Natural Grocers (NYSE:NGVC) by Vitamin Cottage, Inc. (NYSE: NGVC) has announced strong financial outcomes for the fourth quarter and the full Fiscal Year 2024, showcasing continued growth in net sales and earnings per share. The health-focused grocery chain reported a 9.3% increase in net sales for Q4, reaching $322.7 million, and a full-year revenue increase of 8.9% to $1.24 billion. The company's diluted earnings per share also saw a significant rise from $1.02 to $1.47.
Key Takeaways
- Natural Grocers achieved a 7.1% growth in daily average comparable store sales in Q4, and a 14% increase on a two-year basis.
- The company marked its 21st consecutive year of positive comparable store sales growth.
- Gross margin and operating income saw substantial increases in Q4.
- Net income rose to $9 million, up from $5.9 million the previous year.
- The company's strategic initiatives include expanding its Npower rewards program and increasing the presence of Natural Grocers branded products.
- Natural Grocers announced a 20% increase in its quarterly cash dividend to $0.12 per share.
Company Outlook
- The company plans to open 4-6 new stores and relocate or remodel 2-4 stores in Fiscal Year 2025.
- Expected daily average comparable store sales growth of 4-6%.
- Projected diluted earnings per share for Fiscal Year 2025 is between $1.52-$1.60.
- Capital expenditures for the upcoming fiscal year are estimated to be between $36-$44 million.
Bearish Highlights
- No specific bearish highlights were mentioned in the earnings call summary.
Bullish Highlights
- Natural Grocers experienced strong performance in key departments such as meat, dairy, and produce.
- The company has a consistent focus on high-quality, natural, and organic products, which continues to attract customers.
Misses
- The earnings call summary did not report any specific misses.
Q&A highlights
- There were no Q&A highlights provided in the earnings call summary.
Leadership Changes
- CFO Todd Dissinger is set to retire at the end of the year, with Richard Helet taking over the role on January 1st.
Shareholder Returns
- Reflecting its strong financial performance, Natural Grocers has increased its quarterly cash dividend by 20%.
Important Quotes
- Co-President Kemper (NYSE:KMPR) Eiseley expressed pride in the company's sustained growth and balanced approach.
- Eiseley also highlighted the award of significant discretionary incentives for the company's Good4U crew, attributing this to the record earnings in Fiscal 2024.
- Outgoing CFO Todd Dissinger conveyed confidence in the company's ability to drive profitable growth and enhance stakeholder value.
In summary, Natural Grocers by Vitamin Cottage, Inc. has delivered a robust financial report for Q4 and Fiscal Year 2024, with notable growth in sales, net income, and earnings per share. The company's focus on strategic initiatives and store expansion, along with an increase in shareholder returns, positions it for continued success in the coming fiscal year.
Full transcript - Natural Grocers by Vitamin Cottage Inc (NGVC) Q4 2024:
Conference Operator: Good day, ladies and gentlemen. Welcome to the Natural Grocers 4th Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a 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.
I would now like to turn the conference over to Ms. Jessica Thiessen, Vice President, Treasurer for Natural Grocers. Ms. Thiessen, you may begin.
Jessica Thiessen, Vice President, Treasurer, Natural Grocers: Good afternoon, and thank you for joining us for the Natural Grocers by Vitamin Cottage 4th quarter and Fiscal Year 20 24 Earnings Conference Call. On the call with me today are Kemper Eiseley, Co President Todd Dissinger, Chief Financial Officer and Richard Halle, our Incoming Chief Financial Officer. As a reminder, certain information provided during this conference call contains forward looking statements based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward looking statements due to a variety of factors, including the risks and uncertainties detailed in the company's most recently filed Forms 10 Q and 10 ks. The company undertakes no obligation to update forward looking statements.
Today's press release is available on the company's website and a recording of this call will be available on the website at investors. Naturalgrocers.com. Now, I will turn the call over to Kemper.
Kemper Eiseley, Co President, Natural Grocers: Thank you, Jessica, and good afternoon, everyone. Thank you for joining us for our Q4 call. Today, I will highlight our financial results, including key drivers of our performance and provide an update on our priorities. Then Todd will discuss the Q4 results in greater detail and introduce our fiscal year 2025 guidance. We are pleased with our strong performance in the Q4, particularly the balanced nature of our growth.
We had 7.1% daily average comparable store sales growth and 14% on a 2 year basis. Sales growth included Additionally, gross margin increased 100 basis points, driven by both store occupancy cost leverage and higher product margin. The sales and margin improvements combined with expense management and leverage resulted in a 53% increase in net income. The full fiscal year performance was also balanced, including a daily average comparable store sales increase of 7% and gross margin improvement of 70 basis points. Furthermore, we sales increase of 7% and gross margin improvement of 70 basis points.
Furthermore, we delivered operating margin expansion of 100 basis points and diluted earnings per share growth of 44%. Our positive comp in fiscal 2024 represented our 21st consecutive year of positive comparable store sales growth. Our outstanding 4th quarter and fiscal year results underscore our customers' appreciation for our commitment to the exceptional quality, value and convenience provided by our innovative business model. Additionally, we continue to benefit from consumers' increasing prioritization of products that support health and sustainability. We provide a differentiated merchandising strategy that delivers affordable, high quality, natural and organic grocery products and dietary supplements.
In the Q4 and for the fiscal year, the departments with the highest sales growth were meat, dairy and produce. We believe our high product standards in these departments resonate with consumers now more ever. Our meat product standards prioritize humanely raised and sustainably sourced offerings. For example, our chicken product standard has always prohibited the use of antibiotics, hormones and other growth percent certified organic and was organic even before there was an official USDA organic designation. Our commitment to offering high quality products at always affordable prices creates a compelling value proposition that is distinctive within the market.
Proposition that is distinctive within the market. Our marketing initiatives consistently emphasize these key characteristics to drive customer engagement. We believe that communicating and reinforcing our distinct position in the marketplace has been instrumental in generating our strong sales performance over the past several quarters. As we reflect upon our performance over a longer horizon, we have achieved sustained growth by consistently executing our founding principles and focusing on customer engagement and operational initiatives. Additionally, we have benefited from favorable category and consumer Over the previous 5 years, we have grown net sales by 37% and more than tripled diluted earnings per share.
Furthermore, during this period, we returned $108,000,000 in capital to our stockholders through $4.76 of cumulative dividends per common share. We take great pride in our sustained and balanced growth. Consistent with our focus on returning capital to our stockholders, today we announced that our Board of Directors has approved increasing our quarterly cash dividend to $0.12 per common share, representing a 20% increase. Turning now to an update on key priorities for our business. We believe that our initiatives drove growth in fiscal 2024 and will continue to provide growth opportunities in the future.
We continue to leverage our Npower rewards program as reflected in the 4th quarter net sales penetration of 81%, up from 77% a year ago. Npower has been an effective tool for increasing customer loyalty and engagement. Our Natural Grocers branded products continue to experience elevated growth in the 4th quarter. Our branded products accounted for 8.4% of total sales, up from 7.8 percent a year ago. During the quarter, we launched 19 new Natural Grocers brand items, including limited edition flavors of our organic coffee, expanded our household products line and added new gourmet varieties of frozen pizza.
For the year, we launched 80 new products, which like all our Natural Grocers brand products represent premium quality at compelling prices. Store unit growth and development continues to be a priority for our company. During the Q4, we opened a store in the Incline Village, Nevada, which is in the Lake Tahoe region. During fiscal 2024, we opened a total of 4 new stores and relocated or remodeled 4 stores. We are pleased with their early performance.
Subsequent to the quarter end, we relocated 2 stores and closed 1 store. Over the next several years, we are targeting a return to opening between 6 8 new stores per year, subject to real estate opportunities and improving construction conditions. In closing, I would like to thank our Good4U crew, their commitment to operational excellence and exceptional customer service. We're instrumental in driving our strong results. We are fortunate to have crew who share an affinity for our founding principles and are dedicated to ensuring that our stores, operations and supply chain reflect these values.
Our record earnings in fiscal 2024 supported the award of significant discretionary incentives for our Good 4 U crew. Our history of paying discretionary incentives tied to the company's performance unites the organization in driving profitable growth and reflects our commitment to our crew. With that, I will turn our call over to Todd to discuss our financial results and guidance.
Todd Dissinger, Chief Financial Officer, Natural Grocers: Thank you, Kemper, and good afternoon. During the Q4, we generated strong financial results consistent with our trends throughout the year. For the Q4, net sales increased 9.3% from the prior year period to $322,700,000 Daily average comparable store sales increased 7.1% and increased 14% on a 2 year basis. Our daily average comparable transaction count increased 3.6%. This marks our 7th consecutive quarter with positive customer traffic comps.
Our daily average comparable transaction size increased 3.4%. The transaction size comp included an increase in items per basket of approximately 2 percentage points. Importantly, this was the 3rd consecutive quarter with an increase in items per basket. Every major product category had an increase in items per basket. The transaction size comp also included product cost inflation of approximately 1 percentage point.
Sales growth continued to be broad based across product categories. Our strongest performing departments were meat, dairy and produce. The dietary supplement sales comp was slightly positive. For the Q4, gross margin increased 100 basis points to 29.6 percent, driven by store occupancy cost leverage and higher product margin. Store expenses increased 10.2% in the 4th quarter, primarily driven by higher compensation expenses and long lived asset impairment charges related to a store closure.
Store expenses as a percentage of sales increased 20 basis points, primarily driven by higher long lived asset impairment charges, partially offset by expense leverage. Administrative expenses as a percentage of sales decreased 10 basis points reflecting expense leverage. Operating income increased 56% to $12,100,000 Net income was $9,000,000 with diluted earnings per share of $0.39 in the 4th quarter. This compares to net income of $5,900,000 or $0.26 of diluted earnings per share in the Q4 of last year. Adjusted EBITDA increased 41% to $22,600,000 in the 4th quarter.
Briefly touching on the full year results. For fiscal 2024, total revenue increased 8.9% to $1,240,000,000 Our daily average comparable store sales growth was 7%, resulting in an increase of 10.6% on a 2 year basis. Gross margin was 70 basis points higher than the prior year. Store expenses as a percentage of sales were 30 basis points lower than the prior year and primarily reflects expense leverage. For fiscal 2024, diluted earnings per share were 1.47 compared to $1.02 in fiscal 2023.
Adjusted EBITDA in fiscal 2024 was $83,300,000 Turning to the balance sheet and cash flow. We ended the 4th quarter in a strong liquidity position, including $8,900,000 of cash and cash equivalents and no outstanding borrowings on our $75,000,000 revolving credit facility. During fiscal 2024, we generated cash from operations of $73,800,000 and invested $38,600,000 in net capital expenditures, primarily for new and relocated stores, resulting in free cash flow of $35,200,000 Today, we announced that our Board of Directors has increased our quarterly cash dividend to $0.12 from $0.10 per common share. The dividend will be paid on December 18, 2024 to all stockholders of record at the close of business on December 2, 2024. This increase reflects our strong operating performance and financial position, confidence in our future and is consistent with our objective of enhancing stockholder value by returning capital.
Now I would like to review the company's outlook, which was developed based upon the current operating momentum we are experiencing, consumer trends, as well as consideration of the uncertainty of the economic environment. For fiscal 2025, we expect to open 4 to 6 new stores, relocate or remodel 2 to 4 stores, achieve daily average comparable store sales growth between 4% 6%, achieved diluted earnings per share between $1.52 $1.60 and direct $36,000,000 to $44,000,000 towards capital expenditures to support our growth initiatives. In addition, our outlook includes the benefits of our new store growth, targeted marketing focused on our value proposition, differentiation and customer engagement and operating initiatives focused on driving higher productivity in our stores. Our current expectation is that sales comps will be at the high end of our outlook range in the first half of the year, while moderating somewhat in the second half of the year as we continue to cycle relatively strong comps in the prior year. We expect modest inflation throughout the year in line with current trends.
Our outlook anticipates that year over year gross margin will be relatively flat. Lastly, we expect that year over year store expenses as a percentage of sales will be relatively flat to slightly lower. Considering fiscal 2025 and beyond, we believe we have opportunity for growth from our alignment with consumer trends, strong customer engagement through our Npower Rewards program, expansion of the Natural Grocers branded products, new store development and driving existing store productivity. In closing, we had a strong quarter to conclude a record setting fiscal year. We are confident in our ability to continue to drive profitable growth and enhance value for all stakeholders.
With that, I turn our call back to Kemper.
Kemper Eiseley, Co President, Natural Grocers: Thank you, Todd. In late June, Todd announced his intention to retire at the end of the year. Since his appointment as CFO in 2017, Todd has been an invaluable member of our executive team, helping Natural Grocers to execute to our founding principles while achieving record financial performance and enhancing shareholder value. Stepping into the CFO role on January 1st is Richard Helet, who served as a member of Natural Grocers Board of Directors and Audit Committee since 2012. Rich's deep strategic knowledge of our company and strong background as a seasoned finance executive makes him the ideal fit as we continue to execute to our founding principles.
I'm thrilled to welcome Rich to our executive team. Todd will continue in the CFO role through year end to ensure a successful transition. Todd, I want to thank you for your many contributions to our success and wish you well in retirement. Now I would like to open the lines for questions. Thank you.
Conference Operator: We will now begin the question and answer Our first question comes from Scott Mushkin with R5 Capital. Please go ahead.
Scott Mushkin, Analyst, R5 Capital: Great. Hey, guys. Todd, congratulations on retirement and I'm jealous, I think.
Kemper Eiseley, Co President, Natural Grocers: Thank you, Scott.
Scott Mushkin, Analyst, R5 Capital: So I guess I just wanted to I hate talking short term, but I guess I'll start off that way. Since one of your competitor kind of commented that they've seen acceleration September, October, like maybe into a little November. I mean, are you guys I know the comps get tougher, but I mean, are you seeing the same kind of continuous acceleration that they're seeing in the business?
Kemper Eiseley, Co President, Natural Grocers: Well, their acceleration was off of a lower comp in the previous quarter than ours. But our comp for we don't really give good, but we were very similar to how we did throughout the year in October.
Scott Mushkin, Analyst, R5 Capital: Okay. That's good color. Sticking with this type of theme, you guys overlap in a number of markets, I think, well, at least in the Colorado market, but also down Texas. Do you see any difference in store performance, whether you're competing with Sprouts or not competing with Sprouts?
Kemper Eiseley, Co President, Natural Grocers: Not really. They our store performance is pretty even throughout wherever we're located. I mean, one of our stronger markets right now is down in Arizona, Tucson and Phoenix area. So that's their headquarters area. Texas is actually pretty strong too right now.
Scott Mushkin, Analyst, R5 Capital: Okay. And then, Kemper, I don't know how much you put into the idea that some of the acceleration in the industry has to do with these weight loss drugs. Maybe you don't put any credence on that. I'd like to get your input on that. But do you think that that burns out after a while if you think it's helping propel the industry?
Or are you thinking it can keep going longer again if you think that's part of what's going on?
Kemper Eiseley, Co President, Natural Grocers: No, I don't really think the weight loss drugs have. I mean they might be having somewhat of an effect just from the standpoint that people are more aware of what they're putting into their body. So that's good for our business. But I think that's an overall throughout the country sort of thing that people are more worried about what they're consuming rather than just the people that are on the weight loss drug. I actually think that people think weight loss drugs probably are less likely to be our customers just because they want something they want to solve their problem of weight without actually addressing what the underlying cause of the weight gain is.
Scott Mushkin, Analyst, R5 Capital: Right. And then how do you view the I don't know if there's anyone else here to ask questions, so I figured I'll just keep throwing them out unless there is and I'll get off.
Kemper Eiseley, Co President, Natural Grocers: No, we're good.
Scott Mushkin, Analyst, R5 Capital: We're good. Okay. So how do you think about obviously there's Health and Human Services person nominated. He is very against food additives and kind of some of the stuff that I think is poison, but maybe I shouldn't say that on a live conference call. But I mean how do you think that plays out?
If he's successful, does it help you or hurt you?
Kemper Eiseley, Co President, Natural Grocers: It would be helpful if he succeeds in making people more aware of what they're putting into their bodies because we have an authentic story of not allowing artificial food additives into the products that we sell in our stores. So that just reaffirms that we're authentic and that we're the original player in the field of actual natural foods.
Scott Mushkin, Analyst, R5 Capital: Yes, okay. That makes sense. I was trying to frame it. I think that helps. I mean, I think to the degree he draws more and more attention to it, it obviously helps.
I agree with what you said.
Kemper Eiseley, Co President, Natural Grocers: I mean, even if he is nominated, it's going to be a big struggle for him to get a lot of stuff taken care of that probably should be taken care of in this country. I mean, the way we grow food and the way we manufacture food, etcetera, is quite problematic. I mean, it's part of the reason why so many people have weight issues and have to take the weight loss drugs.
Scott Mushkin, Analyst, R5 Capital: Yes, it's amazing some of the stuff. When I first was a young analyst, I did a lot of work around the chemicals and additives just back in the 2000s, early 2000s. And it just amazed me as I did the research on some of the stuffs in our food and the fact that a lot of it's known carcinogens and it's still there.
Kemper Eiseley, Co President, Natural Grocers: And then you have the artificial colors and flavors that they put into the candies for the kids, not super hyperactive.
Scott Mushkin, Analyst, R5 Capital: And the plastics. In the plastics. You guys have plastic? I don't think so, right? Or do you have do you allow plastics in?
Kemper Eiseley, Co President, Natural Grocers: No, we don't allow plastics into the foods.
Scott Mushkin, Analyst, R5 Capital: All right. We digress just a little bit. So if you're going to look at 25, you went over Kevin, you went over some of the initiatives that you're excited about. But if you're looking at the top things for 25, especially on the revenue drive side, but I guess also maybe the efficiency side, If I was going to look at something for 25, like, hey, this is really a focus for the company.
Kemper Eiseley, Co President, Natural Grocers: Well, we're really focused on as far as revenue driving is just marketing to our Npower customers because that's the most cost effective way for us to market. And so getting even a higher percentage of our sales people higher percentage of our customer base signed up as Npower members is super effective in driving the top line of sales. And so if we can drive that from 81%, so we went 78% to 81%, so we can go from 81% to 84% this year, that would be a tremendous driver of sales. And it's just Because I mean to Empower members to spend a lot more for transactions than other customers do because we're marketing to them and telling them about all of their good benefits, 5 times a week.
Scott Mushkin, Analyst, R5 Capital: And is the sign up
Kemper Eiseley, Co President, Natural Grocers: Really good programs on this. Yes, sorry.
Scott Mushkin, Analyst, R5 Capital: Go ahead. So are the efforts to get people to sign up like we just had the most tremendous my partner and I who does a lot of the consulting for R5. We were actually in Keller, Texas. We were in your store and we just had the most positive interaction with the actually it was the cashier who actually had to sign up. And is that how you're getting it done?
Is it just is that how you get from 79 to 81? Is it just like associates engaging with people? Anyway. Exactly, exactly.
Kemper Eiseley, Co President, Natural Grocers: And then we're running we have in store friendly contests in each region. So the stores once a quarter we run a contest to see which store can sign up the most. And our members in a quarter and just things like that just to drive the sign ups.
Todd Dissinger, Chief Financial Officer, Natural Grocers: And you need to be in the program to take advantage of promotions.
Scott Mushkin, Analyst, R5 Capital: Yes. Right. I mean you can't get
Kemper Eiseley, Co President, Natural Grocers: your eggs at the really good price most of your NAND Power program. So and eggs seem to be a driver again because there's an egg shortage again.
Scott Mushkin, Analyst, R5 Capital: That's amazing. I got to tell you I was definitely impressed with that interaction. We both were, to see how engaged the employee was. And unfortunately, this was a bit ago, but you guys are running a big, I think it was your annual sale or something like that. I forget what it was.
It was we were kind of bummed that we weren't going to
Kemper Eiseley, Co President, Natural Grocers: be there for it, but we weren't.
Scott Mushkin, Analyst, R5 Capital: I think that's what I told you. You're going to ever open a natural grocers down here in Florida, but you said no.
Kemper Eiseley, Co President, Natural Grocers: Not right now, no. Not right now. We still have a lot to do so west of the Mississippi.
Scott Mushkin, Analyst, R5 Capital: Yes. There is a competitor down here, but not nearly as good as you or someone that does the same thing, but they're not nearly as good. All right. I think that's it. I think that's it for me.
I appreciate it. And I see the company doing so well. Thanks for the dividend. I own the stock. So I appreciate it.
Kemper Eiseley, Co President, Natural Grocers: You're welcome. I mean quite a few dollars given back in dividends over the last few years.
Scott Mushkin, Analyst, R5 Capital: Yes, that's the one good thing of having a smaller company. We can actually that's in our disclosures, this will probably be in print, but we can actually put our money where our mouth is. So, I
Kemper Eiseley, Co President, Natural Grocers: appreciate it. We appreciate your coverage. Thank you.
Scott Mushkin, Analyst, R5 Capital: Thanks. Thanks guys. Bye.
Kemper Eiseley, Co President, Natural Grocers: Thank you, Scott. Bye.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Kempler Isley for any closing remarks.
Kemper Eiseley, Co President, Natural Grocers: I never had been called Kemplar isolating. Anyway, thank you for joining us to discuss our Q4 results. We take great pride in our sustained and balanced growth in fiscal 2024 and over the past several years. We are committed to maximizing value for our stockholders as we look forward to fiscal year 2025. We expect to build upon our momentum by executing through our founding principles, leveraging our emphasizing operational excellence to drive profitable growth at an authentic company.
Thank you and have a great day. Bye.
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