News Column

Natural Grocers by Vitamin Cottage Announces Third Quarter and Year to Date Fiscal 2014 Results

August 16, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) announced results for its third quarter and year to date fiscal 2014 for the period ended June 30, 2014. The Company also updated its outlook for fiscal year 2014 and provided initial fiscal year 2015 outlook.

In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) for the third quarter and year to date fiscal 2014 and 2013 in conformity with U.S. generally accepted accounting principles (GAAP), the Company has presented EBITDA, which is a non-GAAP financial measure. The reconciliation from GAAP to this non-GAAP financial measure is provided at the end of this earnings release.

Highlights for Third Quarter and Year to Date Fiscal 2014 Compared to Third Quarter and Year to Date Fiscal 2013

-- Net sales increased 18.4% to $134.0 million in the third quarter and

increased 22.0% to $385.0 million year to date

-- Daily average comparable store sales increased 3.1% in the third quarter

and increased 6.3% year to date

-- Net income increased 16.6% to $3.4 million with diluted earnings per

share of $0.15 in the third quarter and increased 23.6% to $10.3 million

with diluted earnings per share of $0.46 year to date

-- EBITDA increased 22.0% to $10.6 million in the third quarter and

increased 28.8% to $31.2 million year to date "We continue to focus on new store investments including infrastructure to support our growth while controlling expenses and maintaining profitability," said Kemper Isely, Co-President. "We have clear direction on how we intend to manage expenses and margin going forward while we work on various initiatives to increase sales. We plan to continue our 20% unit growth into fiscal 2015 and intend to open 18 new stores in that period. We are excited about the increasing demand for natural and organic food and believe this supports the growth opportunity we see ahead of us."

Operating Results -- Third Quarter Fiscal Year 2014 Compared to Third Quarter Fiscal Year 2013

During the third quarter of fiscal year 2014, net sales increased $20.9 million, or 18.4% over the same period in fiscal year 2013 to $134.0 million due to an $18.6 million increase in sales from new stores and a $2.3 million, or 2.0%, increase in comparable store sales. Daily average comparable store sales increased 3.1% in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013. The 3.1% increase in the third quarter of fiscal year 2014 was driven by a 1.3% increase in daily average transaction count and a 1.8% increase in average transaction size. Daily average mature store sales increased 1.6% in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013.

Gross profit during the third quarter of fiscal year 2014 increased 18.5% over the same period in fiscal year 2013 to $38.6 million driven by an increase in the number of stores. Gross profit was negatively impacted in third quarter of fiscal year 2014 by one less selling day due to the occurrence of Easter in April of 2014 versus March of 2013. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 28.8% in both the third quarter of fiscal year 2014 and 2013. Gross margin remained flat due to increases in product margin offset by an increase in occupancy costs both as a percentage of sales. The increase in product margin is due to increases in product margin across almost all departments, partially offset by a shift in sales mix towards products with lower margin. Additionally, gross margin benefited from operating efficiencies at the bulk food repackaging and distribution center. Occupancy costs as a percentage of sales increased during the third quarter of fiscal year 2014 compared to the third quarter of last year primarily driven by increased average lease expenses at newer stores ((1)).

Store expenses as a percentage of sales increased 50 basis points during the third quarter compared to the comparable period of fiscal year 2013 driven by increases in salary-related expenses, depreciation and advertising expenses, and, to a lesser extent an increase in utilities, all as a percentage of sales. The increase in salary-related expenses was due to those salaries and related expenses required to support the sales growth slightly outpacing the increase in sales.

Administrative expenses as a percentage of sales decreased 20 basis points during the third quarter compared to the comparable period of fiscal year 2013 as a result of the Company's ability to support additional store investments and sales without proportionate increases in the cost of overhead.

During the third quarter of fiscal year 2014 both store and administrative expenses were favorably impacted by lower incentive compensation and other discretionary benefits expense, reflecting our pay-for-performance philosophy.

Pre-opening and relocation expenses decreased $0.2 million in the third quarter compared to the comparable period of fiscal year 2013 primarily due to the timing of new store openings. During both the third quarter of fiscal year 2014 and 2013 three new stores opened.

Interest expense increased $0.1 million in the third quarter compared to the comparable period of fiscal year 2013, primarily due to interest expense related to capital and financing lease obligations, and to a lesser extent, interest related to borrowings on the revolving credit facility.

Net income increased 16.6% to $3.4 million compared to the comparable period in fiscal year 2013 with diluted earnings per share of $0.15 in the third quarter of fiscal year 2014.

EBITDA increased $1.9 million, or 22.0%, to $10.6 million, or 7.9% of sales, for the third quarter of fiscal year 2014 compared to the comparable period in fiscal year 2013.

Operating Results -- Year to Date Fiscal 2014 Compared to Year to Date Fiscal 2013

Year to date fiscal 2014, net sales increased $69.5 million, or 22.0% over the same period in fiscal year 2013 to $385.0 million due to a $49.8 million increase in sales from new stores and a $19.7 million, or 6.3%, increase in comparable store sales. Daily average comparable store sales increased 6.3% year to date fiscal 2014 compared to year to date fiscal 2013. The 6.3% increase year to date fiscal 2014 was driven by a 2.7% increase in daily average transaction count and a 3.5% increase in average transaction size. Daily average mature store sales increased 4.0% year to date fiscal 2014 compared to year to date fiscal 2013.

Gross profit year to date fiscal 2014 increased 22.2% over the same period in fiscal year 2013 to $112.7 million driven by an increase in the number of stores. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 29.3% year to date fiscal 2014 compared to 29.2% year to date fiscal 2013. Gross margin was positively impacted by increases in product margin across almost all departments, partially offset by a shift in sales mix towards products with lower margin. Occupancy costs as a percentage of sales increased year to date fiscal 2014 compared to the year to date last year primarily driven by increased average lease expenses at newer stores ((1)).

Store expenses as a percentage of sales remained flat year to date fiscal 2014 compared to the comparable period of fiscal year 2013 driven by a decrease in salary-related expenses offset by an increase in depreciation expense, all as a percentage of sales.

Administrative expenses as a percentage of sales decreased 20 basis points year to date fiscal 2014 compared to the comparable period as a result of the Company's ability to support additional store investments and sales without proportionate increases in the cost of overhead.

Year to date fiscal 2014 both store and administrative expenses were favorably impacted by lower incentive compensation and other discretionary benefits expense, reflecting our pay-for-performance philosophy.

Pre-opening and relocation expenses increased $0.6 million year to date fiscal 2014 compared to the comparable period primarily due to the increased number of new store openings and the timing of new store openings. Year to date fiscal 2014, 12 new stores opened compared to nine new stores opened year to date fiscal 2013.

Interest expense increased $0.9 million year to date fiscal 2014 compared to the comparable period, primarily due to interest expense related to capital and financing lease obligations.

Net income increased 23.6% to $10.3 million compared to the same period in fiscal year 2013 with diluted earnings per share of $0.46 year to date fiscal 2014.

EBITDA increased $7.0 million, or 28.8%, to $31.2 million, or 8.1% of sales, year to date fiscal 2014 compared to the same period in fiscal year 2013.

(1) The Company had nine and seven

stores accounted for as capital

and financing lease obligations

for the third quarter of fiscal

year 2014 and 2013, respectively,

and for year to date fiscal 2014

Keywords for this news article include: Finance, Natural Grocers by Vitamin Cottage Inc.

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Source: Investment Weekly News


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