Natural Grocers by Vitamin tage(NGVC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4, net sales increased by 4.2% year-over-year to $336.1 million, with diluted earnings per share reaching $0.51, a 31% increase [11][12] - For fiscal year 2025, total revenue rose by 7.2% to $1.33 billion, with diluted earnings per share increasing by 36.1% to $2.00 [13] - Adjusted EBITDA for Q4 increased by 7.7% to $24.4 million, while for the full year, it rose by 17.5% to $97.9 million [12][13] Business Line Data and Key Metrics Changes - Daily average comparable store sales increased by 4.2% in Q4 and 7.3% for the full year, with a two-year growth of 11.3% and 14.3% respectively [11][13] - The penetration of Natural Grocers branded products in total sales rose to 8.8% from 8.4% a year ago, reflecting strong growth in house-branded offerings [8] Market Data and Key Metrics Changes - The company noted a shift in consumer behavior towards more cautious retail spending, influenced by macroeconomic pressures [5][11] - A modest decline in SNAP EBT transactions was observed, representing approximately 2% of net sales, but it was deemed immaterial to overall sales [12] Company Strategy and Development Direction - The company plans to open six to eight new stores in fiscal 2026, maintaining a commitment to 4%-5% annual new store unit growth [9][14] - The focus remains on enhancing the NPower Rewards program and expanding the Natural Grocers branded products to drive long-term success [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumer prioritization of health and wellness, despite macroeconomic challenges [6][30] - The outlook for fiscal 2026 includes expectations for daily average comparable store sales growth between 1.5% and 4%, with diluted earnings per share projected between $2 and $2.15 [14][15] Other Important Information - The company announced a 25% increase in the quarterly cash dividend to $0.15 per common share, reflecting strong operating performance [9] - The company ended Q4 with $17.1 million in cash and cash equivalents and no outstanding borrowings, indicating a strong liquidity position [13] Q&A Session Summary Question: Is it a good time to increase the penetration of Natural Grocers brands? - Management confirmed that they are actively marketing their own brand and aim to increase penetration by one percentage point per year, targeting 10.8% to 11% in two years [20][22] Question: What challenges does the company face in the current economic environment? - Management acknowledged a pullback from less loyal customers and noted that economic uncertainty is affecting consumer sentiment, but they remain confident in their core customer base [27][30] Question: What is the expectation for free cash flow in 2026? - Management expects positive free cash flow in 2026, with significant investments in capital expenditures to support growth initiatives [33]