to And unusual helpful. maybe else you quarter? the a anything helpful. in

Kemper Isely

it I for X.X% trends the month almost Yes. traffic The quarter. every our was were - X.X%. essentially, mean, was comp

our the impact many had traffic Reset as counts, X event in happened markets. was January weather with and in X we Day because particular, coincide on that we - the have far Resolution major of in As our day, on of to snowstorm

was traffic stop government we that. decline The tended the that have employees the after when traffic their to an up it back it's shutdown on in shutdown we out seems impact to getting bottomed ended. other noticed and paychecks, the since - noticed a thing had And

mean for April. would wasn't being an year goes, I year this Easter from really to from I that Easter as I as April huge this late it far this the X year being being - - mean year can As possibly in shift be impact say be April there to last a

counts April, our count guidance As far up. on those our go traffic the comp we're comps, as percent within in

Renato Basanta

able line last amount seen all what's scheduling? guidance increase successful talk cost. half a we've That's from been then Okay. into marketplace. about from Looks then you there on And just labor can of helpful. that you me bit have on expectations baked any on like given second you've the Maybe your good item? touch for little what labor benefit labor? made very a absorb But on you sort the one what And of in to your

Kemper Isely

been gain hour Yes. has We've our to comp stills our been leverage as going been hours, up, on we've our - worked. per able

year. have And baked been increases - there's we year, to helpful. than the year. inflation of our the what's half by have then the a this that's the forecast headwind the year. the our increase baked And the forward, slight been second into half become in a And We second less into is forecast going tend wage been of rest labor-wise we pretty in for have far. efficient substantial So of that higher definitely

Renato Basanta

Okay, luck. thanks. Best of

Kemper Isely

Thanks.

Operator

[Operator of Instructions] Our next Mushkin question Wolfe will Research. Scott from come

Sid Dandekar

question. Thanks specifically This delivery Hi. is even are my talk on share given omnichannel, or Dandekar if attractive. thinking still it's how Scott. you forward, bit for Sid but economics qualitative, just of on a great, about not that the Can you some going it that's qualitatively for for you color, just taking are

get wanted Just thinking to latest your on that?

Kemper Isely

in to with most rolled incremental business Instacart our business. amount the with of our to We out a And that is we've regards them of Well, not doing we delivery are still in our that markets. they've business. significant that. believe It's partnered

it's And that. expensive it's incrementally of because so profitable even though

away it pushing As from to on - not it far we're incrementally it's as delivery. it, because profitable takes not our because if in-store planning be do business, pushing expensive it's be the that it would not

Sid Dandekar

- great. your about And secondly, you in-house can the talk Grocers then brand. Natural Okay

year? particular the this SKUs. for new for So been that XX you the What's And mentioned uptake target how's product?

Kemper Isely

year. Our SKUs of so roll to SKUs and year year probably and out similar the the add last we And after this added double is amount XXX a after the next more than a that. year, year that we'll target number

Sid Dandekar

Thank you.

Operator

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

Kemper Isely

forward on look for Have speaking our to to quarter you discuss much next our results. our day. XXXX call review Thank third very with quarter great joining to second We you a us results.

Operator

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

You may now disconnect.

Natural Grocers by Vitamin Cottage (NGVC) 5 May 192019 Q2 Earnings call transcript