Earnings call transcript: Natural Grocers’ Q3 2025 results show strong EPS beat

Natural Grocers by Vitamin Cottage Inc (NGVC) reported its third-quarter 2025 earnings, showcasing a robust performance with an EPS of $0.50, surpassing analysts’ forecast of $0.46. Despite a slight revenue miss, the company’s stock surged 12.37% in premarket trading, reflecting investor optimism. The company raised its fiscal 2025 guidance, signaling confidence in sustained growth.

Key Takeaways

• EPS exceeded expectations, reaching $0.50 against a forecast of $0.46.
• Revenue slightly missed estimates, coming in at $328.7 million.
• The stock rose 12.37% in premarket trading following the earnings release.
• Fiscal 2025 guidance was raised for both EPS and comparable store sales growth.
• No signs of softer demand or trade-down behavior were observed.

Company Performance

Natural Grocers demonstrated solid financial health in Q3 2025, with net sales increasing by 6.3% to $328.7 million, contributing to an impressive 9.36% revenue growth over the last twelve months. The company continued its streak of positive transaction counts, marking ten consecutive quarters. The performance was driven by strong sales in meat, dairy, and produce, along with an increase in customer engagement through its Empower Rewards program. With a market capitalization of $850 million, the company has demonstrated strong cash flow management, as highlighted in InvestingPro’s analysis, which reveals several additional positive indicators available to subscribers.

Financial Highlights

• Revenue: $328.7 million, up 6.3% year-over-year
• Earnings per share: $0.50, up 25% year-over-year
• Operating income: $15.6 million, up 21.3%
• Net income: $11.6 million, up 26%
• Adjusted EBITDA: $24.4 million, up 10.1%

Earnings vs. Forecast

Natural Grocers reported an EPS of $0.50, exceeding the forecast of $0.46 by 8.7%. However, revenue slightly missed expectations, with a recorded figure of $328.7 million against a forecast of $330.54 million, marking a surprise of -0.55%. This EPS beat continues the company’s trend of outperforming analyst expectations.

Market Reaction

Following the earnings announcement, Natural Grocers’ stock experienced a significant premarket surge of 12.37%, reaching $41.60. This movement reflects positive investor sentiment despite the revenue miss, likely driven by the strong EPS performance and optimistic forward guidance. The stock has delivered an impressive 56.74% return over the past year, though it recently experienced a notable pullback. For deeper insights into NGVC’s valuation and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports, available for over 1,400 US stocks.

Outlook & Guidance

The company raised its fiscal 2025 outlook, projecting daily average comparable store sales growth between 7.25% and 7.75%, and EPS in the range of $1.90 to $1.95. This growth outlook appears sustainable given the company’s strong financial metrics, including a healthy gross profit margin of 33.69% and efficient capital management as evidenced by its return on invested capital. Natural Grocers plans to open 6-8 new stores in fiscal 2026, with leases already signed for five locations. The expansion strategy underscores the company’s confidence in its growth trajectory.

Executive Commentary

"Our third quarter performance exceeded expectations, and we again delivered outstanding results across all key metrics," said Kemper Isley, Co-President. Richard Halle, CFO, noted, "To date, we have not observed any indicators of softer demand for our products, trade down, or fewer items per basket."

Risks and Challenges

• Potential supply chain disruptions could impact product availability.
• Increased administrative expenses due to technology investments may affect margins.
• Market saturation in key regions could limit growth opportunities.
• Macroeconomic pressures, such as inflation, may affect consumer spending.
• Competitive pressures from larger grocery chains could impact market share.

Q&A

No questions were asked during the Q&A session, indicating a comprehensive presentation that addressed investor concerns.

Full transcript - Natural Grocers by Vitamin Cottage Inc (NGVC) Q3 2025:

Conference Operator: Good day, ladies and gentlemen. Welcome to the Natural Grocers Third Quarter Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in 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 now like to turn the conference over to Ms. Jessica Thiessen, Vice President, Treasurer for Natural Grocers. Ms. Teesson, you may begin.

Jessica Thiessen, Vice President, Treasurer, Natural Grocers: Good afternoon, and thank you for joining us for the Natural Grocers by Vitamin Cottage Third Quarter Fiscal Year twenty twenty five Earnings Conference Call. On the call with me today are Kemper Isley, Co President and Richard Halle, Chief Financial Officer. As a reminder, certain information provided during this conference call contains 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 Forms 10 Q and 10 ks. The company undertakes no obligation to update forward looking statements.

Our remarks today include references to adjusted EBITDA, which is a non GAAP measure. Please see our earnings release for a reconciliation of adjusted EBITDA to net income. Today’s earnings 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.

Kemper Isley, Co President, Natural Grocers: Thank you, Jessica, and good afternoon, everyone. Our third quarter performance exceeded expectations, and we again delivered outstanding results across all key metrics. On today’s call, I will highlight financial results, including drivers of our performance, and provide an update on our initiatives. Then Rich will discuss our third quarter results in greater detail and review our updated fiscal year twenty twenty five guidance. Sales growth in the third quarter continued the strong trends of the previous two years.

Third quarter daily average comparable store sales increased 7.4%. This was our tenth consecutive quarter with positive transaction count comp and our sixth consecutive quarter with an increase in items per basket, driving transaction size comp growth. Sales performance was strong across geographies and vintages. Furthermore, sales remained strong across product categories, with our highest comparable store sales growth in our most differentiated offerings, including meat, dairy, and produce. We believe our strong sales performance over the past two years is evidence of the relevance of our offering for an increasing number of consumers, the overall strength of our business model, and productivity of our initiatives.

For the third quarter, our ongoing focus on operational execution, including effective promotions and store productivity initiatives, combined with expense leverage from higher sales, resulted in an operating margin improvement of 50 basis points and a 25% increase in diluted earnings per share. Based on our strong third quarter results, we are raising our fiscal twenty twenty five outlook for daily average comparable store sales growth and diluted earnings per share. In June, our primary distributor, UNFI, experienced a cybersecurity incident that temporarily impacted UNFI’s ability to fulfill orders and distribute products to our stores, resulting in product shortages in June and July. In the weeks following the incident, we collaborated with UNFI to minimize disruptions and restore normalized levels of product distribution to our stores. We estimate that the disruption to our operations adversely impacted our third quarter net sales by 3,500,000.0 to $4,000,000 daily average comparable store sales by one to 1.5 percentage points, and diluted earnings per share by $04 to $05 Our operations have substantially normalized, and we do not expect the disruption to materially impact our operations or financial performance in the future.

I will now highlight the third quarter performance of key initiatives, which continue to contribute to our growth. During the third quarter, net sales penetration of our Empower Rewards program was 82%, up from 80% a year ago, reflecting continued positive trends in customer loyalty and engagement. To date, during fiscal twenty twenty five, we have opened two new stores, relocated two stores, and remodeled one store. Store unit growth and development is a company priority. I am pleased to announce that we are accelerating store unit growth and plan to open six to eight new stores in fiscal twenty twenty six.

With a consistent track record of strong financial and operating performance over the past several years, we are well positioned to execute this plan. We have already signed leases for five future new stores and are in negotiations on another five sites. Moreover, our new store pipeline includes approximately 75 vetted and approved communities in which we are actively pursuing real estate opportunities. In closing, I would like to thank our Good4U crew for their ongoing commitment to our operational execution and exceptional customer service that have been instrumental in driving our results in the third quarter and over the past several years. With that, I will turn our call over to Rich to discuss our financial results and outlook.

Richard Halle, Chief Financial Officer, Natural Grocers: Thank you, Kemper, and good afternoon. We are very pleased with the continuation of our strong performance through the third quarter. Net sales increased 6.3% from the prior year period to $328,700,000 Note, the 2025 had one less selling day than the 2024 due to the Easter shift. Daily average comparable store sales increased 7.4 and on a two year basis increased 14.6%. Our daily average comparable transaction count increased 4.8%.

Our daily average comparable transaction size increased 2.4%, composed mostly of modest product cost inflation of an estimated two percentage points on an annualized basis and a slight increase in items per basket. In light of the broader macro environment, we continue to monitor consumer trends closely. To date, we have not observed any indicators of softer demand for our products, trade down, or fewer items per basket. Gross margin increased 70 basis points to 29.9%, driven by higher product margin, primarily attributed to effective promotions. Store expenses as a percentage of net sales decreased 10 basis points, reflecting expense leverage.

Administrative expenses as a percentage of net sales increased 20 basis points, primarily driven by higher technology expenses. Operating income increased 21.3% to $15,600,000 Operating margin increased 50 basis points. Net income increased 26% to $11,600,000 and diluted earnings per share increased 25% to $0.50 Adjusted EBITDA increased 10.1% to $24,400,000 Turning to the balance sheet and cash flow. We ended the third quarter in a strong liquidity position, including $13,200,000 in cash and cash equivalents, no outstanding borrowings and $69,500,000 available to borrow on our revolving credit facility. During the first nine months of fiscal twenty twenty five, we generated cash from operations of $39,700,000 and invested $22,900,000 in net capital expenditures, primarily for new and relocated stores, resulting in free cash flow of $16,800,000 We are raising our fiscal twenty twenty five outlook for daily average comparable store sales growth and diluted earnings per share.

We are also updating our outlook for the count of new stores and relocations and remodels and capital expenditures. Our revised outlook includes the following: two new store openings compared to our prior outlook of three to four three store relocations or remodels compared to our prior outlook of two to four daily average comparable store sales growth between 7.257.75%, an increase compared to our prior outlook of 6.57.5% diluted earnings per share between $1.9 and $1.95 an increase compared to our prior outlook of $1.78 and $1.86 and capital expenditures of 30,000,000 to $33,000,000 to support our growth initiatives, a reduction from our prior outlook of 36,000,000 to $44,000,000 primarily due to new store delays. Finally, as Kemper mentioned in his prepared remarks, we are planning to accelerate store growth in fiscal twenty twenty six and expect to open six to eight new stores. Please review our investor presentation on our company’s Investor Relations website for more information about our store growth plans. As we look to the remainder of fiscal twenty twenty five and beyond, we will continue to focus on our key priorities to drive growth, including communicating our differentiated offering, further enhancing customer engagement through our Empower Rewards program, expanding our selection of Natural Grocers brand products, and driving new store development and existing store productivity.

Now, we’d like to open the line for questions. Thank you.

Conference Operator: Thank you. We will now begin our question and answer session. At this time, I’m showing no questions. So this concludes our question and answer session. I’d like to return the call to Kemper Eisley for closing remarks.

Kemper Isley, Co President, Natural Grocers: Thank you very much for joining us to discuss our third quarter results. This month marks our company’s seventieth year serving our communities. I encourage you to visit one of our locations between August 14 and August 16 to celebrate our anniversary with us. We look forward to updating you on our next call regarding the fourth quarter and full fiscal year 2025 results. Thank you.

Good bye.

Conference Operator: The conference call has now concluded. Thank you for attending the Natural Grocers Third Quarter Fiscal Year twenty twenty five Earnings Conference Call. You may now

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