Natural Grocers nears 100th store landmark

By Hank Schultz

- Last updated on GMT

Image: © iStockPhoto / marilyna
Image: © iStockPhoto / marilyna

Related tags Marketing

As Natural Grocers by Vitamin Cottage nears its 60th birthday, the company is nearing another milestone, too; the company is slated to open its 100th store this month, CEO Kemper Isley said.

In the company’s third quarter earnings call with analysts, Isley said the company will by the end of its fiscal 2015 have extended its reach to 18 states west of the Mississippi. The company has a unique model that splits the store fairly evenly between organic foods and dietary supplements and personal care.

Supplement market slackens

On the dietary supplements side, Isley said the company has noticed the same softening in the market that other sellers have reported on. The sector is growing, but not as fast as it once did. But strength in personal care product sales more that took up that slack, Isley said in the call that was posted in transcript form on the site

“(Supplements) didn't gain market share, but they didn't lose very much market share. But our H&B (health and beauty) department gained substantial market share, and our general merchandise gained substantial market share, and both of those are really higher margin departments for us,” ​Isley said.

The company has been on a rapid growth pace in terms of stores since going public in 2012. At that time, the company released a report that cited a potential for 1,000 new health food stores, which was misinterpreted by some to mean a potential for 1,000 new Natural Grocers stores. Even though that report referred to the potential size of the market for all players, there is still is plenty of room for growth for the company.

But the momentum of that growth has proved difficult to be a strain. The company said it will likely miss by one the goal for 17 new stores it had set for its present fiscal year. The company said it plans to open 22 new stores in fiscal 2016.

In one way, though, Isley said that increased store footprint makes the new store growth pace easier to maintain.  He said the company seeks first to promote from within, so with an ever-expanding store footprint, the company has a bigger talent pool from which to promote new manager.

Direct delivery service

Isley said Natural Grocers continues to experiment with new ways to connect with customers and find new ones.  The company has a new loyalty program dubbed {N} Power that offers coupons and rebates. The program, which is planned to be rolled out company-wide by the end of the fiscal year, has helped boost the average ticket size, he said.

In addition, the company has also partnered with home delivery service Instacart in a number of stores. Data from the test run in Colorado and Oregon showed that 80% of the customers who used the service had not been Natural Grocers customers previously, Isley said.

Earnings details

Net sales in the third quarter of fiscal 2015 increased 18.4% to $158.7 million. Daily average comparable store sales increased 5.8%, driven by a 3.3% increase in daily average transaction count and a 2.4% increase in average transaction size. Daily average mature store sales increased 2.3% in the third quarter.

Gross profit during the third quarter of fiscal 2015 increased 19.5% to $46.1 million, driven by positive comparable store sales and an increase in the comparable store base.

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