Natural Grocers by Vitamin Cottage raised its projections for its financial performance in fiscal 2024 after reporting strong profit and sales gains in the second quarter.
Net income in the second quarter was up 35.3% over year-ago levels, to about $8 million, on an 8.8% increase in net sales, to $308.1 million. Sales growth was spread across all categories and also included contributions from new store openings, the company said in a conference call with analysts. The strongest categories included meat, dairy, and body care, the company said.
The period marked the company’s fifth consecutive quarter of positive customer traffic counts, said Todd Dissinger, chief financial officer.
“Second-quarter results were outstanding as we delivered record quarterly sales, margin expansion, and significant earnings growth,” said Kemper Isely, co-president of the Lakewood, Colo.-based retailer.
Daily average comparable store sales increased 7.5% in the quarter compared with year-ago results, driven by a 3.9% increase in transaction size, including item count growth, and a 3.5% increase in transaction count.
The company attributed its sales growth in part to its highly targeted loyalty program, called {N}power. Natural Grocers now generates 78% of sales from loyalty plan members, Isely said, noting that the retailer communicates with its members an average of four times per week.
Natural Grocers also attributed sales growth to local and regional marketing initiatives that boosted lower-performing store sales, and investments in systems that boost productivity.
He said that product cost inflation was up 2% in the second quarter, a one percentage point decline from the previous quarter.
Through the first two quarters, Natural Grocers reported net income growth of 52.4%, to $15.7 million, on a net sales increase of 8.2%, to $609.8 million, compared with the first six months of fiscal 2023.
“Based upon the strength of our results through the second quarter, we are raising our fiscal 2024 outlook for daily average comparable store sales growth and diluted earnings per share,” said Isely.
The company now said it expects daily average comp-store sales growth of between 4% and 6%, up from previous projections of 3% to 5%, and diluted earnings per share of $1.08 to $1.18, up from previous projections of $1.02 to $1.12.
Projections for capital expenditures are expected unchanged at between $30 million and $39 million, with four to six new stores and four to six relocations or remodels.
In response to a question about the impact of new weight loss drugs such as Ozempic, Isely said Natural Grocers was well-positioned.
“If you are losing weight, you are looking for ways to keep it off, so you are looking for education on nutrition and taking care of your body, and that’s what we do very well,” he said.