PR Newswire
LAKEWOOD, Colo., Aug. 3, 2023
LAKEWOOD, Colo., Aug. 3, 2023 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its third quarter of fiscal 2023 ended June 30, 2023 and raised its outlook for fiscal 2023.
Highlights for Third Quarter Fiscal 2023 Compared to Third Quarter Fiscal 2022
- Net sales increased 5.8% to $281.8 million;
- Daily average comparable store sales increased 4.4%, and increased 6.9% on a two-year basis;
- Operating income increased 60.8% to $9.1 million;
- Net income increased 79.8% to $7.1 million;
- Diluted earnings per share was $0.31, up 82.4% from $0.17 in the third quarter of fiscal 2022; and
- Adjusted EBITDA was $16.7 million.
"We delivered strong results in the third quarter reflecting continued top-line momentum as comparable store sales accelerated to 4.4% including a 1.9% increase in daily average transaction count. Moreover, strength was broad-based across categories," said Kemper Isely, Co-President. "Growth continues to be driven by a loyal and resilient customer base that prioritizes our offering of high-quality natural and organic products at Always AffordableSM prices. We believe the enduring strength of our business model is further reflected in the 19.1% increase in daily average comparable store sales compared to the third quarter of 2019. Our crew members' commitment to operational excellence and exceptional customer service was instrumental in driving our strong sales results, as well as our 130 basis point improvement in gross margin and 82.4% growth in diluted earnings per share to $0.31."
Mr. Isely continued, "We are confident in our execution and the trajectory of our business. We are increasing our outlook for comparable store sales and diluted earnings per share for fiscal year 2023 to reflect the strong results in the third quarter."
In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) in conformity with U.S. generally accepted accounting principles (GAAP), the Company is also presenting EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. The reconciliation from GAAP to these non-GAAP financial measures is provided at the end of this earnings release.
Operating Results — Third Quarter Fiscal 2023 Compared to Third Quarter Fiscal 2022
During the third quarter of fiscal 2023, net sales increased $15.5 million, or 5.8%, to $281.8 million, compared to the third quarter of fiscal 2022, due to an $11.7 million increase in comparable store sales and a $3.8 million increase in new store sales. Daily average comparable store sales increased 4.4% in the third quarter of fiscal 2023, comprised of a 2.4% increase in daily average transaction size and a 1.9% increase in daily average transaction count. The increase in net sales was driven by transaction count, retail price increases, new store sales, and marketing initiatives including market-specific campaigns and {N}power® loyalty program offers that drove customer engagement.
Gross profit during the third quarter of fiscal 2023 increased $7.8 million, or 10.6%, to $81.4 million, compared to $73.6 million in the third quarter of fiscal 2022. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased 130 basis points to 28.9% during the third quarter of fiscal 2023, compared to 27.6% in the third quarter of fiscal 2022. The increase in gross margin was driven by higher product margin attributed to effective pricing and promotions.
Store expenses during the third quarter of fiscal 2023 increased $2.5 million, or 4.2%, to $62.6 million. Store expenses as a percentage of net sales were 22.2% during the third quarter of fiscal 2023, down from 22.6% in the third quarter of fiscal 2022. The decrease in store expenses as a percentage of net sales was primarily driven by expense leverage on sales, partially offset by higher labor expense as a result of increased wage rates.
Administrative expenses during the third quarter of fiscal 2023 increased $1.8 million, or 24.8%, to $9.3 million, primarily driven by higher compensation expense, software expense and technology amortization. Administrative expenses as a percentage of net sales were 3.3% and 2.8% for the third quarters of fiscal 2023 and 2022, respectively.
Operating income for the third quarter of fiscal 2023 was $9.1 million, compared to $5.7 million in the third quarter of fiscal 2022. Operating margin during the third quarter of fiscal 2023 was 3.2%, compared to 2.1% in the third quarter of fiscal 2022.
The effective income tax rate was 14.1% and 22.1% for the third quarter of fiscal 2023 and 2022, respectively. The decrease in the effective income tax rate was primarily attributable to increased food donation deductions recorded during the third quarter of fiscal 2023.
Net income for the third quarter of fiscal 2023 was $7.1 million, or $0.31 diluted earnings per share, compared to net income of $3.9 million, or $0.17 diluted earnings per share, for the third quarter of fiscal 2022.
Adjusted EBITDA for the third quarter of fiscal 2023 increased 28.2% to $16.7 million, compared to $13.0 million in the third quarter of fiscal 2022.
Operating Results — First Nine Months Fiscal 2023 Compared to First Nine Months Fiscal 2022
During the first nine months of fiscal 2023, net sales increased $30.1 million, or 3.7%, to $845.5 million, compared to the first nine months of fiscal 2022, due to a $20.4 million increase in comparable store sales and an $11.5 million increase in new store sales, partially offset by a $1.8 million decrease in net sales related to store closures. Daily average comparable store sales increased 2.5% in the first nine months of fiscal 2023, and was comprised of a 1.4% increase in daily average transaction size and a 1.1% increase in daily average transaction count. The increase in net sales was primarily driven by transaction count, retail price increases, new store sales and marketing initiatives, partially offset by a moderation of the pandemic trends experienced in the first six months of fiscal 2022.
Gross profit during the first nine months of fiscal 2023 increased $13.5 million, or 5.9%, to $242.6 million. Gross profit reflects earnings after product and occupancy expenses. Gross margin increased to 28.7% during the first nine months of fiscal 2023, compared to 28.1% in the first nine months of fiscal 2022. The increase in gross margin was driven by higher product margin partially offset by higher shrink expense.
Store expenses during the first nine months of fiscal 2023 increased $12.4 million, or 6.9%, to $191.4 million. Store expenses as a percentage of net sales were 22.6% during the first nine months of fiscal 2023, up from 22.0% in the first nine months of fiscal 2022. The increase in store expenses as a percentage of net sales reflects higher labor expense as a result of increased wage rates and an impairment charge related to a store closure.
Administrative expenses during the first nine months of fiscal 2023 increased $3.2 million, or 14.1%, to $26.2 million. The increase in administrative expenses was primarily driven by higher compensation expense, technology amortization and software expense. Administrative expenses as a percentage of net sales were 3.1% during the first nine months of fiscal 2023, up from 2.8% in the first nine months of fiscal 2022.
Operating income for the first nine months of fiscal 2023 was $23.9 million, compared to $26.5 million in the first nine months of fiscal 2022. Operating margin during the first nine months of fiscal 2023 was 2.8%, compared to 3.3% in the first nine months of fiscal 2022.
The effective income tax rate was 19.1% and 22.7% for the nine months of fiscal 2023 and 2022, respectively. The decrease in the effective income tax rate was primarily attributable to increased food donation deductions recorded during the third quarter of fiscal 2023.
Net income for the first nine months of fiscal 2023 was $17.4 million, or $0.76 diluted earnings per share, compared to net income of $19.2 million, or $0.84 diluted earnings per share for the first nine months of fiscal 2022.
Adjusted EBITDA for the first nine months of fiscal 2023 was $47.3 million, compared to $48.6 million in the first nine months of fiscal 2022.
Balance Sheet and Cash Flow
As of June 30, 2023, the Company had $8.6 million in cash and cash equivalents, no outstanding borrowings on its $50.0 million revolving credit facility, and $9.7 million outstanding on its term loan facility.
During the first nine months of fiscal 2023, the Company generated $36.2 million in cash from operations and invested $24.3 million in net capital expenditures, primarily for new and relocated stores.
Dividend Announcement
Today, the Company announced the declaration of a quarterly cash dividend of $0.10 per common share. The dividend will be paid on September 13, 2023 to stockholders of record at the close of business on August 28, 2023.
Growth and Development
The Company ended the third quarter of fiscal 2023 with 164 stores in 21 states. As of August 3, 2023, the Company has signed leases for an additional five new stores planned to open in fiscal years 2023 and beyond.
Fiscal 2023 Outlook
The Company is raising its fiscal 2023 outlook for comparable store sales and diluted earnings per share based upon year-to-date performance and current trends. The Company is also refining its outlook for the number of new stores and relocations/remodels. The outlook reflects recent results, current operating trends, consumer trends, and the uncertainty of the economic environment, including inflationary factors. The Company now expects:
Fiscal | |
Number of new stores | 4 |
Number of relocations/remodels | 3 |
Daily average comparable store sales growth | 2.0% to 3.0% |
Diluted earnings per share | $0.86 to $0.94 |
Capital expenditures (in millions) | $28 to $35 |
Earnings Conference Call
The Company will host a conference call today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss this earnings release. The dial-in number is 1-888-347-6606 (US) or 1-412-902-4289 (International). The conference ID is "Natural Grocers Q3 FY 2023 Earnings Call." A simultaneous audio webcast will be available at http://Investors.NaturalGrocers.com and archived for a minimum of 20 days.
About Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is an expanding specialty retailer of natural and organic groceries, body care products and dietary supplements. The products sold by Natural Grocers must meet strict quality guidelines and may not contain artificial colors, flavors, preservatives or sweeteners, or partially hydrogenated or hydrogenated oils. The Company sells only USDA certified organic produce and exclusively pasture-raised, non-confinement dairy products, and free-range eggs. Natural Grocers' flexible smaller-store format allows it to offer affordable prices in a shopper-friendly, clean and convenient retail environment. The Company also provides extensive free science-based nutrition education programs to help customers make informed health and nutrition choices. The Company, founded in 1955, has 164 stores in 21 states.
Visit www.NaturalGrocers.com for more information and store locations.
Forward-Looking Statements
The following constitutes a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, statements in this release are "forward-looking statements" and are based on management's current expectations and are subject to uncertainty and changes in circumstances. All statements that are not statements of historical fact are forward-looking statements. Actual results could differ materially from these expectations due to changes in global, national, regional or local political, economic, inflationary, deflationary, recessionary, business, interest rates, labor market, competitive, market, regulatory and other factors, and other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (the Form 10-K) and the Company's subsequent quarterly reports on Form 10-Q. The information contained herein speaks only as of the date of this release and the Company undertakes no obligation to publicly update forward-looking statements, except as may be required by the securities laws.
For further information regarding risks and uncertainties associated with the Company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Form 10-K and the Company's subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting Investor Relations at 303-986-4600 or by visiting the Company's website at http://Investors.NaturalGrocers.com.
Investor Contact:
Reed Anderson, ICR, 646-277-1260, [email protected]
NATURAL GROCERS BY VITAMIN COTTAGE, INC. Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) | ||||||||||
Three months ended | Nine months ended | |||||||||
2023 | 2022 | 2023 | 2022 | |||||||
Net sales | $ | 281,791 | 266,309 | 845,493 | 815,419 | |||||
Cost of goods sold and occupancy costs | 200,401 | 192,750 | 602,907 | 586,341 | ||||||
Gross profit | 81,390 | 73,559 | 242,586 | 229,078 | ||||||
Store expenses | 62,631 | 60,124 | 191,419 | 179,065 | ||||||
Administrative expenses | 9,308 | 7,459 | 26,166 | 22,924 | ||||||
Pre-opening expenses | 367 | 325 | 1,069 | 550 | ||||||
Operating income | 9,084 | 5,651 | 23,932 | 26,539 | ||||||
Interest expense, net | (848) | (603) | (2,478) | (1,692) | ||||||
Income before income taxes | 8,236 | 5,048 | 21,454 | 24,847 | ||||||
Provision for income taxes | (1,164) | (1,115) | (4,091) | (5,642) | ||||||
Net income | $ | 7,072 | 3,933 | 17,363 | 19,205 | |||||
Net income per share of common stock: | ||||||||||
Basic | $ | 0.31 | 0.17 | 0.76 | 0.85 | |||||
Diluted | $ | 0.31 | 0.17 | 0.76 | 0.84 | |||||
Weighted average number of shares of common stock outstanding: | ||||||||||
Basic | 22,734,375 | 22,676,882 | 22,722,712 | 22,659,042 | ||||||
Diluted | 22,887,923 | 22,854,754 | 22,825,343 | 22,812,692 | ||||||
NATURAL GROCERS BY VITAMIN COTTAGE, INC. Consolidated Balance Sheets (Unaudited) (Dollars in thousands, except per share data) | ||||||
June 30, 2023 | September 30, | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 8,576 | 12,039 | |||
Accounts receivable, net | 8,873 | 10,496 | ||||
Merchandise inventory | 116,709 | 113,756 | ||||
Prepaid expenses and other current assets | 6,071 | 4,369 | ||||
Total current assets | 140,229 | 140,660 | ||||
Property and equipment, net | 162,312 | 157,179 | ||||
Other assets: | ||||||
Operating lease assets, net | 292,779 | 307,132 | ||||
Finance lease assets, net | 46,236 | 43,554 | ||||
Deposits and other assets | 406 | 452 | ||||
Goodwill and other intangible assets, net | 14,134 | 14,131 | ||||
Total other assets | 353,555 | 365,269 | ||||
Total assets | $ | 656,096 | 663,108 | |||
Liabilities and Stockholders' Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 72,755 | 71,283 | |||
Accrued expenses | 22,938 | 26,737 | ||||
Term loan facility, current portion | 1,750 | 1,750 | ||||
Operating lease obligations, current portion | 34,839 | 34,735 | ||||
Finance lease obligations, current portion | 3,552 | 3,223 | ||||
Total current liabilities | 135,834 | 137,728 | ||||
Long-term liabilities: | ||||||
Term loan facility, net of current portion | 7,938 | 13,938 | ||||
Operating lease obligations, net of current portion | 281,189 | 295,064 | ||||
Finance lease obligations, net of current portion | 48,066 | 44,664 | ||||
Deferred income tax liabilities, net | 16,133 | 15,902 | ||||
Total long-term liabilities | 353,326 | 369,568 | ||||
Total liabilities | 489,160 | 507,296 | ||||
Stockholders' equity: | ||||||
Common stock, $0.001 par value, 50,000,000 shares authorized, 22,743,895 and 22,690,188 shares issued at June 30, 2023 and September 30, 2022, respectively, and 22,736,344 and 22,690,188 shares outstanding at June 30, 2023 and September 30, 2022, respectively | 23 | 23 | ||||
Additional paid-in capital | 58,725 | 58,072 | ||||
Retained earnings | 108,264 | 97,717 | ||||
Common stock in treasury at cost, 7,551 shares at June 30, 2023 | (76) | — | ||||
Total stockholders' equity | 166,936 | 155,812 | ||||
Total liabilities and stockholders' equity | $ | 656,096 | 663,108 | |||
NATURAL GROCERS BY VITAMIN COTTAGE, INC. Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) | ||||||
Nine months ended June 30, | ||||||
2023 | 2022 | |||||
Operating activities: | ||||||
Net income | $ | 17,363 | 19,205 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 21,426 | 21,088 | ||||
Impairment of long-lived assets | 930 | 95 | ||||
Loss on disposal of property and equipment | 104 | 57 | ||||
Share-based compensation | 1,046 | 887 | ||||
Deferred income tax expense | 231 | 274 | ||||
Non-cash interest expense | 14 | 17 | ||||
Changes in operating assets and liabilities: | ||||||
Decrease (increase) in: | ||||||
Accounts receivable, net | 2,188 | (298) | ||||
Merchandise inventory | (2,953) | (10,783) | ||||
Prepaid expenses and other assets | (569) | (1,088) | ||||
Income tax receivable | (1,111) | (328) | ||||
Operating lease assets | 24,730 | 23,795 | ||||
(Decrease) increase in: | ||||||
Operating lease liabilities | (25,643) | (20,974) | ||||
Accounts payable | 2,202 | 1,696 | ||||
Accrued expenses | (3,799) | (4,138) | ||||
Net cash provided by operating activities | 36,159 | 29,505 | ||||
Investing activities: | ||||||
Acquisition of property and equipment | (23,241) | (15,925) | ||||
Acquisition of other intangibles | (1,133) | (2,293) | ||||
Proceeds from sale of property and equipment | 76 | 16 | ||||
Proceeds from property insurance settlements | — | 184 | ||||
Net cash used in investing activities | (24,298) | (18,018) | ||||
Financing activities: | ||||||
Borrowings under revolving facility | 379,700 | 6,100 | ||||
Repayments under revolving facility | (379,700) | (6,100) | ||||
Repayments under term loan facility | (6,000) | (6,000) | ||||
