Loyalty, private label drive modest Q1 growth at Natural Grocers

Sales are up slightly at the 166-unit, health-focused grocer, largely because of inflation, while store visits declined during the quarter.
Natural Grocers
Loyalty, private label drove modest Q1 growth at Natural Grocers. / Photo: Shutterstock

A surging loyalty program and sustained interest in private-label products gave Natural Grocers by Vitamin Cottage a slight bump during the first quarter, the natural-and-organic retailer reported late Thursday.

For the quarter ended Dec. 31, Lakewood, Colorado-based Natural Grocers reported a same-store sales increase of just 0.5%—17.6% on a stacked, three-year basis. Net sales grew 1.1% to $280.5 million, driven by a $2.7 million increase in new store sales and a $1.4 million increase in comparable-store sales, partially offset by a $900,000 hit connected to a store closure at the beginning of the third quarter.

That modest comparable-store sales increase was attributed to a 1.7% increase in transaction size due to inflation and a 1.2% drop in average transaction count.

The slowdown in store traffic “reflects the moderation of pandemic trends year over year, more normalized levels of travel and food-away-from-home consumption and fewer SNAP EBT customer transactions,” Natural Grocers CFO Todd Dissinger told analysts during a call Thursday, according to a transcript from financial services site Sentieo.

Natural Grocers’ loyalty program, {N}power, grew 18%, to more than 1.8 million members by the end of the quarter. The program’s net sales penetration climbed to 76%, up three percentage points from a year ago, the company said.

{N}power members receive communications from Natural Grocers at least three times a week, “informing them of all of our standards, affordable prices and other attributes of our company,” Kemper Isely, chairman and co-president, said during the earnings call, adding, “And it really works … The base customers are incredibly loyal.”

Private-label products accounted for 7.9% of Natural Grocers’ total sales during the first quarter, up from 7.5% a year ago. The grocer launched eight new Natural Grocers-branded items during Q1.

The retailer said it is on track to open four to six new stores and relocate one or two markets in 2023.

“Over the next several years, we expect to return to opening between six and eight new stores per year as we anticipate improving construction and supply chain conditions,” Isley said.

Natural Grocers opened its eighth store in Denver during the first quarter, and the company’s fifth Idaho location, in McCall, in January.

Store expenses during the first quarter increased 7.2%, to $63.6 million, rising to 22.7% of net sales. That’s up from 21.4% a year ago. Higher wages drove the increase, the company said. Similarly, administrative expenses during Q1 climbed 13.2%, to $8.3 million.

Natural Grocers, which was founded in 1955, sells natural and organic groceries, body care products and dietary supplements at 166 stores in 21 states.



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