Natural Grocers by Vitamin Cottage Announces Fiscal 2022 Fourth Quarter and Full Year Results

46 3 Natural Grocers by Vitamin Cottage Announces Fiscal 2022 Fourth Quarter and Full Year Results

<br /> Natural Grocers by Vitamin Cottage Announces Fiscal 2022 Fourth Quarter and Full Year Results<br />

PR Newswire



LAKEWOOD, Colo.


,


Nov. 17, 2022


/PRNewswire/ — Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its fourth quarter and fiscal year ended

September 30, 2022

and provided its outlook for fiscal 2023.



Highlights for Fourth Quarter Fiscal 2022 Compared to Fourth Quarter Fiscal 2021

  • Net sales increased 0.6% to

    $274.2 million

    ;
  • Daily average comparable store sales decreased 0.2%, and increased 15.8% on a three-year basis;
  • Net income was

    $2.2 million

    , with diluted earnings per share of

    $0.09

    ; and
  • Adjusted EBITDA was

    $13.6 million

    .


Highlights for Fiscal 2022 Compared to Fiscal 2021

  • Net sales increased 3.2% to

    $1.1 billion

    ;
  • 19

    th

    consecutive year of positive comparable store sales growth;
  • Daily average comparable store sales increased 2.6%, and 15.7% on a three-year basis;
  • Net income was

    $21.4 million

    , with diluted earnings per share of

    $0.94

    ; and
  • Adjusted EBITDA was

    $62.2 million

    .

“The fourth quarter results were in-line with our expectations given the moderation of pandemic trends, including more normalized levels of summer travel and food-away-from-home consumption,” said

Kemper Isely

, Co-President. “We estimate that product cost inflation was approximately 7% for the fourth quarter and 5% for the fiscal year. Historically, our inflation rate has been more stable than conventional grocers due to our specialized supply chain. In the last year our inflation rate was lower than our peers, and did not contribute to our comparable store sales to the same magnitude as our peers. We continue to pass along the impact of product cost inflation through pricing.”

Mr. Isely continued “We had record results for the full year, achieving our previously announced guidance for daily average comparable store sales growth and diluted earnings per share. Fiscal 2022 was our nineteenth consecutive year of positive daily average comparable store sales growth. As we look forward to fiscal 2023, we remain focused on enhancing shareholder value by driving profitable growth, leveraging our differentiated model, emphasizing operational excellence, and executing to our founding principles.”

In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) in conformity with U.S. generally accepted accounting principles (GAAP), the Company is also presenting EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. The reconciliation from GAAP to these non-GAAP financial measures is provided at the end of this earnings release.



Operating Results — Fourth Quarter Fiscal 2022 Compared to Fourth Quarter Fiscal 2021

During the fourth quarte­­r of fiscal 2022, net sales increased

$1.6 million

, or 0.6%, to

$274.2 million

, compared to the fourth quarter of fiscal 2021, due to a

$2.9 million

increase in new store sales, partially offset by a

$0.8 million

decrease in sales from one store that closed at the beginning of the third quarter and a

$0.5 million

decrease in comparable store sales. Daily average comparable store sales decreased 0.2% in the fourth quarter of fiscal 2022, comprised of a 2.6% decrease in daily average transaction count, offset by a 2.5% increase in daily average transaction size. The increase in net sales was primarily driven by new store sales and retail price inflation, partially offset by a moderation of the pandemic trends we experienced in the fourth quarter of last year.

Gross profit was

$75.8 million

in each of the fourth quarters of fiscal 2022 and 2021. Gross profit reflects earnings after product and store occupancy costs. Gross margin decreased 20 basis points to 27.6% during the fourth quarter of fiscal 2022, compared to the fourth quarter of fiscal 2021. The decrease in gross margin was primarily driven by lower product margin attributed to higher freight, distribution and shrink expenses.

Store expenses during the fourth quarter of fiscal 2022 increased 7.2% to

$63.0 million

. Store expenses as a percentage of net sales were 23.0% during the fourth quarter of fiscal 2022, up from 21.5% in the fourth quarter of fiscal 2021. The increase in store expenses as a percentage of net sales was primarily driven by higher wage rates. Store expenses included long-lived asset impairment charges of

$2.8 million

in the fourth quarter of fiscal 2022 and

$1.1 million

in the fourth quarter of fiscal 2021.

Administrative expenses during the fourth quarter of fiscal 2022 increased 16.4% to

$8.6 million

. Administrative expenses as a percentage of net sales were 3.2% in the fourth quarter of fiscal 2022, up from 2.7% in the fourth quarter of fiscal 2021.

Operating income for the fourth quarter of fiscal 2022 was

$3.6 million

, compared to

$9.4 million

in the fourth quarter of fiscal 2021. Operating margin during the fourth quarter of fiscal 2022 decreased to 1.3%, compared to 3.4% in the fourth quarter of fiscal 2021.

Net income for the fourth quarter of fiscal 2022 was

$2.2 million

, or

$0.09

diluted earnings per share, compared to net income of

$7.2 million

, or

$0.32

diluted earnings per share, for the fourth quarter of fiscal 2021.

Adjusted EBITDA for the fourth quarter of fiscal 2022 was

$13.6 million

, compared to

$17.8 million

in the fourth quarter of fiscal 2021.



Operating Results — Fiscal 2022 Compared to Fiscal 2021

During fiscal 2022, net sales increased

$34.1 million

, or 3.2%, to

$1.1 billion

, compared to fiscal 2021, due to a

$27.1 million

increase in comparable store sales and an

$8.6 million

increase in new store sales, partially offset by a

$1.6 million

decrease in sales from one store that closed at the beginning of the third quarter of fiscal 2022. Daily average comparable store sales increased 2.6% in fiscal 2022, comprised of a 2.1% increase in daily average transaction size and a 0.4% increase in daily average transaction count. The increase in net sales was primarily driven by retail price inflation, our customers’ response to pandemic trends, new store sales, marketing initiatives, and increased engagement in our {N}power® customer loyalty program.

Gross profit during fiscal 2022 increased 4.3% to

$304.9 million

, primarily driven by increased sales volumes. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased 30 basis points to 28.0% during fiscal 2022, compared to fiscal 2021. The increase in gross margin was primarily driven by improved product margin and store occupancy cost leverage.

Store expenses during fiscal 2022 increased 3.2% to

$242.1 million

. Store expenses as a percentage of net sales were unchanged at 22.2% for fiscal year 2022, as leverage attributed to higher sales offset higher labor expense due to increased wage rates. Store expenses included long-lived asset impairment charges of

$2.9 million

in fiscal 2022 and long-lived asset impairment charges and store closing costs of

$1.5 million

in fiscal 2021.

Administrative expenses during fiscal 2022 increased 11.3% to

$31.6 million

. Administrative expenses as a percentage of net sales were 2.9% during fiscal 2022, up from 2.7% in fiscal 2021.

Operating income for fiscal 2022 was

$30.2 million

, compared to

$28.3 million

in fiscal 2021. Operating margin during fiscal 2022 increased to 2.8%, compared to 2.7% in fiscal 2021.

Net income for fiscal 2022 was

$21.4 million

, or

$0.94

diluted earnings per share, compared to net income of

$20.6 million

, or

$0.91

diluted earnings per share, for fiscal 2021.

Adjusted EBITDA for fiscal 2022 was

$62.2 million

, compared to

$60.3 million

in fiscal 2021.



Balance Sheet and Cash Flow

As of

September 30, 2022

, the Company had

$12.0 million

in cash and cash equivalents, no outstanding borrowings on its

$50.0 million

revolving credit facility, and

$15.7 million

outstanding on its term loan facility.

During fiscal 2022, the Company generated

$39.7 million

in cash from operations and invested

$31.1 million

in net capital expenditures, primarily for new and relocated stores.



Dividend Announcement

Today, the Company announced the declaration of a quarterly cash dividend of

$0.10

per common share. The dividend will be paid on

December 14, 2022

to stockholders of record at the close of business on

November 28, 2022

.



Growth and Development

During the fourth quarter of fiscal 2022, the Company opened two stores and relocated/remodeled one store, ending the quarter with a total of 164 stores in 21 states. During fiscal 2022, the Company opened three new stores and relocated two stores.

As of

November 17, 2022

, the Company has signed leases for an additional five new stores planned to open in fiscal years 2023 and beyond.



Fiscal 2023 Outlook

The Company is introducing its fiscal 2023 outlook reflecting current operating trends, consumer consumption trends, and the uncertainty of the economic environment, including inflationary factors. The Company expects:



Fiscal

2023 Outlook


Number of new stores


4-6


Number of relocations/remodels


1-2


Daily average comparable store sales growth


-2.0% to 1.0%


Diluted earnings per share


$0.70 to $0.90


Capital expenditures (in millions)


$28 to $35



Earnings Conference Call

The Company will host a conference call today at

2:30 p.m. Mountain Time

(

4:30 p.m. Eastern Time

) to discuss this earnings release. The dial-in number is 1-888-347-6606 (US) or 1-412-902-4289 (International). The conference ID is “Natural Grocers Q4 FY 2022 Earnings Call.” A simultaneous audio webcast will be available at

http://Investors.NaturalGrocers.com

and archived for a minimum of 20 days.



About Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is an expanding specialty retailer of natural and organic groceries, body care products and dietary supplements. The products sold by Natural Grocers must meet strict quality guidelines and may not contain artificial colors, flavors, preservatives or sweeteners, or partially hydrogenated or hydrogenated oils. The Company sells only USDA certified organic produce and exclusively pasture-raised, non-confinement dairy products, and free-range eggs. Natural Grocers’ flexible smaller-store format allows it to offer affordable prices in a shopper-friendly, clean and convenient retail environment. The Company also provides extensive free science-based nutrition education programs to help customers make informed health and nutrition choices. The Company, founded in 1955, has 164 stores in 21 states.

Visit

www.NaturalGrocers.com

for more information and store locations.



Forward-Looking Statements

The following constitutes a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, statements in this release are “forward-looking statements” and are based on management’s current expectations and are subject to uncertainty and changes in circumstances. All statements that are not statements of historical fact are forward-looking statements. Actual results could differ materially from these expectations due to changes in global, national, regional or local political, economic, inflationary, deflationary, recessionary, business, interest rate, labor market, competitive, market, regulatory and other factors, and other risks detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (the Form 10-K) and the Company’s subsequent quarterly reports on Form 10-Q. The information contained herein speaks only as of the date of this release and the Company undertakes no obligation to publicly update forward-looking statements, except as may be required by the securities laws.

For further information regarding risks and uncertainties associated with the Company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s filings with the Securities and Exchange Commission, including, but not limited to, the Form 10-K and the Company’s subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting Investor Relations at 303-986-4600 or by visiting the Company’s website at

http://Investors.NaturalGrocers.com

.


Investor Contact:


Reed Anderson

, ICR, 646-277-1260,

[email protected]



NATURAL GROCERS BY VITAMIN COTTAGE, INC.



Consolidated Statements of Income



(Unaudited)




(Dollars in thousands, except per share data)




Three months ended

September 30,



Year ended

September 30,



2022



2021



2022



2021


Net sales


$


274,206


272,649


1,089,625


1,055,516


Cost of goods sold and occupancy costs


198,403


196,855


784,744


763,328


Gross profit


75,803


75,794


304,881


292,188


Store expenses


62,992


58,748


242,057


234,586


Administrative expenses


8,638


7,420


31,562


28,355


Pre-opening expenses


557


255


1,107


920


Operating income


3,616


9,371


30,155


28,327


Interest expense, net


(679)


(572)


(2,371)


(2,271)


Income before income taxes


2,937


8,799


27,784


26,056


Provision for income taxes


(777)


(1,586)


(6,419)


(5,475)


Net income


$


2,160


7,213


21,365


20,581


Net income per share of common stock:


Basic


$


0.10


0.32


0.94


0.91


Diluted


$


0.09


0.32


0.94


0.91


Weighted average number of shares of common stock

outstanding:


Basic


22,689,714


22,619,902


22,666,773


22,591,816


Diluted


22,838,786


22,704,008


22,816,614


22,711,003



NATURAL GROCERS BY VITAMIN COTTAGE, INC.



Consolidated Balance Sheets



(Unaudited)




(Dollars in thousands, except per share data)




September 30,



2022



2021



Assets


Current assets:


Cash and cash equivalents


$


12,039


23,678


Accounts receivable, net


10,496


8,489


Merchandise inventory


113,756


100,546


Prepaid expenses and other current assets


4,369


2,914


Total current assets


140,660


135,627


Property and equipment, net


157,179


151,399


Other assets:


Operating lease assets, net


307,132


316,388


Finance lease assets, net


43,554


39,367


Deposits and other assets


452


530


Goodwill and other intangible assets, net


14,131


11,768


Total other assets


365,269


368,053


Total assets


$


663,108


655,079



Liabilities and Stockholders’ Equity


Current liabilities:


Accounts payable


$


71,283


68,949


Accrued expenses


26,737


26,589


Term loan facility, current portion


1,750


1,750


Operating lease obligations, current portion


34,735


33,308


Finance lease obligations, current portion


3,223


3,176


Total current liabilities


137,728


133,772


Long-term liabilities:


Term loan facility, net of current portion


13,938


21,938


Operating lease obligations, net of current portion


295,064


301,895


Finance lease obligations, net of current portion


44,664


39,450


Deferred income tax liabilities, net


15,902


15,293


Total long-term liabilities


369,568


378,576


Total liabilities


507,296


512,348


Stockholders’ equity:


Common stock, $0.001 par value. 50,000,000 shares authorized, 22,690,188 and

22,620,417 shares issued at September 30, 2022 and 2021, respectively


23


23


Additional paid-in capital


58,072


57,289


Retained earnings


97,717


85,419


Total stockholders’ equity


155,812


142,731


Total liabilities and stockholders’ equity


$        663,108


655,079



NATURAL GROCERS BY VITAMIN COTTAGE, INC



Consolidated Statements of Cash Flows



(Unaudited)




(Dollars in thousands)




Year ended September 30,



2022



2021


Operating activities:


Net income


$


21,365


20,581


Adjustments to reconcile net income to net cash provided by operating

activities:


Depreciation and amortization


27,906


29,633


Impairment of long-lived assets and store closing costs


2,920


1,155


Loss on disposal of property and equipment


78


209


Share-based compensation


1,186


877


Deferred income tax expense


609


864


Non-cash interest expense


22


24


Changes in operating assets and liabilities:


(Increase) decrease in:


Accounts receivable, net


(2,973)


30


Income tax receivable


(631)


3,004


Merchandise inventory


(13,210)


(371)


Prepaid expenses and other assets


(1,025)


(141)


Operating lease assets


31,895


31,090


(Decrease) increase in:


Operating lease liabilities


(29,044)


(32,030)


Accounts payable


447


(2,639)


Accrued expenses


148


1,594


Net cash provided by operating activities


39,693


53,880


Investing activities:


Acquisition of property and equipment


(28,038)


(26,350)


Acquisition of other intangibles


(3,406)


(1,937)


Proceeds from sale of property and equipment


21


89


Proceeds from property insurance settlements


280


443


Net cash used in investing activities


(31,143)


(27,755)


Financing activities:


Borrowings under revolving facility


129,000


65,900


Repayments under revolving facility


(129,000)


(65,900)


Borrowings under term loan facility




35,000


Repayments under term loan facility


(8,000)


(11,313)


Finance lease obligation payments


(2,719)


(2,823)


Dividends to shareholders


(9,067)


(51,453)


Loan fees paid




(52)


Payments on withholding tax for restricted stock unit vesting


(403)


(340)


Net cash used in financing activities


(20,189)


(30,981)


Net decrease in cash and cash equivalents


(11,639)


(4,856)


Cash and cash equivalents, beginning of year


23,678


28,534


Cash and cash equivalents, end of year


$


12,039


23,678


Supplemental disclosures of cash flow information:


Cash paid for interest


$


627


370


Cash paid for interest on financing lease obligations, net of capitalized interest

of $313 and $194, respectively


1,801


1,782


Income taxes paid


7,012


6,747


Supplemental disclosures of non-cash investing and financing activities:


Acquisition of property and equipment not yet paid


$


6,965


4,770


Acquisition of other intangibles not yet paid


12


319


Property acquired through operating lease obligations


24,429


9,216


Property acquired through finance lease obligations


9,625


3,025



NATURAL GROCERS BY VITAMIN COTTAGE, INC.



Non-GAAP Financial Measures



(Unaudited)


EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation and non-recurring items.

The following table reconciles net income to EBITDA and Adjusted EBITDA, dollars in thousands:



Three months ended

September 30,



Year ended

September 30,



2022



2021



2022



2021


Net income


$


2,160


7,213


21,365


20,581


Interest expense, net


679


572


2,371


2,271


Provision for income taxes


777


1,586


6,419


5,475


Depreciation and amortization


6,818


7,171


27,906


29,633


EBITDA


10,434


16,542


58,061


57,960


Impairment of long-lived assets and store

closing costs


2,825


1,050


2,920


1,455


Share-based compensation


299


211


1,186


877


Adjusted EBITDA


$


13,558


17,803


62,167


60,292

EBITDA decreased 36.9% to

$10.4 million

for the fourth quarter of fiscal 2022 compared to

$16.5 million

for the fourth quarter of fiscal 2021. EBITDA increased 0.2% to

$58.1 million

for fiscal 2022 compared to

$58.0 million

for fiscal 2021. EBITDA as a percentage of net sales was 3.8% and 6.1% for the fourth quarters of fiscal 2022 and 2021, respectively. EBITDA as a percentage of net sales was 5.3% and 5.5% for fiscal 2022 and 2021, respectively.

Adjusted EBITDA decreased 23.8% to

$13.6 million

for the fourth quarter of fiscal 2022 compared to

$17.8 million

for the fourth quarter of fiscal 2021. Adjusted EBITDA increased 3.1% to

$62.2 million

for fiscal 2022 compared to

$60.3 million

for fiscal 2021. Adjusted EBITDA as a percentage of net sales was 4.9% and 6.5% for the fourth quarters of fiscal 2022 and 2021, respectively. Adjusted EBITDA as a percentage of net sales was 5.7% for both fiscal 2022 and 2021.

Management believes some investors’ understanding of our performance is enhanced by including EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe EBITDA and Adjusted EBITDA provide additional information about: (i) our operating performance, because they assist us in comparing the operating performance of our stores on a consistent basis, as they remove the impact of non-cash depreciation and amortization expense as well as items not directly resulting from our core operations, such as interest expense and income taxes and (ii) our performance and the effectiveness of our operational strategies. Additionally, EBITDA is a component of a measure in our financial covenants under our credit facility.

Furthermore, management believes some investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry. Management believes that some investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. By providing these non-GAAP financial measures, together with a reconciliation from net income, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.

Our competitors may define EBITDA and Adjusted EBITDA differently, and as a result, our measures of EBITDA and Adjusted EBITDA may not be directly comparable to EBITDA and Adjusted EBITDA of other companies. Items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. EBITDA and Adjusted EBITDA are supplemental measures of operating performance that do not represent, and should not be considered in isolation or as an alternative to, or substitute for, net income or other financial statement data presented in the consolidated financial statements as indicators of financial performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

  • EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
  • EBITDA and Adjusted EBITDA do not reflect any depreciation or interest expense for leases classified as finance leases;
  • EBITDA and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
  • Adjusted EBITDA does not reflect share-based compensation, impairment and store closing costs;
  • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; and
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements.

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA as supplemental information.

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