Press release·03/03/2025 17:45:23

Natural Grocers Delivers Strong Financial Performance in Fiscal Year 2024

Company Overview

Natural Grocers is a leading natural and organic grocery and dietary supplement retailer focused on providing high-quality products at affordable prices, exceptional customer service, and community outreach. As of September 30, 2024, the company operated 169 stores across 21 states, including Colorado, Arizona, and Texas. Natural Grocers also operates a bulk food repackaging facility and distribution center in Golden, Colorado.

The company offers a wide variety of natural and organic groceries, dietary supplements, and body care products that meet its strict quality standards. Store sizes range from approximately 7,000 to 16,000 selling square feet. The growth in the organic and natural foods industry, as well as increasing consumer interest in health and nutrition, have enabled Natural Grocers to continue expanding its store footprint and enter new markets.

Performance Highlights

Natural Grocers delivered strong financial results in fiscal year 2024, building on its momentum from the prior year:

• Net Sales: Net sales increased 8.9% to $1,241.6 million, driven by a 7.0% increase in daily average comparable store sales and new store openings.
• Gross Profit: Gross profit increased 11.6% to $364.8 million, with gross margin expanding to 29.4% from 28.7% in the prior year.
• Net Income: Net income grew 46.0% to $33.9 million, or $1.47 per diluted share, up from $23.2 million, or $1.02 per diluted share, in fiscal 2023.
• EBITDA and Adjusted EBITDA: EBITDA increased 28.6% to $77.9 million, while Adjusted EBITDA, which excludes certain one-time items, rose 31.4% to $83.3 million.
• Liquidity: The company ended the year with $8.9 million in cash and $72.8 million available under its credit facility.

These strong results demonstrate Natural Grocers’ ability to drive sales growth, improve profitability, and effectively manage its operations and finances.

Industry Trends and Economics

Several key industry trends and economic factors have impacted Natural Grocers’ performance:

Broader Economic Trends: The company’s sales are affected by general economic conditions, including consumer spending, disposable income, inflation, and the political environment. Over the past year, Natural Grocers has navigated challenges such as labor shortages, supply chain disruptions, and elevated inflation, which have impacted its costs and operations.

Growing Demand for Natural and Organic Products: The organic and natural foods industry continues to experience robust growth, driven by increased consumer interest in health and nutrition. Natural Grocers has capitalized on this trend by expanding its store base and product offerings.

Competitive Landscape: The grocery and dietary supplement retail industry is highly competitive, with few barriers to entry. Natural Grocers faces competition from a range of players, including traditional grocery stores, specialty retailers, and online providers. The company believes its focus on high-quality, affordable natural and organic products, as well as its emphasis on customer service and nutrition education, differentiate it in the market.

Consumer Preferences: Shifts in consumer preferences towards natural and organic products, dietary supplements, and at-home meal preparation can impact Natural Grocers’ performance. Negative publicity or regulatory changes related to dietary supplements could also affect demand for the company’s offerings.

Outlook

Natural Grocers is well-positioned for continued growth and profitability. The company cites several key factors that have contributed to its success and will enable it to increase comparable store sales and expand its store base:

• Loyal customer base and growing transaction size
• Increasing consumer interest in nutrition and wellness
• Differentiated shopping experience focused on customer service and nutrition education
• Commitment to high-quality, affordable natural and organic products

While the company expects opportunities for new store openings and increased profitability, future sales growth and profitability could be affected by competitive pressures and broader economic conditions, including the potential impact of inflation or recessionary trends.

Key Financial Metrics

Natural Grocers monitors several key financial metrics to assess its performance:

Net Sales: The company’s net sales are comprised of gross sales, net of discounts, coupons, returns, and allowances. Natural Grocers tracks changes in daily average comparable store sales, transaction count, and average transaction size to understand sales trends.

Cost of Goods Sold and Occupancy Costs: These costs include the cost of inventory sold, shipping and handling, distribution, buying, shrink, and store occupancy expenses such as rent and real estate taxes.

Gross Profit and Gross Margin: Gross profit is net sales less cost of goods sold and occupancy costs. Gross margin, or gross profit as a percentage of net sales, is impacted by changes in retail prices, product costs, occupancy costs, and product mix.

Store Expenses: Store expenses consist of labor-related costs, supplies, utilities, depreciation, advertising, and other store-level expenses. These expenses tend to be higher at new stores compared to mature stores.

Administrative Expenses: Administrative expenses include corporate-level costs such as salaries, benefits, office expenses, depreciation, and professional fees.

Pre-Opening Expenses: These are costs incurred prior to the opening of new stores or the relocation/remodel of existing stores.

Interest Expense, Net: Interest expense, net of capitalized interest, related to the company’s credit facility and finance lease obligations.

Income Taxes: Natural Grocers’ effective income tax rate was 20.7% in fiscal 2024, up from 18.1% in the prior year.

By closely monitoring these key metrics, Natural Grocers can better understand its operational performance, identify areas for improvement, and make informed strategic decisions.

Results of Operations

Fiscal Year 2024 vs. Fiscal Year 2023

• Net Sales: Net sales increased 8.9% to $1,241.6 million, driven by a 7.0% increase in daily average comparable store sales and new store openings, partially offset by sales declines from closed stores.
• Gross Profit: Gross profit increased 11.6% to $364.8 million, with gross margin expanding to 29.4% from 28.7% in the prior year, primarily due to store occupancy cost leverage and higher product margins.
• Store Expenses: Store expenses increased 7.8% to $277.4 million, but decreased as a percentage of net sales to 22.3% from 22.6%, reflecting expense leverage.
• Administrative Expenses: Administrative expenses increased 7.6% to $38.7 million but declined as a percentage of net sales to 3.1% from 3.2%.
• Net Income: Net income grew 46.0% to $33.9 million, or $1.47 per diluted share, up from $23.2 million, or $1.02 per diluted share, in the prior year.
• EBITDA and Adjusted EBITDA: EBITDA increased 28.6% to $77.9 million, while Adjusted EBITDA rose 31.4% to $83.3 million.

The strong sales growth, improved gross margins, and effective cost management drove the significant increase in profitability in fiscal 2024.

Liquidity and Capital Resources

Natural Grocers’ primary sources of liquidity are cash generated from operations, cash and cash equivalents, and its $72.5 million credit facility. The company used cash during the year to fund capital expenditures for new store openings and relocations/remodels, pay dividends, and fully repay its outstanding term loan.

As of September 30, 2024, Natural Grocers had $8.9 million in cash and $72.8 million available under its credit facility. The company plans to spend approximately $36 million to $44 million on capital expenditures in fiscal 2025, primarily for new store openings and relocations/remodels.

Natural Grocers paid quarterly cash dividends of $0.10 per share in fiscal 2024 and a special cash dividend of $1.00 per share. The company’s Board of Directors has approved a quarterly cash dividend of $0.12 per share to be paid in December 2024.

Conclusion

Natural Grocers delivered exceptional financial performance in fiscal year 2024, demonstrating its ability to drive sales growth, expand profitability, and effectively manage its operations and finances. The company’s focus on providing high-quality, affordable natural and organic products, coupled with its differentiated shopping experience and loyal customer base, have positioned it for continued success.

While the company faces ongoing challenges from broader economic trends and a competitive landscape, Natural Grocers’ strong liquidity, strategic initiatives, and favorable industry dynamics suggest it is well-equipped to capitalize on the growing demand for natural and organic products and further strengthen its market position in the years ahead.