Q1 2020 Earnings Call
Dead dead dead dead dead.
Thursday
good day, ladies and gentlemen, welcome to the Natural Grocers first quarter of fiscal 2020 earnings conference call at this time. All participants are in a listen-only mode later. We should conduct a question-and-answer session and instructions will be given at that time as a reminder today's call is being recorded. I'd now like to turn the conference over to mister David Colson vice president and treasurer for Natural Grocers Mr. Coulson. You may begin
Good afternoon, everyone and thank you for joining us for the Natural Grocers by Vitamin Cottage first quarter fiscal year 2020 earnings conference call on the phone with me today are Kimber Isley co-president and Todd disinger Chief Financial Officer. As a reminder all statements made on this conference call other than statements of historical fact are forward-looking statements. All forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties actual results could differ materially from those described in forward-looking statements due to a variety of factors including the risks detailed in the company's most recently filed forms, 10-q and 10K the company undertakes no obligation to update forward-looking statements. Today's press release is available on the company's website and recording of This call will be available on the website at investors dead.
now I will turn the call over to
Thank you, David and good afternoon everyone. We are pleased to report another quarter of continued daily average comparable-store sales growth reflecting our ongoing focus on our customer service and marketing initiatives while staying true to our founding principles. We are also proud to open our first store in Louisiana putting us in 20 States. We have steadily maintained store growth bringing our account at the end of the quarter to 155 stores through the first quarter. We are on track to meet our 2020 guidance for, new stores margin and earnings per share. We saw gains across most product categories during the first quarter including a 3.4% daily average comparable-store sales tax increase in supplements accelerating from the fourth quarter as we indicated on our last earnings call. We see the supplement product category as an opportunity wage.
an area of focus in
Fiscal twenty-twenty the comp gain and supplements is attributable to several initiatives in our in-store nutritional education programs are Npower program continues to drive loyalty and support our marketing initiatives with enrollment growth and increased and power penetration contributing to our positive comps in the quarter as of the first quarter of our enrollment increased by 37% year-over-year in sales penetration increased to 69% of total sales are newly implemented personalized Npower promotions continue to prove effective adding to our efforts to leverage and power to enhance the customer experience with personalized offers recipes and coupons. We have also recently rolled out new billboard and outdoor creative advertising and expanded our marketing coverage our partnership with Steamboat in Winter Park Resorts that started during the fourth quarter of fiscal 2019 wage.
has also contributed to our
Marketing reach as the impact of this partnership cramped up during the ski season.
During the quarter. We reported a 40 basis-point decline in gross margin on a year-over-year basis is Todd will discuss approximately half of the year-over-year decline simply reflects the change in the Leesburg accounting standard that went into effect at the beginning of the fiscal year and the remainder of the decrease reflected product mix in comparison to the second half of fiscal 2019 with a meaningful Improvement in gross. Margin Trends. We continue to see a relatively stable competitive market and remain confident in our price positioning as always we continue to focus on our in-store customer experience to drive sales and build Customer Loyalty. We pride ourselves and making our customers feel welcomed and valued by providing world-class customer service rep quality or everyday affordable prices unparalleled nutrition education and Superior customer service are some of the foundations of the Natural Grocers competitive Advantage we wage
remain focused on driving growth through
New store openings in both existing and new markets driving consistent comp store sales growth and controlling costs to deliver enhanced profitability cash flow and returned to our valued share home with our quarterly cash dividend with that. Let me turn the call over to table to discuss our financial results and guidance.
Thank you and good afternoon everyone. We are pleased with a solid start to fiscal 2020 and the first quarter we continued our trend of driving Revenue growth with another positive off of 1.9% and executing on our new store growth plans. We continue to see a favorable response to our marketing initiatives and importantly we are not an accelerated growth in our nutritional supplements offering as Kemper mentioned. We are on track with our 2020 goals through the first quarter and remain confident with our Outlook off turning to our financial results during the first quarter net sales increased 3.8% to $230 daily average cop store sales increased 5.9%
amateur store
Increased 2.8% on a 2-year stack basis daily average comp store sales were up 7.4% and mature cops were up 4.4% off. The first quarter cop increase was driven by a 2.5% increase in average transaction size partially offset by a 6% decrease in daily life transaction count compared with the first quarter of last year while traffic was down modestly in the quarter note. The traffic was up 1.7% on a 2-year stack basis as we were comparing to a strong first-quarter a year ago as camper noted while the environment continues to be competitive. It also remains relatively stable and inflation remains low at about 1% gross profit margin during the first quarter was 26.3% compared to 26.7% in the prior year and a phone number.
eventually over the fourth quarter of
Fiscal 2019 approximately half of the gross margin decline in the first quarter reflected an increase in occupancy costs that directly relates to change the option of the new lease accounting standard the remainder of the decrease reflected a continued shift in sales mix as we discussed last quarter the adoption of the new lease accounting standard has the effect of increasing occupancy and depreciation expense, which is partially offset by reduced interest expense store expenses, as a percent of sales increased to 22.4% during the first quarter compared to 22.2% in the prior year. The year-over-year increase in store expenses, as a percentage of sales was solely attributable to the company's adoption of the new lease accounting standard.
Pre-opening and relocation expenses decreased approximately $240,000 year-over-year impacted by the timing of new store openings and store relocations during a quarter. We open to new stores compared to opening for new stores and relocating one store in the first quarter of fiscal 2019. We are excited to have entered Louisiana during the quarter becoming our 20th State of operation. We believe there is Meaningful opportunity for new market growth for Natural Grocers over the coming years and long-term. Net income was one point nine million dollars with diluted earnings per share of $0.08 in the first quarter compared to net income of 2.2 million dollars or ten cents wage earnings per share in the first quarter of last year.
even though I was
Ten point six million dollars in the first quarter down 6.8% compared to eleven point three million dollars in the first quarter of fiscal 2019 the adoption of the new lease accounting standard wage for a majority of the change in Eva. During the first quarter of fiscal 2020. We generate a cash from operations of ten point five million dollars and invested $12,000 in net capital expenditures as noted in our press release today. We have declared a quarterly cash dividend of $0.07 per share. The dividend will be paid on March 17th, 2022 all stockholders of record at the close of business on March 2nd 2020. Now I would like to review our fiscal 2020 Outlook which we are iterating today. The 2020 Outlook was originally provided on November 14th, 2019.
Please note that our 2020 Outlook factors in the impact of the new lease accounting standard which went into effect for us on October 1st. Given our September fiscal year end with the new lease accounting change is still expected to have a 1 to $0.02 negative impact on our diluted earnings per share as a result of an increase in occupancy expense and appreciation which will be partially offset by lower interest expense this shift in the classification of expenses will also negatively impact gross margin by 20 to 25 basis points and result in a 2 to 2 and 1/2 million dollar negative impact on ebitda. Each of these factors are in line with our expectations provided last quarter off.
during
Till 2020 we expect to open 5 to 6 new stores relocate one to two stores achieve daily average comparable-store sales growth of wage to 2.5% achieve. Net income. Margin of nine to 1.1% achieve diluted earnings per share between $0.37 and $0.45 and we expect Capital expenditures for the fiscal year in the range of 28 to 33 million dollars.
We are pleased with our first quarter performance, which is aligned with our fiscal 2020 expectations. We continue to anticipate moderate pressure on gross margin attributed to the continued impact of an unfavorable shift in mix as well as the impact of the new lease accounting standard. The anticipated gross margin pressure should be a partially offset by an expectation for modest or expense leverage as the year progresses dependent upon the level of comp sales generated in closing. We remain focused on leveraging our founding principles to drive performance while creating value for our shareholders those principles which include offering our customers the highest quality products month for double prices while providing science-based nutrition education and maintaining our commitment to our communities and our good for you crew are what sets us apart from the competition dead.
And continues to propel.
Our company forward we remain a committed partner in the pursuit of a healthy lifestyle for our customers and communities.
With that I would like to open the lines up for questions. Thank you.
We will now begin the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.
The first question today comes from Greg from City, please go ahead. Hi. This is actually off on for Greg. So, came in this quarter at 1.9% which is above the midpoint of your full year guidance, which is 5 to 2.5 page that you have easier comps in the back half of the year. So why not tighten that guidance range given the saint performance this quarter?
I think it would be more prudent to wait until after this quarter to do that.
Okay. Is there anything one time we should think about this quarter?
No, I think that we're trending fairly similar to how we trended last quarter. So I think if we keep on that Trend then of course, we'll probably tighten the guidance at the end of this quarter off. Okay, great. And then just on the competitive environment. Have you seen an any acceleration or deceleration of promotions? And are there any categories you've been more or less. I want to say that promotions have been too significant, you know any any acceleration or deceleration in promotions. I think our pricing is gotten slightly more competitive particularly in organic produce part of the business.
Okay, great. Thank you. Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Kemper Isley for any closing remarks.
Thank you very much for joining us to discuss our first quarter results. We remain confident in our long history of being a leader in providing natural and organic groceries to Consumers. We look forward to speaking with you on our next call to review our second quarter 2020 results. Have a great day by conference is now concluded. Thank you for attending today's presentation. You may not connect.