The company, which operates health food stores in 13 Western states, relies more heavily on supplement sales than other comparable retailers, generating about 30% of its revenues from this channel. The company carries a reported 10,000 to 12,000 supplement skus.
Sales growth accelerates
To put the company’s growth in perspective, in the whole of fiscal 2011 (the last year before the company’s IPO), Natural Grocers by Vitamin Cottage recorded $264.5 million in sales, representing 16.6% growth over the previous year.
During the first quarter of fiscal year 2014, net sales increased $24.8 million, or 25.8% over the same period in fiscal year 2013 to $120.6 million due to a $14.6 million increase in sales from new stores and a $10.2 million, or 10.6%, increase in comparable store sales. Daily average comparable store sales increased 10.6% in the first quarter of fiscal year 2014 compared to a 12.9% increase in the first quarter of fiscal year 2013. The 10.6% increase in the first quarter of fiscal year 2014 was driven by a 5.1% increase in daily average transaction count and a 5.3% increase in average transaction size. Daily average mature store sales increased 6.9% in the first quarter of fiscal year 2014.
Gross profit during the first quarter of fiscal year 2014 increased 27.1% over the same period in fiscal year 2013 to $35.4 million driven by positive comparable store sales and new store growth. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 29.3% during the first quarter of fiscal year 2014 compared to 29.0% in the first quarter of fiscal year 2013. Gross margin increased due to increases in product margin across all departments, partially offset by a shift in sales mix towards products with lower margin. Additionally, gross margin benefited from productivity improvements at the bulk food repackaging and distribution center.
In its 2012 IPO filing, the company made a prediction that the market could support 1,100 of its stores. Currently there are 76 stores, including the four that opened in the first quarter. The company’s pace of store openings is not as rapid as its sales growth has been; in 2012 the company opened 10 stores; it has plans to open 15 in fiscal 2014.
The company, which was established in 1955 by Margaret and Philip Isely (parents of current CEO Kemper Isley) sells a large range of natural and organic groceries in addition to supplements. It sets strict standards for suppliers on its website, banning among other things high intensity sweeteners ace-K, sucralose and aspartame; artificial colors and flavors; bleached flours; dairy products with rBGH (recombinant bovine growth hormone); hydrogenated and/or partially-hydrogenated oils; irradiated food and non-organic produce.