Q4 2023 Natural Grocers by Vitamin Cottage Inc Earnings Call
[music].
Good day, ladies and gentlemen, welcome to the natural grocers fourth quarter and fiscal year 2023 earnings conference call. At this time all participants are in a listen only mode. 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 recorded.
Speaker 1: Good day, ladies and gentlemen. Welcome to the National Grocers fourth quarter and fiscal year 2023 earning.
Speaker 1: At this time, all participants are in a listen-only mode. 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 recorded. I'd like now to turn the conference over to Ms. Jessica Thiessen, Vice President and Treasurer for Natural Resources.
I'd like now to turn the conference over to MS. Jessica season, Vice President Treasurer for natural Grocers Mathijsen you may begin.
Good afternoon, and thank you for joining us for the natural grocers by vitamin Cottage fourth quarter and fiscal year 2023 earnings conference call on the call with me today are Kemper Isley co President and Todd Dissinger, Chief Financial Officer.
Speaker 2: Good afternoon and thank you for joining us for the Nassau Grocers by Vitamin Cottage fourth quarter and fiscal year 2023 earnings conference call. On the call with me today are Kemper Isley, Co-President, and Todd Dissinger, Chief Financial Officer.
Speaker 2: 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.
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 uncertainties detailed in the company's most recently filed form.
Speaker 2: Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks and uncertainties 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.naturalgrocers.com. Now I will turn the call over to Kemper.
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.
Speaker 3: Thank you, Jessica, and good afternoon, everyone. Thank you for joining us for our fourth quarter call. Today, I would like to highlight our financial results, outline several key drivers and accomplishments, and review our priorities and initiatives.
Thank you Jessica and good afternoon, everyone. Thank you for joining us for our fourth quarter call today, I would like to highlight our financial results outlined several key drivers and accomplishments and review our priorities and initiatives.
Speaker 3: Then Todd will discuss the fourth quarter results in greater detail and introduce our fiscal year 2024 guidance.
Then Todd will discuss the fourth quarter results in greater detail and introduce our fiscal year 2024 guidance.
Speaker 3: Our fiscal year 2023 daily average comparable store sales growth of 3.6% marked our 20th consecutive year of positive comparable store sales.
Our fiscal year 2023 daily average comparable store sales growth of three 6% marked our 20th consecutive year of positive comparable store sales. We are proud of this extra ordinary accomplishment.
Speaker 3: We are proud of this extraordinary accomplishment.
Speaker 3: For the fiscal year, we achieved record diluted earnings per share of $1.02 and an 8.5% increase compared to last year.
For the fiscal year, we achieved record diluted earnings per share of $1, two and an 8.5% increase compared to last year.
Speaker 3: Our fourth quarter sales trends were particularly strong. Daily average comparable store sales increased 6.9%
Our fourth quarter sales trends were particularly strong daily average comparable store sales increased 6.9%, including a three 6% increase in daily average transaction count.
Speaker 3: including a 3.6% increase in daily average transaction
Speaker 3: Moreover, the strength was broad-based across our product category.
Moreover, the strength was broad based across our product categories.
Speaker 3: We attribute the strong fourth quarter and fiscal year sales to our differentiated business model and our responsiveness to the industry dynamic.
We attribute the strong fourth quarter and fiscal year sales to our differentiated business model and our responsiveness to the industry dynamics, we continue to be positively impacted by consumers prioritizing health and wellness.
Speaker 3: we continue to be positively impacted by consumers prioritizing health and wellness.
Speaker 3: Our customers appreciate our carefully vetted natural and organic product offer.
Our customers appreciate our carefully vetted natural and organic product offering.
Speaker 3: We believe that our value proposition of high quality products at always affordable prices resonates with consumers.
We believe that our value proposition of high quality products at always affordable prices resonates with consumers in.
Speaker 3: in the current economic environment. During fiscal 2023, our targeted marketing and promotions effectively drove customer engagement.
And the current economic environment during fiscal 'twenty twenty-three, our targeted marketing and promotions effectively drove customer engagement are.
Speaker 3: Our percentage of sales on promotion has been relatively stable over recent quarters.
Our percentage of sales on promotion has been relatively stable over recent quarters further emphasis on the in store shopping experience has been an important contributor to driving our strong traffic trends I.
Speaker 3: Further, our emphasis on the in-store shopping experience has been an important contributor to driving our strong traffic trends. I would like to recognize our
I'd like to recognize our operations.
Speaker 3: purchasing and marketing teams for how they have nimbly transitioned from pandemic conditions to focus on core execution and navigating the current macro environment.
[noise] purchasing and marketing teams for how they have nimbly transitioned from pandemic conditions to focus on core execution and navigating the current macro environment.
Speaker 3: Our company's commitment to operational excellence and continuous improvement were instrumental in driving our strong fourth quarter and fiscal year performance.
Our company's commitment to operational excellence and continuous improvement were instrumental in driving our strong fourth quarter and fiscal year performance.
We developed and executed market specific campaigns that accelerated sales growth in underperforming stores.
Speaker 3: We developed and executed market-specific campaigns that accelerated sales growth in underperforming stores.
Speaker 3: Effective pricing and promotional strategies contributed to the fiscal year gross margin improvement of 70 basis points.
Fact of pricing and promotional strategies contributed to the fiscal year gross margin improvement of 70 basis points higher.
Higher labor efficiency, partially offset increased wage rates and drove store productivity.
Speaker 3: Higher labor efficiency partially offset increased wage rates and drove store productivity.
We prioritize driving engagement with our customers during fiscal year 2023 we continued to enhance the personalization frequency and range of our empower rewards program offers.
Speaker 3: we prioritize driving engagement with our customers.
Speaker 3: During fiscal year 2023, we continued to enhance the personalization, frequency, and range of our NPower Rewards program.
Speaker 3: In particular, we featured MPower Promotions with a focus on local store markets.
In particular, we featured empower promotions with a focus on local store marketing.
Speaker 3: In August , we launched a National Grocers mobile app, which provides NPower members with enhanced access to exclusive offers, digital coupons,
In August we launched a national grocers mobile App, which provides empower members with enhanced access to exclusive offers digital coupons recipes and articles. We believe these initiatives collectively drove the 17% increase in empower membership and were a major contributor to our broad based sales.
Speaker 3: We believe these initiatives collectively drove the 17 percent increase in NPOWER membership and were a major contributor to our broad-based sales
Growth.
Speaker 3: Our natural grocers brand products remain a key point of differentiation due to their emphasis on quality and price.
Our natural grocers brand products remain a key point of differentiation due to their emphasis on quality and price.
Speaker 3: In the fourth quarter, private label brands represented 7.8% of total sales, up from 7.6% in the fourth quarter of last year.
In the fourth quarter private label brands represented seven 8% of total sales up from seven 6% in the fourth quarter of last year.
Speaker 3: During fiscal year 2023, we expanded our line of National Grocers brand products with 59 new offers.
During fiscal year 2023 we expanded our line of natural grocers brand products with 59, new offerings, including a distinctive offering of organic eggs from regenerative farms launched in the fourth quarter. We believe that we are the first national grocery chain to offer private label.
Speaker 3: including a distinctive offering of organic eggs from regenerative farms.
Speaker 3: launched in the fourth quarter. We believe that we are the first national grocery chain to offer private label, regenerative, certified, organic pasture-raised, and organic free-range eggs.
Regenerative.
Certified organic pasture raised an organic free range eggs.
Our company has a long standing commitment to investing in our crew is one of our founding principles.
Speaker 3: Our company has a long-standing commitment to investing in our crew as one of our founding principles. Earlier this month, we implemented another company-wide wage rate increase. Our all-in average hourly wage rate for full-time store crew now exceeds $21 per hour.
Earlier this month, we implemented another companywide wage rate increase our all in average hourly wage rate for full time store crew now exceeds $21 per hour.
Speaker 3: partially offset higher labor rates, we continue to implement productivity initiatives.
To partially offset higher labor rates, we continue to implement productivity initiatives.
Speaker 3: Recent projects include improvements to the receiving process.
Recent projects include improvements to the receiving process.
Speaker 3: enhancements to automated replenishment, and point-of-sale system updates designed to create labor efficiency.
Enhancements to automated replenishment and point of sale system updates designed to create labor efficiencies.
Improved inventory accuracy and provide more pricing flexibility.
Speaker 3: improve inventory accuracy, and provide more pricing flexibility.
Speaker 3: These initiatives have enabled us to streamline and automate certain in-store tasks, while maintaining a high level of customer service.
These initiatives have enabled us to streamline and automate certain in store tasks, while maintaining a high level of customer service.
Speaker 3: New store development continues to be a priority for our company.
New store development continues to be a priority for our company.
Speaker 3: During the fourth quarter, we opened a store in Kennewick, Washington, relocated our store in Beaverton, Oregon, and remodeled our store in Norman, Oklahoma.
During the fourth quarter, we opened a store in Kennewick, Washington relocated our store in Beaverton, Oregon, and remodel of our store in Norman Oklahoma.
Speaker 3: In fiscal year 2023, we opened a total of three stores, relocated two stores, and remodeled one store.
In fiscal year 'twenty twenty-three, we opened a total of three stores relocated two stores and remodeled one store.
Speaker 3: We are pleased with the performance of these stores. Our new store development was constrained in fiscal year 2021 through 2023 due to delays in permitting and construction and the availability of materials.
We are pleased with the performance of these stores, our new store development was constrained in fiscal year 2021 through 'twenty twenty-three due to delays in permitting and construction and the availability of materials.
Speaker 3: Over the next several years, we are targeting a return to opening between six and eight new stores per year.
Over the next several years, we are targeting a return to opening between six and eight new stores per year.
Speaker 3: subject to improving construction and supply chain conditions.
Subject to improving construction and supply chain conditions.
I am pleased to announce that our board has declared a special cash dividend of $1 per common share.
Speaker 3: I am pleased to announce that our board has declared a special cash dividend of $1 per common share.
Speaker 3: in addition to our quarterly cash dividend of $0.10 per common share, to be paid in December .
In addition to our quarterly cash dividend of 10 cents per common share to be paid in December the.
The special dividend reflects our strong operating trends and financial position confidence in our business outlook and commitment to returning value to our stockholders include.
Speaker 3: including the special and quarterly dividends announced today, we will have cumulatively returned $4.46 in cash per share to stockholders since initiating our dividend program four years ago.
Including the special and quarterly dividends announced today, we will have cumulatively returned $4.46 in cash per share to stockholders since initiating our dividend program four years ago.
Speaker 3: Finally, I would like to thank every member of our Good4U crew for their commitment to operational execution and exceptional customer service, which were instrumental in driving our strong performance in the fourth quarter that culminated in a record-setting year.
Finally, I would like to thank every member of our good for you crew for their commitment to operational execution and exceptional customer service, which were instrumental in driving our strong performance in the fourth quarter that culminated in a record setting year.
With that I will turn the call over to Todd to discuss our financial results and guidance.
Speaker 3: With that, I will turn the call over to Todd to discuss our financial results and guidance.
Thank you Kemper and good afternoon for the fourth quarter net sales increased 7.6% from the prior year period to $295 $1 million.
Speaker 4: Thank you, Kemper, and good afternoon. For the fourth quarter, net sales increased 7.6% from the prior year period to $295.1 million.
Speaker 4: Our daily average comparable store sales increase of 6.9% was comprised of a 3.6% increase in daily average transaction count and a 3.3% increase in daily average transaction size.
Our daily average comparable store sales increase of six 9%.
It's comprised of a 3.6% increase in daily average transaction count.
And a 3.3% increase in daily average transaction size, we are very encouraged by the strong customer traffic trends, we have experienced over the past several quarters.
Speaker 4: We are very encouraged by the strong customer traffic trends we have experienced over the past several quarters.
Speaker 4: We estimate that product cost inflation was approximately 5% on an annualized basis for the fourth quarter, down 200 basis points from the third quarter, and was approximately 7% for the fiscal year 2023. Our product cost inflation and disinflation have been less volatile than conventional grocery as a result of our specialized supply chain.
We estimate the product cost inflation was approximately 5% on an annualized basis for the fourth quarter.
Down 200 basis points from the third quarter and was approximately 7% for the fiscal year 2023.
Our product cost inflation, and disinflation had been less volatile than conventional grocery as a result of our specialized supply chain.
The item count per basket was down less than one half of an item compared to the same period in the prior year, reflecting an improving trend over the past several quarters.
Speaker 4: The item count per basket was down less than one-half of an item compared to the same period in the prior year, reflecting an improving trend over the past several quarters.
Our item count remains above pre pandemic levels.
Speaker 4: Our item count remains above pre-pandemic levels. Sales growth was broad-based.
Sales growth was broad based across categories.
Speaker 4: Our strongest performing departments were dairy, body care, meat, and dietary supplements.
Our strongest performing departments were dairy body care meat and dietary supplements.
Speaker 4: The growth in supplements continues to be encouraging and reflects our differentiation in this important category, which is margin accretive. The Empower Rewards Program represented 77% of net sales, reflecting the strength of our relationships with so many of our customers.
The growth in supplements continues to be encouraging and reflects our differentiation in this important category, which is margin accretive the empower rewards program represented 77% of net sales, reflecting the strength of our relationships with so many of our customers.
Speaker 4: For the fourth quarter, gross margin increased 100 basis points to 28.6% and was driven by higher product margin attributed to effective pricing and promotions, partially offset by higher shrink expense.
For the fourth quarter gross margin increased 100 basis points to 28.6% and was driven by higher product margin attributed to effective pricing and promotions, partially offset by higher shrink expense.
Speaker 4: Store expenses as a percentage of net sales decreased 70 basis points and was primarily driven by lower long-lived asset impairment charges as compared to the prior year period. Administrative expenses as a percentage of net sales increased 10 basis points and was primarily driven by higher compensation expenses, technology amortization, and legal expenses. For Operating Income.
Store expenses as a percentage of net sales decreased 70 basis points and was primarily driven by lower long lived asset impairment charges as compared to the prior year period.
Administrative expenses as a percentage of net sales increased 10 basis points and was primarily driven by higher compensation expenses technology amortization and legal expenses.
Our operating income.
Speaker 4: increased 114% to $7.7 million. The effective income tax rate was 15% and 26.5% for the fourth quarter of fiscal 2023 and 2022 respectively. The decrease in effective income tax rate was primarily attributable to increased food donation deductions.
Increased 114% to $7.7 million the.
The effective income tax rate was 15% and 26, 5% for the fourth quarter of fiscal 2023 and 2022, respectively.
The decrease in effective income tax rate was primarily attributable to increased food donation deductions.
Net income was $5 $9 million with diluted earnings per share of 26 cents in the fourth quarter. This compares to net income of $2.2 million or nine cents of diluted earnings per share in the fourth quarter of last year adjusted.
Speaker 4: Net income was $5.9 million with diluted earnings per share of $0.26 in the fourth quarter. This compares to net income of $2.2 million or $0.09 of diluted earnings per share in the fourth quarter of last year.
Speaker 4: Adjusted EBITDA increased 18.5% to $16.1 million.
EBITDA increased 18.5% to $16 $1 million.
Briefly touching on the full year results for fiscal year 2023, total revenue increased 4.7% to $1.1 billion.
Speaker 4: Briefly touching on the full year results, for fiscal year 2023, total revenue increased 4.7% to $1.1 billion.
Speaker 4: Our daily average comparable store sales growth was 3.6 percent, resulting in an increase of 6.2 percent on a two-year basis.
Our daily average comparable store sales growth was 3.6%, resulting in an increase of 6.2% on a two year basis.
Speaker 4: Gross margin was 70 basis points higher than the prior year. Store expenses as a percentage of sales were 40 basis points higher than the prior year.
Gross margin was 70 basis points higher than the prior year store expenses as a percentage of sales were 40 basis points higher than the prior year.
Speaker 4: The effective income tax rate was 18.1% and 23.1% for the fiscal year 2023 and 2022, respectively. The decrease was primarily attributable to increased food donations.
The effective income tax rate was 18, 1% and 23, 1% for the fiscal year 2023, and 2022, respectively. The decrease was primarily attributable to increased food donations.
We anticipate our normalized effective income tax rate will be between 20 and 21% during fiscal 2024.
Speaker 4: We anticipate our normalized effective income tax rate will be between 20 and 21 percent during fiscal 2024.
Speaker 4: For fiscal year 2023, diluted earnings per share was $1.02 compared to $0.94 in fiscal 2022.
For fiscal year, 2000, and twenty-three diluted earnings per share was a dollar to compare to 94 cents in fiscal 2022.
Speaker 4: Adjusted EBITDA in the fiscal year 2023 was $63.4 million.
Adjusted EBITDA in the fiscal year, 2000, and twenty-three was $63.4 million.
Speaker 4: Turning to the balance sheet and cash flow, for fiscal year 2023, we generated cash from operations of $64.6 million and invested $38 million in net capital expenditures, primarily for new and relocated stores, resulting in free cash flow of $26.7 million.
Turning to the balance sheet and cash flow for fiscal year, 2000, and twenty-three we generated cash from operations of $64.6 million and invested $38 million and net capital expenditures, primarily for new and relocated stores, resulting in <unk>.
Free cash flow of $26.7 million.
Speaker 4: We finished the year in a strong liquidity position with $18.3 million of cash and cash equivalent.
We finished the year in a strong liquidity position with $18.3 million of cash and cash equivalents.
Speaker 4: We had no outstanding borrowings under our $50 million Revolving Credit Facility.
We had no outstanding borrowings under our 50 million dollar revolving credit facility.
Speaker 4: Additionally, today we announced that we have amended our credit facility to increase the revolving credit facility commitment to $75 million and extend the maturity to November 16, 2028, to further enhance our liquidity.
Additionally, today, we announced that we have amended our credit facility to increase the revolving credit facility commitment to $75 million and extend the maturity to November 16th 2028 to further enhance our liquidity.
Speaker 4: As Kemper noted, our Board of Directors has declared a special cash dividend of $1 per common share, in addition to a quarterly cash dividend of $0.10 per common share.
As Kemper noted our board of Directors has declared a special cash dividend of one dollar per common share. In addition to our quarterly cash dividend of 10 cents per common share.
Speaker 4: The special dividend reflects our commitment to returning capital and maximizing value for our stockholders, recognizing our strong cash flow, cash position, and modest financial leverage.
The special dividend reflects our commitment to returning capital and maximizing value for our stockholders, recognizing our strong cash flow cash position and modest financial leverage.
Speaker 4: To fund the dividend, we will use cash on hand and borrowings under the revolving credit facility.
To fund the dividend, we will use cash on hand, and borrowings under the revolving credit facility.
Speaker 4: We expect to continue investing in profitable growth and development initiatives including new stores and store relocation opportunities.
We expect to continue investing in profitable growth and development initiatives, including new stores and store relocation opportunities.
Both dividends are payable on December 13th 2000, and twenty-three to all stockholders of record at the close of business on November 27th 2023.
Speaker 4: Both dividends are payable on December 13th, 2023 to all stockholders of record at the close of business on November 27th, 2023.
Now I would like to introduce the company's outlook for fiscal year 2024.
Our guidance was developed based upon consideration of current operating trends consumer trends and the uncertainty of the economic environment.
Speaker 4: Our outlook includes the benefits of new store growth, targeted marketing focused on our value proposition and customer engagement.
Our outlook includes the benefits of new store growth targeted marketing focused on our value proposition and customer engagement.
And operating initiatives.
Our current expectation is that sales comps will be at the high end of our outlook range in the first half of the year and more challenging in the second half of the year as we cycled stronger comps in the back half of fiscal 2023.
Speaker 4: Decelerating inflation will likely be a factor as the year progresses.
Decelerating inflation will likely be a factor as the year progresses.
Our outlook anticipates that year over year gross margin will be higher in the first half of the year and flat in the second half.
Lastly, we expect store expenses as a percentage of sales to increase driven by higher labor rates, resulting in modest deleverage.
Speaker 4: Lastly, we expect store expenses as a percentage of sales to increase driven by higher labor rates resulting in modest deleverage.
For fiscal year 2024, we expect to open four to six new stores relocate or remodel four to six stores.
Achieve daily average comparable store sales growth between 2% and 4%.
Speaker 4: Achieve daily average comparable store sales growth between 2% and 4%. Achieve diluted earnings per share between $1 and $1.10. And direct $30 to $39 million towards capital expenditures to support our growth initiatives.
Chief diluted earnings per share between one dollar and $1.10 and direct $30 million to $39 million towards capital expenditures to support our growth initiatives.
Speaker 4: In closing, we had another strong quarter and record-setting year. During 2023, our team transitioned from the challenges of the pandemic and redirected their focus to driving customer engagement and store productivity. Over the past
In closing, we had another strong quarter and record setting year. During 2023, our team transitioned from the challenges of the pandemic and redirected their focus to driving customer engagement and store productivity.
Over the past four years Dale.
Speaker 4: Daily average comparable store sales have increased 19.9 percent, gross margin has improved 230 basis points, and diluted earnings per share has grown 143 percent.
Daily average comparable store sales have increased 19.9% gross margin has improved 230 basis points and diluted earnings per share has grown 143%.
Speaker 4: We have effectively managed the challenges over the past four years and have reset our priorities to maximize the opportunities ahead.
We have effectively managed the challenges over the past four years and have reset our priorities to maximize the opportunities ahead.
With that I would like to open the lines for questions. Thank you.
Speaker 4: With that, I would like to open the lines for questions. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker 1: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, please stand by.
Yeah.
Okay.
Okay.
Speaker 1: Our first question comes from Scott Mushkin of R5 Capital. Please go ahead.
Our first question comes from Scott Muskegon of our five capital. Please go ahead.
Speaker 5: Hey guys, wow, unbelievable.
Hey, guys.
Wow unbelievable.
Speaker 5: incredible, kind of along the lines of what we talked about last quarter about, you know, maybe the specialty Europe format resonating a bit more as we come out of the pandemic. So,
Incredible kind of along the lines, what we talked about last quarter about you know maybe the specialty Europe format resonating.
A bit more.
As we come out of the pandemic.
So.
It does though if I look at it you obviously had a real easy compare.
Speaker 5: It does, though, if I look at it, you obviously had a real easy compare. I go back and forth on stacks, but how much do you think that played into the big acceleration of the comp in the fourth quarter versus the third?
I go back and forth on stacks, but you know how much do you think that played into the big acceleration of the comps in the fourth quarter versus the third.
Speaker 3: Um, you know, it played a certain, it definitely played a little bit into that acceleration because.
It played a certain and it definitely played a little bit into that acceleration because as you said we had.
Speaker 3: pretty sad comps last year, but I think we had really strong customer account growth.
Pretty sad comps last year, but I don't think I think we had really strong consumer customer count growth.
Speaker 3: So I think that's the real positive out of what we got.
And so I think that's the real positive out of what we've got for the quarter.
Speaker 3: And remind me what the count growth was in the third quarter. Did it accelerate year-over-year, quarter-to-quarter, sequentially? Yes, it was. You have that.
And remind me what the count growth was in the third quarter did accelerate year over a quarter to quarter sequentially, yes.
Yes.
It was.
After Andy Todd.
Okay.
Nine.
Speaker 3: Yeah, I went from 1.9 to 3.6 in the quarter, so it was a substantial acceleration of customer count growth in our stores.
Yes, it went from $1 93.
$3 six.
In the quarter. So it was.
The substantial acceleration of customer.
Growth, yeah option or sports.
So if you had to frame it as okay.
Speaker 5: this is what we're doing that's driving this, you know, really good performance on sales. And this is kind of what we think is macro, you know, related, our formats resonating more. How, you know, how would you break that down? And then when you look at your own drivers, what do you think?
This is what we're doing that's driving it.
Really good performance on sales.
And this is kind of what we think is macro related or formats resonating more.
How would you break that down and then when you look at your own.
Drivers what do you think the top ones are.
Speaker 3: Well, I mean, our primary driver is that we're communicating with our, you know, 78% of
Well I mean, our primary driver is that we're communicating with our.
78% of our customer base.
Speaker 3: four or five times a week via our in-power promotions.
Five times, a week via our empower promotions in.
And emails to those customers and so.
Speaker 3: That's really helping to get those customers more engaged and then word of mouth is getting out there. And then we're doing an effective job with out-of-home promotion with our billboards and targeted social outreach.
That's really helping too.
Get those customers more engaged and then.
Word of mouth is getting out there and then we're doing an effective job without a home promotion with our billboards and targeted.
Social advertising to get new customers into the stores.
And then the third thing is.
Speaker 3: You know, our pricing strategy is one of affordability, so customers like that quite a bit. And then fourth, we just have.
Our pricing strategy has as one of affordability, so customers like that quite a bit.
And then fourth.
We just have our standards resonate in this.
Uh huh.
A world we live in now and people appreciate the fact that we.
Speaker 3: world we live in now and people appreciate the fact that, you know, we're well over 50% organic in all the products we sell. Our produce is 100% organic and we're using, you know, we're promoting pasture-based animal products which are actually beneficial to the, you know,
We're well over 50% organic and all the products. We sell are produced a 100% organic and were.
Using the.
Promoting pasture based animal products, which are actually beneficial to the.
Two two.
Climate change rather than a negative which is what most other retailers have their animal products.
Speaker 3: climate change rather than a negative, which is what most other of the retailers have with their animal products.
Because they are raising them in combined combined quarters.
Speaker 3: raising them in confined quarters and that actually has a negative connotation for climate change. And so our customers, I think it really resonates
That actually has a negative connotation for climate change and so our customers I think it really resonates.
Speaker 3: with our customers because we're able to communicate with them effectively through our end.
With our customers, because we're able to communicate with them effectively through our empowered program.
And then on campus.
Speaker 4: Scott, I think I'd add to that too that we've got a pretty diverse customer base, but we may be less dependent on the lower income customer. One data point that we have is the SNAP EBT, which is really only about 2% of our total business, and we saw a significant drop in transactions.
Scott I think I'd add to that too that we've got pretty.
Diverse customer base, but we may be less dependent on the lower income customer and one data point that we have is the snap EBT.
There's really only about 2% of our total business and we saw a significant drop in transactions.
With those customers.
This past quarter.
Speaker 5: And then that's actually a good segue. I'm usually like one of the only people on this call. So, if you guys just tell me to shut up, I have a couple more questions. So, hopefully, that's okay. But it's a good segue into demographics. Have you seen a notable shift, maybe younger in the last couple of years to your demographics that are coming into the store?
And that's actually a good segue I'm, usually like one of the only people on this call Silicon you guys. Just tell me to shut up I have a couple more questions. So hopefully that's okay.
But it's a good segue into demographics have you seen a notable shift maybe younger.
In the last couple of years T T or demographics that are coming into the store.
Speaker 3: We definitely have a good.
We're definitely already.
Have a good.
Group.
Speaker 3: group of millennials coming into the store, and families coming into the store. Although, as Todd said, we kind of do skew a little bit on a higher income basis, and the baby boomers who have less financial strain are definitely the backbone of our business.
Millennials coming into the store and families coming into the store, although as Todd said, we kind of do skew a little bit on a higher income.
And the baby Boomers, who Atlas financial strain or definitely the backbone of our business.
And there are any have there been any big changes as you work through your frequent shopper data or is it kind of been steady.
Speaker 5: Have there been any big changes as you look through your frequency chopper data, or has it kind of been steady?
It's been pretty steady.
Sure.
Alright, and last but not least is my special dividend question, which it seems like.
You guys hear it I wouldn't consider your under Levered. It seems like your adjusted leverage is about three times I don't know if you agree with that.
Speaker 5: the using up all the cash and putting on a little bit more debt to pay a special div. I just wanted to understand kind of...
D are using up all the cash and putting out a little bit more debt to pay a special Dave I just wanted to understand kind of.
Speaker 5: I'm going to call it aggressive, but it seems a little bit more that way and kind of just walk me through what the thought process is and walk me through if you think I'm right or wrong about what I said.
It seemed to me and my.
Monthly crashing, but it seems a little bit more that way and kind of just walk me through what the thought processes and walk me through if you think I'm.
Right or wrong about what I said.
Well the way we look at it is that.
Speaker 3: Well, the way we look at it is that if we had two ways of going, we could have increased the size of our quarterly dividend or issued a special dividend.
We could we had two ways of growing we could have increased the size of our quarterly dividend.
The special dividend.
Speaker 3: And then we also look at stock buybacks, but we don't, we don't, we're not going to, you know, we don't, you'd have to spend a significant amount, significantly more money on stock buybacks to get the impact of a special dividend to our shareholder.
And then we also look at stock buyback. So we don't look we don't we're not you know we don't.
You'd have to spend a significant amount of significantly more money on stock buybacks to get the impact of the special dividend to our shareholders.
Speaker 3: But if you look at it on a cash flow basis.
But if you look at it on a cash flow basis.
The special dividend will be paid off fairly rapidly.
Speaker 3: the special dividend will be paid off fairly rapidly and it won't cause any difference in our cash flow over the next.
And it won't cause any difference in our cash flow over the next three years.
Whereas if we had done that increase and it gives us really good value back to our shareholders.
Speaker 3: Whereas if we had done the increase and it gives a really good value back to our shareholders. And then whereas if we'd done the increase in the quarterly dividend, that's just a constant outflow of the cash. I don't know if that makes sense.
And then whereas if we've done the increase in the quarterly dividend.
That's just a constant outflow of the cash.
Okay that makes sense.
Yeah, the way we look at it.
Speaker 3: We looked at it from our cash, you know, how fast are we going to be able to regenerate that cash from the special dividend into the company.
Yeah, we looked at it we looked at it from our cash you know how fast are we going to be able to regenerate that cash.
From this from the special dividend into the company and it really has no effect whatsoever on.
Speaker 3: on our cash outlays compared to where we would have been before, so we thought it was.
On our cash outlays compared to where we would would've been before.
So we thought it was well worth doing.
[laughter].
Speaker 5: Sounds good, guys. You've got another just great quarter. So, nice one. All right, thanks. Yep.
Sounds good guys get another great quarter, so alright. Thanks.
Yep.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Kemper Icily for any closing remarks.
Speaker 1: 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 for joining us to discuss our fourth quarter results, we take great pride in all of the company's accomplishments in fiscal 2023, we are committing committed to maximizing value for our stockholders today's declaration of our second special cash dividend yield a cumulative payout of $4 40.
Speaker 3: Thank you for joining us to discuss our fourth quarter results. We take great pride in all of the company's accomplishments in fiscal 2023. We are committed to maximizing value for our stockholders. Today's declaration of our second special cash dividend yields a cumulative payout of four dollars and forty six cents since the dividend program's inception four years ago. We look forward to many opportunities in fiscal year 2024. Thank you and have a great day. Bye.
Six sense since the dividend program inception, four years ago, we look forward to many opportunities in fiscal year 2024, Thank you and have a great day bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now...
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