Private label, CBD launches help drive Natural Grocers’ profits

By Hank Schultz

- Last updated on GMT

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Getty Images

Related tags Dietary supplements Dietary supplements industry Retailing Retailers Cbd hemp extracts

Private label offerings and a successful CBD launch are helping Natural Grocers show a solid profit, according to company executives.

In the company’s recent year end earnings statement, CEO Kemper Isley said the company (formally known as Natural Grocers by Vitamin Cottage) has increased the pace of private label launches, which has helped drive profitability.

“During the year, we were proud to launch 47 new Natural Grocers brand products, in line with our projections. Our private brand products have been developed consistent with our core values and are positioned as a premium quality brand at an affordable price. We remain encouraged by the customer response to date, and we'll continue to expand our Natural Grocers brand offerings, targeting the launch of an additional 70 products in fiscal 2020,”​ he said.

More new SKUs, fewer new stores

The increased pace of private label launches has to some extent substituted for the company’s earlier intense focus on new store openings.  A few years ago, Natural Grocers was opening as many as 20 new stores a year. That pace has receded to about five to six new stores and one or two relocations per year.  The company also said because of the recent competitive environment, the cash on cash payback on the investment into new stores has stretched out to six years from five.  The company now operates more than 140 stores in 20 states, mostly west of the Mississippi.

Natural Grocers sells both organic produce as well as dietary supplements.  Unlike some competitors such as Whole Foods Markets and Sprouts, Natural Grocers devotes a much greater amount of shelf space to supplement products.

CBD joins lineup

Among the supplements it is selling are CBD skus, which were introduced this year. The company sells products from Barleans, Ancient Nutrition and others. The company has also hosted CBD education sessions in stores​ in the states where the sales of the products are allowed.

“We are also identifying key new product categories that resonate with our consumers to drive sales. A recent example is the addition of Hemp-Derived CBD products across the majority of our stores during fiscal 2019, which have been very well received. We have worked diligently to source high-quality products produced by trusted suppliers and in GMP Certified facilities,” ​Isley said.  He made his comments during a fourth quarter earnings call with analysts that was posted in transcript form on the site​.

Earnings details

For fiscal 2019, Natural Grocers posted $903 million in net sales, which was $54 million more than the previous year, or a 6.4% increase.  The company also announced its first ever stock divided, at 7 cents a share.  But despite the good news, stock traders have been wary of the company;  Natural Grocers hit its high point of more than $31 a share in early 2015 shortly after going public in 2014.  It has been mostly downhill since then, with the company’s shares trading at about $9 today.

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