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Natural Grocers by Vitamin Cottage reports 30.5% sales growth in quarter

By Hank Schultz , 08-Aug-2013

Natural Grocers by Vitamin Cottage reports 30.5% sales growth in quarter

Natural Grocers by Vitamin Cottage, Inc., a major dietary supplements and organic foods retailer, has reported 30.5% sales growth and double digit comparable store sales growth in the third quarter of fiscal 2013.

Overall net sales hit $113.2 million in the third quarter and increased 28.0% to $315.5 million year to date. Daily average comparable store sales increased 10.4% in the third quarter and increased 11.2% year to date, when corrected for different numbers of days in the comparable quarters.

During the quarter the company opened three new stores, bring the total new store openings in fiscal 2013 to 11.  It’s a pattern of momentum that is accelerating, said NGVC co president Kemper Isley.

New stores roll out

“Out total store count grew to 68 stores in 13 states. We are encouraged by our demonstrated ability to expand our presence geographically while maintaining double-digit cost and solid growth on both the top and bottom line.

“We anticipate carrying this positive momentum in the fiscal 2014 and we’ve already set the stage for growth next year with the signing of 11 new leases,” Isley told analysts on a conference call.

Strong business model

Natural Grocers by Vitamin Cottage is unique in that it splits the store between food and supplements.  On its website the company advertises that it carries 10,000 to 12,000 supplement skus; by comparison, GNC, a major competitor in the supplement space, stocks 8,000. Having that split helps the company compete better in varied markets, Isley said.

“The size of the store doesn't have as much of an effect on the mix as does the market we open in. And so there are some cities that are better supplement cities than other cities and some cities that are better grocery cities than other cities,” he said. “Our solid financial results this quarter reflect the continued strength of our business model.”

Fine details on results

During the third quarter of fiscal 2013, net sales increased 30.5% over the same period in fiscal 2012 to $113.2 million due to a $16.4 million increase in sales from new stores and a $10.1 million, or 11.6%, increase in comparable store sales. Daily average comparable store sales increased 10.4% in the third quarter of fiscal 2013 compared to a 13.0% increase in the third quarter of fiscal 2012. The 10.4% increase in the third quarter of fiscal 2013 was driven by a 4.7% increase in daily average transaction count and a 5.4% increase in average transaction size. Daily average mature store sales increased 5.7% in the third quarter of fiscal 2013.

 Gross profit during the third quarter of fiscal 2013 increased 28.3% over the same period in fiscal 2012 to $32.6 million driven by strong comparable store sales and new store growth. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 28.8% during the third quarter of fiscal 2013 compared to 29.3% in the third quarter of fiscal 2012. Gross margin decreased due to a shift in sales mix toward products with lower margins and a decrease in product margin for bulk products. The bulk product margin decreased due to increased production costs as a result of the relocation to a larger bulk food repackaging and distribution center in September 2012.

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