Natural Grocers Shoppers Get the Message as Q4 Comps Soar

Retailer said effective marketing and promotions drove store traffic as sales leverage overcame the expenses
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Effective marketing and promotional programs are cutting through heavy competition and resulting in robust sales for Natural Grocers by Vitamin Cottage, the retailer said.

The Lakewood, Colo.-based natural foods chain said sales improved 9.6% to $217.5 million, and comparable-store sales jumped 6.3% in its fiscal fourth quarterfigures that were well above Wall Street expectations. The company did so while moderating the margin hit it has often encountered while chasing new sales, leading to earnings performance that also exceeded forecasts.

“The grocery business has always been a war, and we've been fighting it for a long time,” CEO Kemper Isely said in a conference call with analysts. “We have been pretty successful at differentiating ourselves and letting our customers know why we're better and why we're different.”

Though quarterly margins were down by 50 basis points to 26.3% of sales, the company was able to leverage expenses on strong sales growth and made progress in areas such as labor and shrink, officials said. That helped net earnings jump 68.7% to $2.1 million. Earnings per share of 9 cents blew past analyst estimates of 4 cents. The period and fiscal year ended Sept. 30.

Isely pointed to growth of its customer loyalty platform, known as NPower, as an effective means of building loyalty and drawing new shoppers. The group now includes 750,000 shoppers and grew by 90% during the year. About 60% of the chain’s sales come through customers enrolled in the program, Isely said. Its members spend “significantly more” than nonmembers.

The company tripled the frequency of email messages to its members from twice a week to six times a week, and the change “was getting traction,” Isely added. Earlier this year, the retailer revamped its website with an eye on more closely connecting with its visitors.

For the fiscal year, Natural Grocers reported a 10.8% sales increase to $849 million, sparked by new stores and 5.8% comp growth.

During fiscal 2019, Natural Grocers said it expects to open seven to nine new stores and relocate another five or six units on a capital budget of $27 million to $32 million. It forecast comps to increase in the range of 2% to 4% and is targeting earnings per share of 33 cents to 40 cents.




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