Specialized supply chain helps Natural Grocers weather inflation storm

By Hank Schultz

- Last updated on GMT

©Getty Images - PM Images
©Getty Images - PM Images

Related tags Inflation Supply chain Supply chain management

Natural Grocers said the supplier network and customer loyalty it has built up over years has enabled it to restrain inflationary cost increases and to pass on whatever price hikes are necessary onto consumers without much pushback, helping the company to post an almost 5% increase in sales in the second quarter.

Todd Dissinger, the company’s chief financial officer, said Natural Grocers’ work over the years to create a dedicated supplier network has paid dividends during this unusual economic interlude.

Specialized supply chain cushions price hikes

“Historically, our specialized supply chain has yielded more stable inflation rates than conventional grocery. We continue to pass along the cost inflation impact via pricing. And to-date, we have not observed customer trade down in response to the inflationary trends,”​ he said.

Kemper Isley, CEO of the natural foods store chain, which also sells a significant amount of dietary supplements, said consumer engagement fostered by the company’s commitment to nutrition education, helped in another way, too.

“Our unique approach to marketing and promotional activity continues to drive high levels of customer engagement and sales growth. For example, in the second quarter, we offered a 21 Days to a Healthier You program, which featured a three series of nutrition education classes, each with an accompanying 7-day challenge,”​ Isley said.  Isley and Dissinger made their remarks during a second quarter fiscal 2022 earnings call with stock analysts that was posted in transcript form on the site seekingalpha.com.

New store pace to accelerate

Isley said the company has ramped up its new product launches, with 8 new SKUs debuting during the quarter, which included new branded dietary supplements.  In addition, the company is looking forward to a return to its recent pace of new store growth, with a forecast for six to eight new stores opening in future fiscal years.  For fiscal 2022 the company expects to open four or five new stores and relocate two.  The pace had declined during the pandemic because of construction delays.  At the end of the second quarter Natural Grocers now operates 162 stores in 20 states, mostly west of the Mississippi.

Earnings details

Fro the second quarter Natural Grocers, which has its headquarters in Lakewood, CO, posted revenue of $271.8 million, representing a 4.8% year over year increase. For the first six months of the year, net sales increased $24.9 million, or 4.7%, to $549.1 million, compared to the first six months of fiscal 2021, due to a $21.3 million increase in comparable store sales and a $3.6 million increase in new store sales.

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