Natural Grocers by Vitamin Cottage Inc

Previous wording

We operate natural and organic grocery and dietary supplement stores that are focused on providing high-quality products at affordable prices, exceptional customer service, nutrition education and community outreach. We offer a variety of natural and organic groceries, dietary supplements and body care products that meet our strict quality standards. We believe we have been at the forefront of the natural and organic foods movement since our founding. We are headquartered in Lakewood, Colorado. As of December 31, 2024, we operated 167 stores in 21 states, including Colorado, Arizona, Arkansas, Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington and Wyoming. We also operate a bulk food repackaging facility and distribution center in Golden, Colorado.

Current wording

We operate natural and organic grocery and dietary supplement stores that are focused on providing high-quality products at affordable prices, exceptional customer service, nutrition education and community outreach. We offer a variety of natural and organic groceries, dietary supplements and body care products that meet our strict quality standards. We believe we have been at the forefront of the natural and organic foods movement since our founding. We are headquartered in Lakewood, Colorado. As of March 31, 2025, we operated 169 stores in 21 states, including Colorado, Arizona, Arkansas, Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington and Wyoming. We also operate a bulk food repackaging facility and distribution center in Golden, Colorado.

Previous wording

We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality guidelines. The sizes of our stores range from approximately 7,000 to 16,000 selling square feet.

Current wording

We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality guidelines. The sizes of our stores range from approximately 7,000 to 17,000 selling square feet.

Previous wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five years ended September 30, 2024, we increased our store count at a compound annual growth rate of 2.0%. In fiscal year 2024, we opened four new stores and relocated/remodeled four existing stores. We plan to open four to six new stores and relocate/remodel two to four existing stores in fiscal year 2025. During the three months ended December 31, 2024, we relocated/remodeled two existing stores and closed two stores. Between January 1, 2025 and the date of this Form 10-Q, we opened one new store and did not relocate/remodel any existing stores.

Current wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five fiscal years ended September 30, 2024, we increased our store count at a compound annual growth rate of 2.0%. In fiscal year 2024, we opened four new stores and relocated/remodeled four existing stores. We plan to open three to four new stores and relocate/remodel two to four existing stores in fiscal year 2025. During the six months ended March 31, 2025, we opened two new stores, relocated/remodeled two existing stores and closed two stores. Between April 1, 2025 and the date of this Form 10-Q, we did not open any new stores nor relocate/remodel any existing stores.

Previous wording

Key highlights of our performance for the three months ended December 31, 2024 are discussed briefly below and in further detail throughout this MD&A. Key financial metrics including, but not limited to, daily average comparable store sales, are defined in the section “Key Financial Metrics in Our Business,” presented later in this MD&A.

Current wording

Key highlights of our performance for the three and six months ended March 31, 2025 are discussed briefly below and in further detail throughout this MD&A. Key financial metrics, including, but not limited to, daily average comparable store sales, are defined in the section “Key Financial Metrics in Our Business,” presented later in this MD&A.

Previous wording

Administrative expenses consist of home office-related expenses, such as salary and benefits, share-based compensation, office supplies, hardware and software expenses, depreciation and amortization expense, occupancy costs (including rent, common area maintenance, real estate taxes and utilities), professional services expenses, expenses associated with our Board, expenses related to compliance with the requirements of regulations applicable to publicly traded companies, and other general and administrative expenses. Depreciation expense included in administrative expenses relates to depreciation for assets directly used at the home office including depreciation on land improvements, leasehold improvements, fixtures and equipment, and computer hardware and software.

Current wording

Administrative expenses consist of home office-related expenses, such as salary and benefits, share-based compensation, office supplies, hardware and software expenses, depreciation and amortization expense, occupancy costs (including rent, common area maintenance, real estate taxes and utilities), software services expenses, professional services expenses, expenses associated with our Board, expenses related to compliance with the requirements of regulations applicable to publicly traded companies, and other general and administrative expenses. Depreciation expense included in administrative expenses relates to depreciation for assets directly used at the home office including depreciation on land improvements, leasehold improvements, fixtures and equipment, and computer hardware and software.

Previous wording

Pre-opening expenses for new stores and relocations/remodels may include rent expense, salaries, advertising, supplies, and other miscellaneous costs incurred prior to the store opening. Rent expense is generally incurred from three to six months prior to a store’s opening date for store leases classified as operating. For store leases classified as finance leases, we recognize pre-opening interest and depreciation expense. Other pre-opening expenses are generally incurred in the four to seven months prior to the store opening. Certain advertising and promotional costs associated with opening a new store may be incurred both before and after the store opens. All pre-opening costs are expensed as incurred. Pre-opening expenses for remodels are incurred if the store is required to be closed due to the remodel.

Current wording

Pre-opening expenses for new stores and relocations/remodels may include rent expense, salaries, advertising, supplies, and other miscellaneous costs incurred prior to the store opening. Rent expense is generally incurred from three to six months prior to a store’s opening date for store leases classified as operating. For store leases classified as finance leases, we recognize pre-opening depreciation expense. Other pre-opening expenses are generally incurred in the four to seven months prior to the store opening. Certain advertising and promotional costs associated with opening a new store may be incurred both before and after the store opens. All pre-opening costs are expensed as incurred. Pre-opening expenses for remodels are incurred if the store is required to be closed due to the remodel.

Previous wording

Net sales increased $28.5 million, or 9.4%, to $330.2 million for the three months ended December 31, 2024 compared to $301.8 million for the three months ended December 31, 2023, due to a $26.7 million increase in comparable store sales and a $2.9 million increase in new store sales, partially offset by a $1.1 million decrease in net sales related to closed stores. Daily average comparable store sales increased 8.9% for the three months ended December 31, 2024 compared to an increase of 6.2% for the three months ended December 31, 2023. The daily average comparable store sales increase in the first quarter of fiscal year 2025 resulted from a 5.3% increase in daily average transaction count and a 3.4% increase in daily average transaction size. Comparable store average transaction size was $48.94 for the three months ended December 31, 2024. The increase in net sales during the three months ended December 31, 2024 was driven by increases in transaction counts, items per transaction, retail prices and new store sales. Sales growth was driven by enhanced customer engagement with our {N}power rewards program, compelling offers, marketing initiatives, and the increased sales ofNatural Grocers brand products.

Current wording

Net sales increased $27.7 million, or 9.0%, to $335.8 million for the three months ended March 31, 2025 compared to $308.1 million for the three months ended March 31, 2024, due to a $27.2 million increase in comparable store sales and a $3.5 million increase in new store sales, partially offset by a $2.9 million decrease in net sales related to closed stores. Daily average comparable store sales increased 8.9% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The daily average comparable store sales increase resulted from a 5.9% increase in daily average transaction count and a 2.8% increase in daily average transaction size. Comparable store average transaction size was $48.94 for the three months ended March 31, 2025.

Previous wording

Gross profit increased $10.1 million, or 11.3%, to $98.8 million for the three months ended December 31, 2024 compared to $88.8 million for the three months ended December 31, 2023. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 29.9% for the three months ended December 31, 2024 compared to 29.4% for the three months ended December 31, 2023. The increase in gross margin during the three months ended December 31, 2024 was primarily driven by store occupancy cost leverage and higher product margin.

Current wording

Gross profit increased $11.4 million, or 12.6%, to $101.7 million for the three months ended March 31, 2025 compared to $90.4 million for the three months ended March 31, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 30.3% for the three months ended March 31, 2025 compared to 29.3% for the three months ended March 31, 2024. The increase in gross margin during the three months ended March 31, 2025 was driven by higher product margin primarily attributed to effective promotions.

Previous wording

Store expenses increased $5.5 million, or 8.1%, to $73.5 million for the three months ended December 31, 2024 compared to $68.0 million for the three months ended December 31, 2023. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 22.3% and 22.5% for the three months ended December 31, 2024 and 2023, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Current wording

Store expenses increased $3.6 million, or 5.1%, to $72.8 million for the three months ended March 31, 2025 compared to $69.2 million for the three months ended March 31, 2024. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 21.7% and 22.5% for the three months ended March 31, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Previous wording

Pre-opening expenses were $0.4 million and $0.5 million for the three months ended December 31, 2024 and 2023, respectively.

Current wording

Pre-opening expenses were $0.4 million for each of the three months ended March 31, 2025 and 2024.

Previous wording

Interest expense, net of capitalized interest, was $0.9 million for each of the three months ended December 31, 2024 and 2023.

Current wording

Interest expense, net of capitalized interest, was $0.8 million for the three months ended March 31, 2025 compared to $1.2 million for the three months ended March 31, 2024.

Previous wording

Income tax expense increased $0.3 million for the three months ended December 31, 2024 to $2.5 million compared to $2.2 million for the three months ended December 31, 2023. The Company’s effective income tax rate was approximately 20.0% and 21.7% for the three months ended December 31, 2024 and 2023, respectively.

Current wording

Income tax expense increased $1.6 million for the three months ended March 31, 2025 to $3.7 million compared to $2.1 million for the three months ended March 31, 2024. The Company’s effective income tax rate was 22.0% and 21.1% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Net income was $9.9 million, or $0.43 diluted earnings per share, for the three months ended December 31, 2024 compared to $7.8 million, or $0.34 diluted earnings per share, for the three months ended December 31, 2023.

Current wording

Net income was $13.1 million, or $0.56 diluted earnings per share, for the three months ended March 31, 2025 compared to $8.0 million, or $0.35 diluted earnings per share, for the three months ended March 31, 2024.

Previous wording

Administrative expenses increased $2.1 million, or 22.4%, to $11.5 million for the three months ended December 31, 2024 compared to $9.4 million for the three months ended December 31, 2023. The increase in administrative expenses was driven by higher compensation expenses, including costs related to our Chief Financial Officer transition, and technology expenses. Administrative expenses as a percentage of net sales were 3.5% and 3.1% for the three months ended December 31, 2024 and 2023, respectively.

Current wording

Administrative expenses increased $3.6 million, or 19.1%, to $22.5 million for the six months ended March 31, 2025 compared to $18.9 million for the six months ended March 31, 2024. The increase in administrative expenses was driven by higher compensation expenses, including costs related to our Chief Financial Officer transition, and technology expenses. Administrative expenses as a percentage of net sales were 3.4% and 3.1% for the six months ended March 31, 2025 and 2024, respectively.

Previous wording

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation and non-recurring items.

Current wording

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation, amortization of software hosting arrangement (SaaS) implementation costs and non-recurring items.

Previous wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service, cash dividends, share repurchases and corporate taxes. As of December 31, 2024, we had $6.3 million in cash and cash equivalents and $61.4 million available for borrowing under our Credit Facility.

Current wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service, cash dividends, share repurchases and corporate taxes. As of March 31, 2025, we had $21.2 million in cash and cash equivalents and $70.3 million available for borrowing under our Credit Facility.

Previous wording

We paid a quarterly cash dividend of $0.12 per share of common stock in the three months ended December 31, 2024. On February 5, 2025, our Board approved the payment of a quarterly cash dividend of $0.12 per share of common stock to be paid on March 19, 2025 to stockholders of record as of the close of business on March 3, 2025.

Current wording

We paid a quarterly cash dividend of $0.12 per share of common stock in each of the first two quarters of fiscal year 2025. On May 7, 2025, our Board approved the payment of a quarterly cash dividend of $0.12 per share of common stock to be paid on June 11, 2025 to stockholders of record as of the close of business on May 27, 2025.

Previous wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation, and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities decreased $13.9 million, or 83.9%, to $2.7 million for the three months ended December 31, 2024 compared to $16.6 million for the three months ended December 31, 2023. The decrease in cash provided by operating activities was the result of a decrease in cash provided by operating assets and liabilities, primarily due to timing of accounts payable payments for goods and services, partially offset by an increase in cash provided by net income as adjusted for non-cash items.

Current wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation, and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities decreased $0.1 million, or 0.3%, to $36.7 million for the six months ended March 31, 2025 compared to $36.8 million for the six months ended March 31, 2024. The decrease in cash provided by operating activities was the result of a decrease in cash provided by operating assets and liabilities, partially offset by an increase in cash provided by net income as adjusted for non-cash items.

Previous wording

Net cash used in investing activities decreased $2.4 million, or 20.2%, to $9.4 million for the three months ended December 31, 2024 compared to $11.8 million for the three months ended December 31, 2023. This decrease was primarily the result of decreases in acquisitions of property and equipment of $2.1 million and other intangibles of $0.1 million during the three months ended December 31, 2024 compared to the three months ended December 31, 2023, attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Current wording

Net cash used in investing activities decreased $6.6 million, or 29.5%, to $15.9 million for the six months ended March 31, 2025 compared to $22.5 million for the six months ended March 31, 2024. This decrease was primarily the result of decreases in acquisitions of property and equipment of $6.1 million and other intangibles of $0.2 million during the six months ended March 31, 2025 compared to the six months ended March 31, 2024, and was attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Previous wording

We plan to spend approximately $26.6 million to $34.6 million on capital expenditures during the remainder of fiscal year 2025 primarily in connection with expected new store openings and store relocations/remodels.

Current wording

We plan to spend approximately $20.1 million to $28.1 million on capital expenditures during the remainder of fiscal year 2025 primarily in connection with expected new store openings and store relocations/remodels.

Previous wording

Acquisition of property and equipment not yet paid decreased $4.7 million to $3.8 million for the three months ended December 31, 2024 compared to $8.5 million for the three months ended December 31, 2023 due to the timing of payments related to new store openings and relocations/remodels.

Current wording

Acquisition of property and equipment not yet paid decreased $2.7 million to $2.7 million for the six months ended March 31, 2025 compared to $5.4 million for the six months ended March 31, 2024 due to the timing of payments related to new store openings and relocations/remodels.

Previous wording

Net cash provided by financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash provided by financing activities was $4.2 million for the three months ended December 31, 2024 compared to net cash used of $9.5 million for the three months ended December 31, 2023. During the three months ended December 31, 2023, we paid a special cash dividend to stockholders of $22.7 million.

Current wording

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash used in financing activities was $8.5 million for the six months ended March 31, 2025 compared to $21.7 million for the six months ended March 31, 2024. During the six months ended March 31, 2024, we paid a special cash dividend to stockholders of $22.7 million.

Previous wording

We had $8.9 million and no revolving loan amounts outstanding under the Credit Facility as of December 31, 2024 and September 30, 2024, respectively. As of December 31, 2024 and September 30, 2024, we had undrawn, issued and outstanding letters of credit of $2.2 million, which were reserved against the amount available for borrowing under the Credit Facility. We had $61.4 million and $72.8 million available for borrowing under the Credit Facility as of December 31, 2024 and September 30, 2024, respectively.

Current wording

We had no revolving loan amounts outstanding under the Credit Facility as of March 31, 2025 and September 30, 2024. As of March 31, 2025 and September 30, 2024, we had undrawn, issued and outstanding letters of credit of $2.2 million, which were reserved against the amount available for borrowing under the Credit Facility. We had $70.3 million and $72.8 million available for borrowing under the Credit Facility as of March 31, 2025 and September 30, 2024, respectively.