Natural Grocers by Vitamin Cottage Q3 Earnings Call Highlights

Natural Grocers by Vitamin Cottage NYSE: NGVC reported a 1.8% increase in third-quarter fiscal 2026 net sales to $334.7 million, as comparable-store sales growth accelerated sequentially despite what management described as a challenging consumer environment. Daily average comparable-store sales rose 1.2% in the quarter, improving from 0.5% growth in the second quarter. The gain reflected a 3.1% increase in basket size, partly offset by a 1.8% decline in transaction count. Chairman and Co-President Kemper Isely said the company continued to see consumer focus on value amid economic uncertainty. He also pointed to continued membership growth in its {N}power Rewards loyalty program. Sales penetration from members increased two percentage points from a year earlier to 84% of sales, while member engagement produced growth in sales, traffic and basket size, according to the company. “As the value leader in natural and organic grocery retail, we continue to emphasize our always affordable pricing,” Isely said, citing the company’s Even More Affordable campaign for rotating everyday staples and Natural Grocers Brand products. Profitability and Cash Flow Third-quarter net income was $11.1 million, or $0.48 per diluted share, compared with $11.6 million, or $0.50 per diluted share, in the prior-year quarter. Adjusted EBITDA declined 7.6% to $22.5 million. Gross margin decreased 60 basis points from the prior year to 29.3%. Chief Financial Officer Richard Hallé attributed the decline primarily to lower product margin from an unfavorable sales mix, along with higher inventory shrink and freight expenses. Hallé said year-over-year comparisons were affected by a cybersecurity incident involving the company’s primary distributor in the third quarter of fiscal 2025. He also said elevated shrink partly reflected temporary operational effects from an enterprise resource planning system upgrade completed during the previous quarter. Administrative expenses fell to $9.5 million from $10.9 million a year earlier. The current-quarter result included a $2 million business-interruption insurance recovery related to the distributor cybersecurity incident in June and July 2025. Pre-opening expenses increased $1.3 million year over year as the company accelerated store openings. Management said those costs reduced diluted earnings per share by about $0.04 during the quarter and are expected to represent $0.08 of full-year earnings per share. Natural Grocers ended the quarter with $17.5 million in cash and cash equivalents, no outstanding borrowings under its credit facility, and $67.3 million available under its revolving credit facility. For the first nine months of fiscal 2026, cash from operations totaled $55.1 million, while net capital expenditures were $40.3