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, 2025, we operated 168 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, 2026, 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

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, 2025, we increased our store count at a compound annual growth rate of 1.2%. In fiscal year 2025, we opened two new stores, relocated/remodeled three existing stores and closed two stores. We plan to open six to eight new stores and relocate/remodel two to three existing stores in fiscal year 2026. We intend to target an annual new store unit growth rate of 4% to 5% for the foreseeable future. During the three months ended December 31, 2025, we relocated one existing store and closed one store. Between January 1, 2026 and the date of this Form 10-Q, we did not open any new stores or 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, 2025, we increased our store count at a compound annual growth rate of 1.2%. In fiscal year 2025, we opened two new stores, relocated/remodeled three existing stores and closed two stores. We plan to open six to eight new stores and relocate/remodel two to three existing stores in fiscal year 2026. We intend to target an annual new store unit growth rate of 4% to 5% for the foreseeable future. During the six months ended March 31, 2026, we opened one new store, relocated one existing store and closed one store. Between April 1, 2026 and the date of this Form 10-Q, we opened one new store and relocated one existing store.

Previous wording

Key highlights of our performance for the three months ended December 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.

Current wording

Key highlights of our performance for the three and six months ended March 31, 2026 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), 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 and income. 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, rental income, and other general and administrative expenses and income. 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

Net sales increased $5.4 million, or 1.6%, to $335.6 million for the three months ended December 31, 2025 compared to $330.2 million for the three months ended December 31, 2024, due to a $5.7 million increase in comparable store sales and a $2.4 million increase in new store sales, partially offset by a $2.8 million decrease in net sales related to closed stores. Daily average comparable store sales increased 1.7% for the three months ended December 31, 2025 compared to an increase of 8.9% for the three months ended December 31, 2024. The daily average comparable store sales increase in the first quarter of fiscal year 2026 resulted from a 1.0% increase in daily average transaction count and a 0.7% increase in daily average transaction size. Comparable store average transaction size was $49.35 for the three months ended December 31, 2025.

Current wording

Net sales increased $1.6 million, or 0.5%, to $337.4 million for the three months ended March 31, 2026 compared to $335.8 million for the three months ended March 31, 2025, due to a $1.7 million increase in comparable store sales and a $1.1 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 0.5% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The daily average comparable store sales increase resulted from a 1.6% increase in daily average transaction size, partially offset by a 1.1% decrease in daily average transaction count. Comparable store average transaction size was $49.67 for the three months ended March 31, 2026.

Previous wording

Store expenses decreased $0.5 million, or 0.7%, to $73.0 million for the three months ended December 31, 2025 compared to $73.5 million for the three months ended December 31, 2024. The decrease in store expenses was primarily driven by expense management. Store expenses as a percentage of net sales were 21.8% and 22.3% for the three months ended December 31, 2025 and 2024, respectively.

Current wording

Store expenses decreased $1.2 million, or 1.6%, to $71.6 million for the three months ended March 31, 2026 compared to $72.8 million for the three months ended March 31, 2025. The decrease in store expenses was primarily driven by expense management. Store expenses as a percentage of net sales were 21.2% and 21.7% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

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

Current wording

Pre-opening expenses were $0.6 million for the three months ended March 31, 2026 compared to $0.4 million for the three months ended March 31, 2025.

Previous wording

Interest expense, net of capitalized interest, was $0.7 million and $0.9 million for the three months ended December 31, 2025 and 2024, respectively.

Current wording

Interest expense, net of capitalized interest, was $0.6 million for the three months ended March 31, 2026 compared to $0.8 million for the three months ended March 31, 2025.

Previous wording

Income tax expense increased $0.1 million for the three months ended December 31, 2025 to $2.6 million compared to $2.5 million for the three months ended December 31, 2024. The Company’s effective income tax rate was approximately 18.7% and 20.0% for the three months ended December 31, 2025 and 2024, respectively.

Current wording

Income tax expense increased $0.3 million for the three months ended March 31, 2026 to $4.0 million compared to $3.7 million for the three months ended March 31, 2025. The Company’s effective income tax rate was 23.1% and 22.0% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Net income was $11.3 million, or $0.49 diluted earnings per share, for the three months ended December 31, 2025 compared to $9.9 million, or $0.43 diluted earnings per share, for the three months ended December 31, 2024.

Current wording

Net income was $13.4 million, or $0.58 diluted earnings per share, for the three months ended March 31, 2026 compared to $13.1 million, or $0.56 diluted earnings per share, for the three months ended March 31, 2025.

Previous wording

Gross profit increased less than $0.1 million, or 0.0%, to $98.9 million for the three months ended December 31, 2025 compared to $98.8 million for the three months ended December 31, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin decreased to 29.5% for the three months ended December 31, 2025 compared to 29.9% for the three months ended December 31, 2024. The decrease in gross margin during the three months ended December 31, 2025 was driven by lower product margin primarily due to higher inventory shrink.

Current wording

Gross profit increased $0.7 million, or 0.4%, to $201.3 million for the six months ended March 31, 2026 compared to $200.6 million for the six months ended March 31, 2025. Gross profit reflects earnings after product and store occupancy costs. Gross margin decreased to 29.9% for the six months ended March 31, 2026 compared to 30.1% for the six months ended March 31, 2025. The decrease in gross margin during the six months ended March 31, 2026 was driven by lower product margin primarily due to higher merchandise inventory shrink during the three months ended December 31, 2025.

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 merchandise inventory, operating expenses, SaaS implementation costs, capital expenditures predominantly in connection with opening, relocating and remodeling stores, property acquisitions, debt service, cash dividends, share repurchases and corporate taxes. As of December 31, 2025, we had $23.2 million in cash and cash equivalents and $67.6 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 merchandise inventory, operating expenses, SaaS implementation costs, capital expenditures predominantly in connection with opening, relocating and remodeling stores, property acquisitions, debt service, cash dividends, share repurchases and corporate taxes. As of March 31, 2026, we had $20.7 million in cash and cash equivalents and $67.6 million available for borrowing under our Credit Facility.

Previous wording

We paid a quarterly cash dividend of $0.15 per share of common stock in the three months ended December 31, 2025. On February 4, 2026, our Board approved the payment of a quarterly cash dividend of $0.15 per share of common stock to be paid on March 18, 2026 to stockholders of record as of the close of business on March 2, 2026.

Current wording

We paid a quarterly cash dividend of $0.15 per share of common stock in each of the first two quarters of fiscal year 2026. On May 6, 2026, our Board approved the payment of a quarterly cash dividend of $0.15 per share of common stock to be paid on June 3, 2026 to stockholders of record as of the close of business on May 18, 2026.

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 increased $18.5 million, or 688.0%, to $21.1 million for the three months ended December 31, 2025 compared to $2.7 million for the three months ended December 31, 2024. The increase in cash provided by operating activities was the result of increases in cash provided by operating assets and liabilities, primarily attributable to the timing of accounts payable payments and merchandise inventory purchases and lower capitalized SaaS implementation costs, and 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 increased $7.1 million, or 19.3%, to $43.8 million for the six months ended March 31, 2026 compared to $36.7 million for the six months ended March 31, 2025. The increase in cash provided by operating activities was the result of increases in cash provided by net income as adjusted for non-cash items and in cash provided by operating assets and liabilities, primarily attributable to the timing of merchandise inventory purchases and lower capitalized SaaS implementation costs.

Previous wording

We plan to spend approximately $40.4 million to $45.4 million on capital expenditures during the remainder of fiscal year 2026, primarily in connection with expected new store openings and store relocations/remodels.

Current wording

We plan to spend approximately $14.7 million to $19.7 million on capital expenditures during the remainder of fiscal year 2026 primarily in connection with expected new store openings and store relocations/remodels.

Previous wording

Acquisition of property and equipment not yet paid increased $2.5 million to $6.3 million for the three months ended December 31, 2025 compared to $3.8 million for the three months ended December 31, 2024 due to the timing of payments related to new store openings and relocations/remodels.

Current wording

Acquisition of property and equipment not yet paid increased $3.2 million to $5.9 million for the six months ended March 31, 2026 compared to $2.7 million for the six months ended March 31, 2025 due to the timing of payments related to new store openings and relocations/remodels.

Previous 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 by financing activities was $5.5 million for the three months ended December 31, 2025 compared to net cash provided by financing activities of $4.2 million for the three months ended December 31, 2024.

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 $9.9 million for the six months ended March 31, 2026 compared to $8.5 million for the six months ended March 31, 2025.

Previous wording

The aggregate revolving commitment amount under the Credit Facility is $70.0 million, including a $5.0 million sub-limit for standby letters of credit. The operating company is the borrower under the Credit Facility, and its obligations under the Credit Facility are guaranteed by us, the holding company. The Credit Facility is secured by a lien on substantially all of the Company’s assets. The Company has the right to borrow, prepay and re-borrow revolving amounts under the Credit Facility at any time prior to the maturity date without premium or penalty. On November 16, 2023, we amended the Credit Facility to: (i) increase our aggregate revolving commitments from $50.0 million to $75.0 million; (ii) extend the maturity date of the revolving commitments under the Credit Facility to November 16, 2028; and (iii) increase the Company’s restricted payment capacity by $2.5 million, allowing the Company to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $15.0 million during any fiscal year. The aggregate revolving commitment amount will be automatically and permanently reduced by $2.5 million on each anniversary date until the Credit Facility matures on November 16, 2028, unless we have previously exercised our option to reduce the aggregate revolving commitments to a lower amount.

Current wording

The aggregate revolving commitment amount under the Credit Facility is $70.0 million, including a $5.0 million sub-limit for standby letters of credit. The operating company is the borrower under the Credit Facility, and its obligations under the Credit Facility are guaranteed by us, the holding company. The Credit Facility is secured by a lien on substantially all of the Company’s assets. The Company has the right to borrow, prepay and re-borrow revolving amounts under the Credit Facility at any time prior to the maturity date without premium or penalty. On November 16, 2023, we amended the Credit Facility to: (i) increase our aggregate revolving commitments from $50.0 million to $75.0 million; (ii) extend the maturity date of the revolving commitments under the Credit Facility to November 16, 2028; and (iii) increase the Company’s restricted payment capacity by $2.5 million, allowing the Company to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $15.0 million during any fiscal year. The aggregate revolving commitment amount is automatically and permanently reduced by $2.5 million on each anniversary date until the Credit Facility matures on November 16, 2028, unless we have previously exercised our option to reduce the aggregate revolving commitments to a lower amount.