Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded.

I'd like to turn the conference over to Ms. Jessica Thiessen, Vice President, Treasurer for Natural Grocers. Ms. begin. may you Thiessen,

Jessica Thiessen

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

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

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

turn the Kemper. call to Now, I would over

Kemper Isely

and Jessica, you, Thank good everyone. afternoon,

year. a results. strong at competitors our particularly sales comp basis. year as sales we guidance Denver market labor expectations with year. a raising X.X% the store our comparable We in quarter expectations. exceeded average comparable our Daily result, cycled we growth on The as last strong one second X% pandemic-related Sales second or for of a X and our trends are exceeded And our strike increased and of are pleased quarter the store was the in

observed sales and second to trade the by year sequentially just the in April The quarter. than Item per down March comp count this Customer quarter. prior accelerated quarter less quarters. in with in was The X.X% recent down basis. X-year compared item basket count and monthly through We line the under increased X.X% comp on comp. minimal for a X was the

charge, including of share share diluted Our $X.XX of per was diluted charge prior exceeded impairment $X.XX. Net the period closure. $X.XX, share share the to would year a have per a store impairment per earnings $X.XX earnings earnings related per

the of to we higher to the X During ongoing efforts store as productivity. close part made drive decision quarter, stores our

prices, strength experience and that value offerings. with natural high base continues believe shopping we and healthy indicate on service, prioritizes consumers customer always a and loyal proposition, position We marketing resilient as convenient that The focused emphasis product our friendly that affordable our sales in our us excellent and have products to markets. a resonate customer sustainably the standards, destination and leading of trends and a for organic our strong

our Grocers runway, Grocers quality. represent to annually. accounted believe approximately contributor our success from Natural X.X% quarter, is One by our branded X brand are our second long has brand and Grocers Natural uncompromising the a ago. total point of sales Natural we sales, that up X.X% which grow value a targeting year for to products, percentage We In and penetration

vendors is team rigorous working products new our identify standards. hard that and Our meet to

in new were Idaho. During quarter, excited to second we store X the open McCall,

relocate X and X XXXX. track X to stores to on X in are We stores open new to fiscal

return and construction years, anticipate we supply the chain to year per we several next to stores as X Over new between X improving expect conditions. and opening

store for the XXXX. of rate wage the provided our quarter for first fiscal hour in second labor pressures increase availability quarter, moderated crew a We per During hourly $X majority stores. the of all

do vitamin average books. our per for We hour crew hourly fiscal Following not including in company-wide blanket full-time $XX that of increase, wage increases store this additional the anticipate hour, per for rate exceeds balance $X wage year.

sustainability practices story The and of tells focused as of our environment. record and prioritizing social and and the environmental, our XXXX report positively report. year business company of fiscal long the impact a initiatives our released we legacy February, the our In governance sustainably that

report I understand practice important to review climate you with year's ability the our of our our to to to the change. This differentiation mitigate tool an as commitment encourage better another business. as agriculture latest regenerative highlights ESG report

like for and their crew organic every affordable Lastly, products thank hard member customer delivering excellent of and to to highest our would commitment at natural and I prices goodXu work quality always the continued service.

results will guidance. to discuss call I over that, to With the and turn Todd our financial

Todd Dissinger

and Kemper, afternoon. you, Thank good

We million. results. X.X% prior quarter Net increased from with sales $XXX.X year period our are second the pleased to

increase in Our average of of sales comprised size. X.X% a average daily transaction transaction daily X.X% was and flat daily average comparable increase count store a

X% passed along was expect product the through the estimate for pricing inflation future. cost second We approximately strategy inflation to for quarter. that this the In continue the on basis annualized an foreseeable we've cost quarter, and

quarter, performing company grocery. were the and departments was our second total dairy, In sales strongest comp the similar supplement The comp. meat to

more Our to X.X end XX% Npower [ph] loyalty grew program of by quarter. than membership million the second members the

basis up XX inflation increased to and XX% again ago. driven year which XX%, ability cost our higher from margin net offset Gross Npower to increased pricing. penetration was The a was points product by reflects through XX.X% sales margin

second with Administrative Store impairment percentage year. points result quarter a of was basis increased and rates as a driven store and a related the increased of expenses wage closure. percentage consistent last expenses primarily as were by charge of second higher as expense an a sales quarter in the sales labor XXX to

was quarter the of per net compares was share share income year. This $X.X in the Adjusted of with by income earnings quarter. expense. quarter. $X.XX $X.X last impacted Net $X.XX a of second share earnings million earnings million $XX.X $X.XX EBITDA second Diluted was second of to per impairment diluted in in million share or the diluted per

a cash flow. We strong and under ended the cash borrowings Turning with million in equivalents. financial outstanding balance million to quarter second We credit no had the our facility. cash sheet revolving of $XX position $XX and

flow stores, expenditures, $XX.X net million. for fiscal in During the $XX.X of invested cash XXXX, and we cash operations capital first primarily relocated of X months $XX.X generated free in and million of new million from resulting

XX, announced at on to XXXX, the our operating value declared in that Directors of on has of all performance share. record stockholders. will model dividend stockholders cash our of of XX, we our per confidence Board $X.XX June a quarterly be XXXX. The dividend to Today, close to and The strong our and dividend returning business financial business commitment reflects position, May paid

and our for We upon store performance comparable XXXX are raising fiscal year-to-date trends. outlook sales based current

guidance the We relocations our are other for remodels. and of also outlook our unchanged. of aspects increasing All are number

to economic current factors. environment, recent of operating and inflationary incorporated are consumer related into plan trends, June updated The close in including stores We reflects results, trends all two uncertainty the XXXX, outlook the costs guidance. and

X%, growth the towards new stores, diluted two share to our relocate comparable includes achieve X to capital open between guidance and or following: X growth average $X.XX Our between remodel $X.XX per $XX X% support direct expenditures and daily stores, sales earnings million $XX initiatives. and to to achieve store million three

In we with closing, quarter relevant differentiated strong business we model. customers' had and attribute a level factors, of many to engagement that our but our high foremost

be enhance our all continue to We value encouraged operating our and by and in to stakeholders. for trends are growth continue ability drive to confident

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

Operator

RX Instructions] the first Scott Capital. [Operator question And with you. Mushkin from Thank comes

Scott Mushkin

Hey, the guys. tremendous performance Thanks environment. And given taking for questions. obviously, my

of to I term business kind guess, thing a of first operating I kind question. about wanted bit the a, kind actually, strategic - little of longer of ask So more

getting guys just business people on our maybe lot labor, labor. we're quality a are companies struggling we're -- of One getting It to advantage that quality but get little of maybe in it's things thought consulting you I with always the running labor, that way. is an with always -- with getting thought easier had a working

I work And its and does Do think you just way wanted kind of company of to maybe to speak And you market? through to maybe you an that kind the have advantage? going how that. sales

Kemper Isely

to Well, definitely couple I labor particularly, the years, labor. quality challenging last of and get think over been

that of course, has that's to the in And of getting changed at has the improved quality kind last keep And ability think hour the substantially. helped labor really quality then, ability that per for our stores. our six attract people the $XX hourly months. labor labor enhance and to up to I

able able live that company has labor foundational our people to that are our quality far to attracted attract labor, lifestyle a quality of think we're the because being to attract values - they to because - that attributes have As company part labor of. principles, to to we as like the and I would and that fact be they

able The store the hour become really staff been with at average lot our level able levels just lower. But a high-quality really we've our a now easier staff to the lot the keep $XX bit wage lot harder people. levels. is that consistent office, to this to store a of it's a -- our wage, per because And at little keep so home we're we're keep up are with

Scott Mushkin

have the are because about many people the lifestyle any feel healthier are it's committed and And to of like of ethos? then, like Kemper, part do kind there at store, you of their kind how

Kemper Isely

members the at store? the crew You mean of

Scott Mushkin

the crew Yes, Yes. members.

Kemper Isely

at crew I live each of store at would able quality our half that the there of because to over they're working say the ethos the members because that of lifestyle is company. and

Scott Mushkin

that XX drove think in it Okay. talked guys gross more in forward, going Bps. mix. And Obviously, performance turning was if I I details should think forward? we economy And then the should the guess, product gross margin and that into quarter. plus especially what performance I more as insight about kind think significant to the you about about, know How margin we how we move any of pretty

were up? to weaken

Kemper Isely

this inflationary little boost bit No, able environment the to get I we're of environment. that inflationary in that just think of because a

up X projecting that at in cost a X have product up be that higher should little little there. we're XX as similar But to now takes far retail we for you you right get as the situation for a higher points next we a while it going the basis up forward, catch points next of quarters, so over retail in buy average basis are quarters. type the You -- bump the and XXX a to to a

goes, far as our not through increases -- be incremental I mean, probably period, try ongoing to get get smaller through efficiencies. to it'll in you're inflationary margin then - as once you the going And we'll

Scott Mushkin

dominating here. turning I were they the don't above then, one, hopefully, and thought But how obviously, in, the I'm sales so know guess, not And people think last process. I many - on our Okay. came call, I my

seeing - little things economy pretty quarter. feel about but coming think up, weaken you this kind good a We guys the into going maybe than forward, are of better

think we that's the rate quarter? business the of 'XX half If of your unemployment how economy happening? the business we type Like about you up back and is - environment? do asked into and to we likely weakens perform and further, do how should Why something you that think particular last in feel get goes

Kemper Isely

Well, have to we have prices. always strived affordable

so And defining of that has been characteristics. one our always

that's company. on have So million considered paycheck sort getting in think time. our we're of -- point not customers period of And program. a particularly recessionary helpful, very And we then whole secondly, we're some Npower I one

four proposition and us also to market week proposition. able customer accounts to And in an really general. at our our increase just we're also our so just to to get And - quality and them times helping moment sales through value increased a it's the

Scott Mushkin

have get more back Okay. too I'll not one actually people, if Great. I there's and many in.

Kemper Isely

one. and other ask the ahead Go

Scott Mushkin

Okay.

do a King Do have just with mean, customer there's what any you you likely itself likely of - spin. is in business? of to your and, have the one So place of is Soopers, Safeway Kroger? guess, probably merger be a base taking help core of overlap feel markets the obviously, your the think I we to your I sort big merger

Kemper Isely

it's substantial. think I Well, pretty

don't I them our think goes Safeway And they'll the of going new that areas. if probably think company spin-off few that's that through, stronger. make locations market are the to I quite that make off a merger the spin in

to So I be think it us. the things of in end would overall beneficial

Scott Mushkin

Thanks very much.

Operator

Thank Research. from you. Greg And the next comes Badishkanian Wolfe with question

Johnny Baldwin

last with have Baldwin quick a seems Greg. inflation. at just Johnny is on was It on roughly it in I like quarter one line X%. This for

would you're thinking half through there think back how curious of year? like maybe helpful. the to low single-digit we about exit Thanks. commentary about in the a rate Just XQ? inflation play be Should Any

Kemper Isely

because entirely it particularly of there's going that again. you're in there, of to rid quarter building last it lot would that the starting this for somewhat. moderates hoping -- get inflationary out to guess prices quarter think probably a that possible area. fourth We're energy could the be our trades And in I similar I quarter, very don't it still fourth quarter. that that will up go pressures it's

And there's going wage to be probably inflation next year. more some

up range you're think below get but - at the year, I that the don't going I of So the it's in the that to to think go end by X% to level. best going

Johnny Baldwin

And for helpful. more guide, then raising just guidance the one leaving Got on but $X.XX you. comp at the EPS That's then me just to XXXX $X.XX.

Just the bottom to curious there you're flow line? through not what seeing sort of like on that

Kemper Isely

we really broad that $X.XX Well, to on range have -- $X.XX. a on the

that could low And tightened But on have up going just so perhaps wanted the there's we end. we -- little a to always uncertainty forward. bit

so just hopefully, be tighten the keep next wanted this quarter, And at for to of we'll we able And the range broad end it that to moment. up.

Johnny Baldwin

me. Appreciate that's it Thanks. the color and from you. Got

Kemper Isely

right. All Thank you.

Operator

comments. would the like And to to Thank Isely turn closing for Kemper you. this session. any the call question-and-answer concludes I

Kemper Isely

discuss our quarter us joining results. for you Thank second to

look our with performance. great call have to speaking forward our third you, are to next results. and by We day. Thank a review We quarter on our you Bye. encouraged XXXX

Operator

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

You lines. may now disconnect your

Natural Grocers by Vitamin Cottage (NGVC) 4 May 232023 Q2 Earnings call transcript