Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q1 2026 Earnings Call Transcript
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Overview
The earnings call presents mixed signals. While there's positive growth in net income and EPS, gross margin decline and inventory shrink are concerns. The Q&A reveals uncertainties, like economic factors affecting consumer behavior and unclear management responses on margin issues. Despite some optimistic guidance, the potential $0.12 EPS headwind from new store investments and cautious consumer behavior tempers expectations. Overall, the stock price is likely to remain stable, reflecting a neutral sentiment.
Key Financial Performance
Net Sales $335.6 million, a 1.6% increase year-over-year. The increase was driven by daily average comparable store sales growth of 1.7% and a 10.6% increase on a 2-year basis.
Daily Average Comparable Store Sales 1.7% growth year-over-year, cycling an 8.9% comp last year. This reflects cautious consumer spending behaviors and stronger sales growth by {N}power Rewards Program members.
Gross Margin 29.5%, a decrease of 40 basis points year-over-year. The decline was primarily due to higher inventory shrink caused by isolated events.
Operating Income $14.6 million, a 9.7% increase year-over-year. This was driven by decreased store expenses (down 0.7%) and administrative expenses (down 5.9%).
Net Income $11.3 million, a 14% increase year-over-year. This was supported by reduced administrative costs and improved operating income.
Diluted Earnings Per Share $0.49, a 14% increase year-over-year. This reflects the overall improvement in net income.
Adjusted EBITDA $23.5 million, a 3.1% increase year-over-year. This was driven by improved operating income and expense management.
Cash and Cash Equivalents $23.2 million, with no outstanding borrowings and $67.6 million available for borrowing on the revolving credit facility. This reflects a strong liquidity position.
Free Cash Flow $11.6 million, resulting from $21.1 million in cash from operations and $9.6 million in net capital expenditures, primarily for new and relocated stores.
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Operating Highlights
Private label products: Accounted for 9.6% of total sales, up 70 basis points from a year ago. Growth driven by new product introductions and marketing efforts.
New store openings: Plan to open 6 to 8 new stores in fiscal 2026, targeting 4% to 5% annual new store unit growth.
Store relocations: Relocated 1 store in Q1, which is part of the strategy to accelerate sales growth.
{N}power Rewards Program: Net sales penetration increased 2 percentage points to 83%, supported by membership gains and higher traffic.
Sustainability initiatives: Released fiscal year 2025 sustainability report, highlighting nutrition education program and earning the Shelby Report 2025 Sustainability in the Food Industry Award.
Consumer spending trends: Observed cautious consumer spending behaviors, with stronger sales growth among {N}power Rewards Program members.
Focus on differentiated offerings: Emphasis on high-quality natural and organic products at affordable prices to reinforce competitive position amid economic uncertainty.
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Risk or Challenges
Cautious Consumer Spending: The company observed cautious consumer spending behaviors across the grocery retail sector, which could impact sales growth.
Non-Rewards Program Customers: Sales trends primarily reflected customers who do not participate in the rewards program, indicating potential challenges in engaging this customer segment.
Gross Margin Decline: Gross margin decreased by 40 basis points to 29.5%, driven by lower product margin and higher inventory shrink, which could affect profitability.
Inventory Shrink: Higher inventory shrink, attributed to isolated events, negatively impacted gross margin.
SNAP Transactions: A modest decline in the number of transactions using SNAP EBT was observed, though its impact on overall sales was immaterial.
Economic Uncertainty: The company highlighted economic uncertainty as a factor influencing consumer behavior and sales trends.
New Store Investments: Investments in new store openings are expected to impact diluted earnings per share by approximately $0.12, primarily through higher preopening and store expenses.
Promotional Activity: The level of promotional activity could influence year-over-year gross margin, adding uncertainty to profitability.
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Guidance & Outlook
New Store Openings: The company plans to open 6 to 8 new stores in fiscal 2026, with the pace of openings weighted towards the back half of the fiscal year. Additionally, they are targeting 4% to 5% annual new store unit growth for the foreseeable future.
Store Relocations/Remodels: The company plans to relocate or remodel 2 to 3 existing stores in fiscal 2026.
Comparable Store Sales Growth: The company expects daily average comparable store sales growth between 1.5% and 4% for fiscal 2026. Sales comps are expected to be at the low end of the range through the second quarter, increasing slightly in the second half of the year.
Earnings Per Share: The company projects diluted earnings per share between $2 and $2.15 for fiscal 2026.
Capital Expenditures: The company plans to direct $50 million to $55 million towards capital expenditures to support growth initiatives in fiscal 2026.
Gross Margin: The company anticipates that year-over-year gross margin will be relatively flat, depending on the level of promotional activity.
Store Expenses: Year-over-year store expenses as a percentage of net sales are expected to be relatively flat to slightly lower in fiscal 2026.
Inflation: The company expects modest inflation throughout fiscal 2026, in line with current trends.
Earnings Impact from New Stores: Approximately $0.12 of diluted earnings per share in fiscal 2026 will be invested in new store openings, primarily through higher preopening expenses and store expenses.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How should we think about the $0.12 headwind from new stores going forward?
A:The $0.12 headwind is due to the acceleration of growth from 2 new stores to 8, leading to increased preopening expenses. If the company opens 8 new stores and does a couple of remodels next year, the headwind should remain flat. However, if the number of new stores increases to 10 or 12, there will be a slight increase in the headwind.
Q:What caused the gross margin issues, and are the isolated events expected to continue?
A:The gross margin issues were caused by cycling low shrink from Q1 last year, weather-related power outages, store closures, and some operational execution issues. Cycling accounted for 50% of the variance, anomalies like power outages contributed 25%, and the rest were standard variances. These isolated events are not expected to continue materially.
Q:What demographic trends are impacting customer behavior?
A:Income-constrained customers are pulling back due to inflation and seeking cheaper alternatives. There is no significant age-related trend, but cautious consumers are shrinking their basket sizes. The {N}power customers remain robust, while less engaged customers are pulling back.
Q:Are there any net closures for the year, and what is the definition of a relocation and remodel?
A:There was one closure in Austin Harbor, Texas, in October, and no more closures are expected this year or next year. A relocation involves moving a store to a new location, while a remodel involves updating an existing store. This year, there will be 6 to 8 new stores and 1 to 3 relocations or remodels, totaling 8 to 11 projects.
Q:How do the strongest categories align with the cautious consumer behavior?
A:Supplements, the highest margin category, saw a slight decline in sales due to 0 inflation and a slight drop in items sold. Body care and household items also saw declines, while grocery experienced good growth in units. The decline in high-margin categories like supplements slightly impacted the overall P&L.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific size of the percentage decline in gross margins attributed to power outages and other anomalies, providing only general estimates and lacking detailed data.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Award practice
Conference
Food Industry
Industry Award
Ms
Program member
Program sale
Relocations element
Rewards Program
Shelby Sustainability
Sustainability Food
Yesterday sustainability
activity customer
afternoon today
appreciation crew
appreciation program
awareness marketing
base today
behavior grocery
benefit tool
change nutrition
class customer
commitment Shelby
crew community
education program
membership
nutrition education
price
quality
sale comp
sector
value
NGVC Transcript
Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q1 2026 Earnings Call Transcript
Unknown2-6
The earnings call presents mixed signals. While there's positive growth in net income and EPS, gross margin decline and inventory shrink are concerns. The Q&A reveals uncertainties, like economic factors affecting consumer behavior and unclear management responses on margin issues. Despite some optimistic guidance, the potential $0.12 EPS headwind from new store investments and cautious consumer behavior tempers expectations. Overall, the stock price is likely to remain stable, reflecting a neutral sentiment.
Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call summary shows strong financial performance with increased sales, EPS, and adjusted EBITDA. Despite some margin pressure and economic challenges, optimistic guidance and a 25% dividend increase suggest confidence in future growth. The Q&A section highlights strategic differentiation and resilience among core customers, which should mitigate concerns. Overall, the positive aspects outweigh the negatives, predicting a stock price increase of 2% to 8%.
Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q3 2025 Earnings Call Transcript
Positive9-22
The earnings call indicates strong financial performance, with increased sales, improved margins, and raised guidance for sales growth and earnings per share. Despite a cybersecurity incident and new store delays, the company has demonstrated resilience and operational efficiency. The positive adjustments in fiscal guidance and store expansion plans for 2026 further support a positive outlook. However, increased administrative expenses and economic uncertainties pose some risks. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q2 2025 Earnings Call Transcript
Positive5-9
The earnings call summary shows strong financial performance with significant growth in net sales, operating income, and EPS. The company raised its sales growth and EPS guidance, indicating confidence in future performance. The Q&A section revealed steady consumer engagement and expansion plans into new markets. Although there are economic uncertainties and competitive pressures, the overall sentiment is positive. No share repurchase program is a slight negative, but the strong financial metrics and optimistic guidance outweigh this, leading to a positive prediction for stock price movement.
NGVC Report
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