Earnings call transcript Q3 2023

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Operator

Good day, ladies and gentlemen. Welcome to the Natural Grocers Third Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. Later we will conduct the question-and-answer session, and instructions will be given at that time.

As a reminder today's call is being recorded.

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

Jessica Thiessen

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

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

described during materially certain uncertainties. risks the are are subject factors in XX-K. risks conference and forward-looking from and statements to a reminder, of recently in and this expectations Forms and As based filed results and the assumptions differ could Actual those information provided due XX-Q variety statements call on current detailed forward-looking most uncertainties to company's a the including

the no company recording obligation will available this a to be undertakes call available of press the The on investors.naturalgrocers.com. website website company's at on statements. and forward-looking Today's update release is

to the will turn Now, call I over Kemper.

Kemper Isely

the today. and expectations. joining another to Thank to strong We appreciate Grocers market Natural differentiated you, you be in consumers. quarter, relevant good everyone. continues very Jessica, in We delivered afternoon, believe that third the us uniquely exceeding and performance We our

the market. comp always transaction a third increase the comparable affordable store including Daily sales at products in trends average across We Our monthly increased strength X.X%, daily were with value relatively believe strong. trends sales our throughout in was sales ever quarter vetted particularly count. average carefully broad-based proposition, The quarter. More prices consistent was that especially X.X% our strong current aligns categories.

initiatives program. from Npower benefited loyalty marketing focused the leveraging also Sales and

execution. post well Our on focus have operations and transitioned teams to marketing pandemic

third their to initiatives like share examples would a that benefited of the quarter. I few

without in that sales growth diluting marketing have market-specific campaigns underperforming developed we margin. First, accelerated stores

third and pricing to contributed of improvement effective Second, XXX basis points. quarter gross the margin promotion

wage partially increased productivity. and efficiency labor higher Finally, store drove rates offset

of us of $X.XX strength customer share our last Todd, diluted The were third comparable store and year. quarter more of guidance prompted commitment third outlook crews share and will to to fiscal cover compared per and third We sales earnings quarter driving for the achieved detail. year. performance. quarter exceptional to growth instrumental excellence, and strong raise results results the improvement in the per in our operational service Our ongoing our XX.X% earnings

Next, milestones during I to like would achieved third highlight the two quarter.

our penetration Npower the The a third by in members million relates quarter. the first year demonstrates for celebrated net penetration membership milestone continuing two value to in from up customers' sales program. loyalty quarter, program. during our and appreciation the XX% sales growth Npower the ago. and reaching was The of Npower We XX% provided third The benefits

value-focused be and for that the continues size e-mails of promotional campaigns effective customer preferences, tailored engagement. activity market On meal basket include nonmember almost average a customers' specific a Npower deals. optimizing tool Npower member marketing Examples promotional to personalized basket. to driving offerings is and an twice

in today to milestone second Our a many sustainability would Natural parents founding relates principles. by recognize that was principles founded who my XXXX are by people Grocers inspired sustainability.

and health well-being humans, checkouts planet, adopted bag-free of part we of single-use standing the XXXX. and our to long animals As commitment the in

the past bags the plastic waste from single-use entering our years XXX than policy and million stream Over has prevented we more XX impacting the estimate environment.

have practices amounted Additionally, inception. local to the a shopping report encourage XXXX, for bank million for more you the operations. who our packaging reduce further review $X each food customer to our since to we on donations own donate and their ESG program information we I in implemented waste bag, brings to $X has throughout which

stronger important Relocations established development our us strategy sales store a facility they realized third of double-digit the with Relocations, off Amarillo in leverage in new to growth an mature an are location. enable as to base. now a quarter, sales store Turning during component relocated Texas. store generally our development, market we presence

new or open For on to track and stores are relocate we remodel fiscal three XXXX year four stores.

to Finally, which I our in would our like were to exceptional commitment for operational their performance. goodXu strong instrumental service customer and execution member every thank driving of third crew quarter

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

Todd Dissinger

afternoon. you, Thank Kemper good and

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

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

quarters. down per X% year the in two annualized for observed and estimate approximately was to quarter. trade quarter We the line inflation recent down minimal item the cost the product basis in from compared with X%, count third in basket, an We on was slightly prior The previous third which quarters. the

performing care, supplements. Our dairy, dietary body strongest meat were departments and

continuing indicates of competitive and differentiation strong of further accretive. also the Our growth this pandemic in elevated The category important growth stickiness is which supplements our reflects margin demand. supplements in position

of ago. X.X% represented slightly year brand from Grocers a X.X%, sales down Natural total The

quarter, points product For increased XXX to pricing higher promotions. attributed effective was by and the driven third XX.X% and basis gross to margin margin

as a was decreased higher as sales sales on by expense increased and percentage by XX of points Store primarily as basis percentage points wage leverage and of driven technology compensation net XX partially by software offset net expense a sales, expense result expenses and driven rates. amortization. increased Administrative basis higher labor a, of was primarily expenses expense

during Operating the income effective in deductions income XXXX, decrease income to third $X.X fiscal fiscal increased XX.X% and The rate quarter XX.X% of tax million. tax XXXX. XXXX rate food third and attributable was quarter the donation respectively. for to recorded XX.X% of the effective primarily was increased The

million. with $XX.X was rate of compares in year-to-date of quarter. normalized income share earnings be $X.X the earnings Adjusted tax rate. of Net in was million per aligned of last our per million $X.X with or the income the diluted third income effective year. more to third $X.XX tax diluted $X.XX net share will anticipate quarter We This EBITDA

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

Directors of all that will of we $XX.X has expenditures, a million. our per on year million Board free resulting for dividend announced September cash Today, August first the stores $XX.X in at dividend close $XX.X XXXX, of nine business we cash primarily capital operations cash XX, invested paid quarterly of relocated be to from record During months generated of flow The new net in declared and and of fiscal of XX, million $X.XX XXXX on XXXX. share. stockholders the

year-to-date on fiscal store our comparable and outlook We and per our diluted trends. performance current for strong are sales earnings raising share XXXX based

also of remodels. stores, outlook number the We our relocations refining for are and new

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

including In that prices. and our closing, customer a strong sustainably prioritizes healthy we offerings base many quarter focused at and had a that loyal to affordable attribute resilient factors, we always

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

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

Operator

Mushkin question Go will comes Scott We RX session. Capital. of Our the now Instructions] first begin from ahead. question-and-answer [Operator

Scott Mushkin

Hey, are business. initiatives benefit nice taking obviously to having clear for the a question. guys. your Thanks my it's that And

that. on congratulations So

Kemper Isely

Thank you. Scott.

Scott Mushkin

of The our step a of look market to like center call guys I on the how into maybe the like you was take traditional of at yours -- little and -- that know you specialty much headed I kind last picture? about grocery store you Walmart. last performed maybe next remember in bit the think you do going if I fits I how you asking to How that don't during to recession. think a or your business broader market. store wanted Amazon is a or what's the as

Kemper Isely

from have grocery lot Walmart our people Well, customer and on I had matter much have And some can store outperformed migrate supplements. are actually supplement a sales but a naturally sales. differentiated you to because think, of an just business. guidance for see comp. of would doesn't and -- supplement would and that service to our online, mean, that effect their think that select I as in conventional a you just so our Amazon it it or we We've sales supplement need our

so can that stores. And at our you get

have market that means we a with it stickiness our lot of and we're our a of -- that. actually lot so customers supplement with And share, because stickiness of loyalty and increasing

of matter. that make its the shop not for whether goes store kind to of or of just our they're standards want for a they not Walmart our Costco come the really and buy, customers lot or far Amazon that's or to because about -- worry to have that easier it don't As ingredients something and at buying as center

so we have experience and format intimidating because the have in the stores is shop. also different and smaller -- to that's not And we easier shopping very our

Scott Mushkin

that. maybe for then really And with looking to what going you for if I'm Like, you think market, grocers produce guys is was if almost natural for and a Walmart and want in where is complementary, actually that so in you're I are starting then Thanks specialty right? going question some ways, that looking items like head the you're fresh to almost doing. to consultation, type that you're or a that to of online complementary or

was headed with kind was I So that of that. where

true. plans Talk but for little we grow? going plans your the how your estate there or heard about a make you should about this just let's the maybe year. real how we thought So can many process that's Maybe real plans like forward, maybe stores real maybe I acceleration, reminder, But going need you forward, said think you that? of that think as thought about estate I new think estate is this a a before

Kemper Isely

of store to of to six our year. is to because relocate slow forward a we years comp a And part or been we new then, quite substantial do in in store. strategy couple of last when is have plan course new lift little development a relocate remodel stores, get stores our bit going our eight a remodel The or but

five And so, we of also. year a those do two to

Scott Mushkin

And then any of thank -- just reaccelerating, kind you happy from you're thoughts or -- And or that you. to then, with X%? X% are

Kemper Isely

means open keeps pretty happy our as not selective at stores. that be and also that with X%. right we're to And to pretty be in said, then, can X% we busy. two more piles the location we I to We're our to can dilutive piles -- it and earnings the like just And five relocations, us site it's moment, of

Scott Mushkin

bit. Right. don't not type that about as mean of think And stepping like you But a how just that M&A. little have guys or no back activities, done guys probably thinking on off-the-wall then, I maybe question strategically, you a I the are even radar? is

Kemper Isely

acquisitions and mergers us? about talking you by Are

Scott Mushkin

Yes.

Kemper Isely

really have We of strategy. as part don't that our

Scott Mushkin

Okay. guys. quarter, listen, congratulations again. We real All solid a right

Kemper Isely

Thanks.

You have day good Scott. a now,

Scott Mushkin

too. You

Operator

[Operator joins. our Instructions] We any conference this the will wait else question-and-answer one closing to Isely now I With no like moment session. concludes anyone turn case for over would Kemper to remarks. back questions, in further

Kemper Isely

marks to our joining XX and month our communities. serving our regarding on Thank one you you you third and celebrate XXXX results. quarter quarter us fourth to help to our our for updating next encourage We This anniversary. very full the August to goodbye. XX XX fiscal results. call year and look Thank you visit year much of locations discuss us between I our forward

Operator

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

You now disconnect. may

Natural Grocers by Vitamin Cottage (NGVC) 3 Aug 232023 Q3 Earnings call transcript