Natural Grocers continues expansion in face of increased competition

11-Aug-2014 - Last updated on 12-Aug-2014 at 13:44 GMT

Natural Grocers by Vitamin Cottage, a regional health food store chain based in Colorado, reported strong results in its third quarter of fiscal 2014 that included expanding the company’s footprint.

The company opened three new stores in Oregon, Washington and Utah. The company currently has 84 stores and plans to open three more stores in the fourth quarter of 2014 and an additional 18 stores during fiscal 2015. By the end of that year the company plans to have stores in 16 states west of the Mississippi. Natural Grocers stores have a layout that splits its stores between supplements and foods, but newer stores skew toward the food end, and include in some instances demonstration kitchens that can be used for education and events as a way to build community engagement, the company said.

“We are excited about the increasing demand for natural and organic food and believe this will forward the growth opportunity we see ahead of us,” Kemper Isley, Natural Grocers CEO told analysts during an earnings call that was transcribed on the site seekingalpha.com.

Increased competition

Isley said same store sales were depressed during the period because of increasing local competition faced by a number of the company’s locations. In Natural Grocers’ home state of Colorado and elsewhere in the west, Whole Foods Markets and Sprouts have been aggressively expanding, and GNC continues to open new stores in many of the company’s markets.

“Our comparable store sales had recently been impacted by increased localized competition. We are currently testing different marketing and advertising initiatives to address this,” Isley said. One of the ways the company is seeking to differentiate itself has been to introduce a line of non-GMO chickens, Isley said.

Earnings details

During the third quarter of fiscal year 2014, net sales increased $20.9 million, or 18.4% over the same period in fiscal year 2013 to $134.0 million due to an $18.6 million increase in sales from new stores and a $2.3 million, or 2.0%, increase in comparable store sales. Daily average comparable store sales increased 3.1% in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013. The 3.1% increase in the third quarter of fiscal year 2014 was driven by a 1.3% increase in daily average transaction count and a 1.8% increase in average transaction size. Daily average mature store sales increased 1.6% in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013.

For the three quarters 2014, net sales increased 22% to $385 million year to date. EBITDA increased 28.8% to $31.2 million year to date.