- Natural Grocers reported a 5.5% increase in its daily average comparable store sales in its first-quarter earnings report for fiscal 2019, along with a 3.2% increase in average transaction size and 2.3% increase in daily average transaction count. The grocer's stock was up 0.5% Friday morning.
- Gross profit rose 40 basis points to 26.7% of sales while operating income jumped 84% year-over-year to $4 million and operating margin increased 70 basis points. The company noted that net sales increased 94% to $221.5 million.
- In addition, the retailer reported a decrease in net income by 57.6% to $2.2 million with diluted earnings per share of $0.10, which the company said is due to a $4.3 million tax-based adjustment to its first-quarter earnings last year.
Natural Grocers has made significant changes over the past year, including opening new stores, expanding its private label line, lowering prices and targeting its marketing efforts. The grocer’s Q1 earnings show these efforts are starting to pay off, with comp-store sales up a healthy 5.5%.
In its first quarter of 2018, the retailer expanded and updated its NPower Loyalty program which it says has contributed to basket gains in its Q1 earnings and also served as a resource for marketing and promotions. In its earnings call, Natural Grocers' executives noted marketing and promotional efforts have focused on differentiating the retailer from competitors and this has resulted in its gross margin increase and strong comp sales in grocery.
These moves are notable considering one of its biggest competitors is Whole Foods, which is aggressively promoting Amazon's Prime loyalty program.
“We haven’t noticed a lot of issues with Prime members not shopping in our store,” Kemper Isely, co-president, director and chairman of Natural Grocers, said during yesterday's call. "We’ve increased our NPower membership up to 800,000 members as of January and are gaining about 30,000-60,000 per month. Our membership doesn’t cost money and that’s the big benefit. We don’t have to ship our product like Amazon has to and lose money every time they do ship a product. I don’t think it’s a big benefit to Whole Foods members either, Whole Foods is still having troubles keeping their prices competitive."
Natural Grocers' private label expansion, announced last fall, includes 50 new products across 15 categories and it plans to expand the line to coconut milk, fair-trade chocolate and grass-fed beef jerky sometime this year.
On the topic of investments, the grocer has opened four new stores and relocated one during the first quarter. The retailer plans to open one new store and relocate one new store in Q2 and has already signed leases for two additional new stores to open in 2019.
Natural Grocers also cited its investments in becoming a more health-focused store. Just last month, the retailer launched a free, six-week keto diet program to help people kick start their nutritional goals for 2019. The diet consists of classes, food journaling as well as sleep and stress management closely tracked by the company’s nutritional health coaches.
To further boost its nutrition-focused store, Natural Grocers has revamped its website, which personalizes the online grocery experience by including healthy recipes, access to coaching services, and product deals. To further its customer experience, just this week Natural Grocers brought craft beer, organic wine and hard kombucha under its Cottage Wine and Craft Beer concept to three more stores in Oklahoma.
“We plan to continue to drive the growth through a balance of new store openings and comp gains that will allow us to focus on improving our existing store's productivity and generate positive cash flow,” said Isely. “We will continue to strategically invest in pricing, promotion and marketing to drive brand awareness and traffic while focusing on continued profit improvement.”