Natural Grocers among retailers that have profited during pandemic

By Hank Schultz contact

- Last updated on GMT

©Getty Images - oatawa
©Getty Images - oatawa

Related tags: Dietary supplement industry, Organic, Organic food sales

The pandemic has created severe challenges for some retailers, while others have prospered. Natural Grocers fits in the latter category, reporting record earnings for its third quarter of fiscal 2020.

The company, whose full formal name is Natural Grocers by Vitamin Cottage, is a chain of more than 150 stores located primarily west of the Mississippi.  The company sells organic meats and produce and devotes a large portion of store square footage to the sale of dietary supplements.  The chain began 65 years ago in Lakewood, CO, where the company is still based.

Record sales

The company posted a net sales increase year over year of 18.1%.  Net sales during the quarter totaled $265.1 million.  In addition, mature store comps were up 12.5% in the quarter and store comps overall were up 15.5%.  The mature stores figure is especially impressive;  increases of the mid single digits in this category are generally thought of as doing well in the food retailing world.

As Natural Grocers is a food retailer as well as being a dietary supplement seller its stores qualified as essential businesses and remained open during the first wave of lockdowns as states tried to restrict the rise in COVID-19 infections.  Some dietary supplement retailers, such as GNC, had a number of stores located in shuttered shopping malls, which led to that company’s bankruptcy filing. And in some jurisdictions, like Colorado, standalone supplement stores, even those not located within malls, were closed for a time by governmental fiat as officials grappled with what policies made the most sense in this unprecedented situation.

New shopping paradigm

Natural Grocers co president Kemper Isley said the quarter saw a new style of shopping develop, in which customers seem to be accommodating themselves to the new realities and risks of life in the pandemic world.  Shoppers are coming in less often, but spending more when they do in an apparent move to lessen their exposure to the risk of infection.  While the big distortions of the stock-up period seem to be past, the changes look as if they will endure for some time, Isley said.

“Our comp for the third quarter was driven by a 31.5% increase in basket size, partially offset by a 12.2% decrease in transaction count, reflecting customers' social distancing efforts. As the quarter progressed, average basket growth moderated from a 40.4% increase in April to a 31.6% increase in May, followed by a 23.3% increase in June, while average traffic declines improved from negative 17.9% to negative 10.8% to negative 7.8% by month for the same three respective months. We have seen these trends continue into July, with comps holding relatively stable with the prior three months,”​ Isley said.  He made his remarks as part of an earnings call with analysts which was posted in transcript form on the site seekingalpha.com​.

Higher wages

Natural Grocers also joined a long list of companies that have increased wages for its workforce, which was placed under heavy pressure during the panicky stock-up period.  The company said it has made a $1 hourly wage increase across the board permanent, and has raised starting wages by $1 an hour as well. 

Despite the concomitant rise in labor costs, the company said it saved on promotional expenses during the quarter and so has been able to extend a 7 cents per share dividend to stockholders.

Stock traders have been impressed by the company’s recent performance.  The company’s share price is up almost 50% in the past 52 weeks, with shares trading today at about $14 a share.

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