Natural Grocers results show inflation may jam brakes on future growth
Natural Grocers by Vitamin Cottage, to use the company’s formal full name, is an organic health food chain based in Lakewood, CO with more than 160 locations in states mostly west of the Mississippi. Unlike some competitors like Sprouts and Whole Food Markets, Natural Grocers devotes more store square footage to the display of dietary supplements and derives more of its overall revenue from this sector.
In its third quarter fiscal 2022 earnings statement released late last week, Natural Grocers reported net sales of $266.3 million, which represented a 3% year over year increase. The company also recorded a 2.5% increase in comparable store sales, a key metric in the retail industry.
Inflation starting to bite hard
While CEO Kemper Isley said the company was ‘pleased’ with the results, he said inflationary pressures were working to constrain the ability of Natural Grocers to implement new promotions to drive future sales increases.
“We do not see a moderation in inflation for the rest of the year. So we're expecting somewhere in the 6% to 7% range for the rest of the year,” Isley said. He made his remarks as part of a call with stock analysts. A transcript of the call was posted on the site seekingalpha.com
“I really don't see that there can be a lot of more promotional activity in the industry, the wage pressure, et cetera, just makes it really hard for people to cut their margins right at the moment,” he added.
Natural Grocers had for years predicated its growth predictions on an aggressive pace for new store openings. That pace, which at one time saw the company opening several new stores each quarter, proved to be unsustainable. The company reset with a goal of opening six to eight new stores, with several remodels/relocations thrown in.
Even that more modest goal is proving hard to meet in the current climate of shortages of everything, including construction materials. Isley said the company has been ‘proactive’ in stockpiling these. Nevertheless, the company plans to open four new stores this year, with a goal of six in the year after.
