Q4 2021 Natural Grocers By Vitamin Cottage Inc Earnings Call
Good day, ladies and gentlemen, welcome to the macho glasses by vitamin Cottage fourth quarter fiscal year, 2021 'twenty conference call.
At this time all participants.
Okay.
Later, we will conduct a question and answer session and instructions will be given at that time.
As a reminder, today's call is being <unk>.
Got it.
I'd now like to turn the conference over to MS. Jessica Houston.
Assistant Treasurer for natural grocers.
Sir you may begin.
Good afternoon, everyone and thank you for joining us for the natural grocers by vitamin Cottage fourth quarter and fiscal year 2021 earnings conference call.
On the call with me today are Kemper Isley co President and Todd Dissinger, Chief Financial Officer.
As a reminder, certain information provided during this conference call are forward looking statements based on current expectations and assumptions and are subject to risks and uncertainties actual results could differ materially from those described in the forward looking statements due to a variety of factors, including the risks and uncertain.
TS detailed in the company's most recently filed forms 10-Q and 10-K the company undertakes no obligation to update forward looking statements.
Today's press release is available on the company's website and a recording of this call will be available on the website at investors Dot natural grocers Dot com.
Now I will turn the call over to Kemper.
Thank you Jessica and good afternoon, everyone. Thank you for joining us today.
We had a record performance in fiscal 2021 with net sales of $1 $1 billion.
Diluted earnings per share of 91 cents.
Fiscal 2021 marked our 18th consecutive year of positive daily average comparable store sales growth I take great pride in all of the company's accomplishments. This year. We finished the year with a strong fourth quarter accelerating sales comps higher margins and lower store expense.
This drove 100 per cent earnings per share growth exceed.
Exceeding our expectations our commitment to our founding principles continue to drive our success as evidenced by our strong results. We have seen an increase in customer engagement and loyalty. We believe are carefully betted offerings.
Natural and organic products.
At always affordable prices continue to resonate with consumers as they have developed a strong appreciation for the value of healthy nutrition and dietary supplements as a result of the pandemic.
Day, we announced that we are increasing our quarterly cash dividend to 10 cents per share from seven cents per common share a 43% increase the dividend increase reflects our strong operating performance and financial position our confidence in our business model and our commitment of returning.
Value to our shareholders.
During the quarter, we opened one new store in Springfield, Missouri relocated our store in Columbia, Missouri, and remodeled one of our stores in Wichita, Kansas for the fiscal year 'twenty 'twenty. One we opened a total of three stores and relocated or remodeled five stores. We were pleased with the performance of.
Our new stores and relocations over the past several years are.
Our unique approach to marketing and promotional activity, including our empower loyalty program continued to drive customer engagement as well as sales growth during the fourth quarter.
Our 66th anniversary event in August was very successful and featured exciting promotions free products in a sweepstakes in September our stores and marketing effort focused on organic harvest month with promotional events discounts and a fundraiser to support beyond pesticides, which helps.
Cities convert parks to being chemical free our empower loyalty program ended the quarter with over $1 5 million members up 19% versus a year ago and net sales penetration for empower was 72% in the fourth quarter up slightly from the third quarter and compared to 68% of your.
Earlier.
Consistent with our company branding in our natural grocers brand products, which we positioned as a premium quality product at an affordable price remain a key point of differentiation in our sales growth driver and.
In the fourth quarter private brands represented seven 1% of sales in total for fiscal 'twenty 'twenty. One we grew our private brand offerings by 185 Skus.
Our total number of natural grocery Skus was approximately 1000 at fiscal year end, our natural grocers brand supplements relaunch began in March of this year, our branded supplements growth exceeded the category growth in the fourth quarter, demonstrating customers' interest in our high quality in them.
Portable offerings Nash.
Natural grocers has a legacy of being a values driven company our commitment to building a healthy sustainable future for our customers are good for you crew and our communities is authentic we work hard to ensure our stores operations and supply chain reflect these values we have been.
A value driven company since 1955 in fiscal 2021 the combination of company donations and customer fund raisers resulted in $1 million and monetary donations and more than $3 million in in-kind food and product donations to local food banks.
Beginning in October 2021, we implemented a permanent pay increase for our hourly good for Ya store crew a $1 per hour.
This increase represents our second one dollar per hour increase in the past 18 months and reflects our longstanding commitment to investing in our crew with the increase the companywide average hourly pay for fulltime crew is $18.43 an hour, including one dollar per hour and vitamin Bucks.
Store credit.
In closing I want to thank every member of our good for you crew for their continued hard work and commitment to helping us deliver the highest quality natural and organic products at always affordable prices and their commitment to our founding principles I would also like to take a moment to reflect on natural grocers accomplishment.
Over the past 10 years.
In those 10 years, we have grown our sales by four times to over $1 billion. Our store base has grown by three times and earnings by six times, even more importantly, we have brought healthy nutritional options at affordable prices and free science based nutrition education to over 100 additional.
Entities and created over 2500 jobs, while I am very proud of our achievements over the last decade I'm equally excited about the opportunity that lies ahead of us.
With that let me turn the call over to Todd to discuss our financial results and guidance.
Thank you Kemper and good afternoon, everyone. We had an outstanding fourth quarter on top of a strong performance in the fourth quarter of last year the.
The most recent quarter posted positive sales growth.
Primarily attributed to increased customer engagement and loyalty and our customers' response to COVID-19 pandemic trends.
Net sales during the fourth quarter increased three 2% from the prior year period to $272 $6 million.
Daily average comparable store sales increased two 5% on top of a 13, 2% increase in the fourth quarter of 2020.
Increased transaction counts continued to drive comps of shopping trips normalized towards pre pandemic levels.
In the fourth quarter, our average daily transaction count increased three 4%.
The count increase was partially offset by a 0.8% decrease in average daily transaction size. However, the basket size remained elevated as compared to the pre pandemic level up over 20% compared to the fourth quarter of 2019.
Supplements remained a top performing category with a comp of over 10% in the fourth quarter and over 20% on a two year stacked basis.
We believe the success we are seeing in this category is largely attributable to consumers continuing interest and supplementing their nutritional intake associated with the pandemic coupled with the strong response to our branded supplements.
Inflation remained in the 2% to 3% range during the fourth quarter and we continue to pass along the impact via pricing.
Note that our rate of inflation tends to be more stable than the industry in general due to our high product standards, which necessitates a specialized supply chain.
Out of stock levels in the fourth quarter remained relatively consistent with prior quarters of this year out of stocks are lower than at the beginning of the pandemic, although still above pre pandemic levels.
We also had a solid performance from a margin and expense standpoint.
Fourth quarter gross margin improved 40 basis points, driven by higher product margin and store occupancy leverage the strong supplements sales comp contributed to a favorable shift in product margin mix.
Store expenses in the fourth quarter declined by 130 basis points. The improvement in store expenses reflects a more normalized level of labor related expenses compared to the prior year.
The tight labor market and labor availability, we are an offset to the impact of higher labor rates.
Net income was $7 $2 million with diluted earnings per share of 32 cents in the fourth quarter.
This compares to net income of $3 $7 million or <unk> 16 of diluted earnings per share in the fourth quarter of last year.
Adjusted EBITDA was $17 $8 million in the fourth quarter up 36% compared to $13 $6 million in the fourth quarter of last year.
Please note that beginning with the fiscal 2021 and fourth quarter reporting.
Adjusted EBITDA excludes share based compensation expense adjusted.
Adjusted EBITDA for the fourth quarter of fiscal 2020 has been recast to exclude share based compensation expense to enhance the comparability of this measure between the fourth quarter of fiscal years 2020 and 2021.
A reconciliation and definition of adjusted EBITDA are provided in our earnings release announcement.
I would like to briefly touch on our full year results for fiscal 2021.
Total revenue increased one 8% to $1 $1 billion, our daily average comparable store sales growth was <unk>, 7%, resulting in an increase of 12, 7% on a two year stacked basis.
Fiscal 2021 gross margin was 40 basis points higher than the prior year due to higher product margin and lower shrink and store occupancy expense as a percentage of net sales.
On a two year stacked basis gross margin increased 130 basis points.
Store expense margin increased.