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Natural Grocers Sees Higher Rings in Q2

Earnings, revenue exceed estimates despite traffic slowdown
Photograph: Shutterstock

The “mainstreaming” of Whole Foods under Amazon’s leadership may yet change the U.S. grocery landscape, but so far, it’s been a boon to rival Natural Grocers. And Whole Foods’ ballyhooed price reductions? They haven’t mattered much either.

That’s the word from Natural Grocers CEO Kemper Isely, who maintains that the chain’s continued focus on the hardcore natural foods shoppers—while competitors have cast a wider net—has helped it to improve sales and earnings during its fiscal second quarter.

“As our competition endeavors to find their position in the grocery landscape, this evolution has created an opportunity for Natural Grocers as we are focused on leveraging our values and differentiation,” Isely said in a conference call discussing results, according to a transcript of the call provided by financial services firm Sentieo. “Our founding principles continue to serve us well and drive our business forward with unsurpassed quality standards, always affordable prices, nutrition education and commitment to our communities and our ‘good4u crew.’ These principles are what differentiate us from our competition and are the foundation of our marketing initiatives.”

Asked specifically about the affect of Whole Foods’ recent pricing initiatives, Isely acknowledged the price differential in produce may had narrowed some but added, “we still have essentially a double-digit price advantage over Whole Foods on organic produce right now at our stores.”

For the period ending March 31, the Lakewood, Colo., retailer said sales increased by 6.7% to $230.4 million, while comparable store sales improved by 2.9%. Comps gained on a 3.5% increase in ticket, offset in part by a 0.6% decline in store traffic. Isely said weather conditions in many markets drove down visits in the quarter, including a snowstorm that interfered with its Resolution Reset event in January.

Gross margin of 28% remained steady with last year’s second quarter, but net income improved by 13.4% to $3.9 million.

The sales and earnings per share of 17 cents were both slightly above Wall Street estimates. The company subsequently raised its annual earnings guidance to 35 to 41 cents a share from January estimates of 33 to 40 cents.

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