US retailer Natural Grocers by Vitamin Cottage has said it expects to open 11 stores in the next 12 months.
The Colorado-based firm, which listed in New York in July, had 59 outlets selling natural and organic groceries across 12 states by the end of September, when its financial year ended.
Last month, the retailer opened a store in Montana. It said on Thursday (15 November) it planned to open 12 outlets in its new financial year and had signed leases for six of them.
In the new financial year, Natural Grocers expects to increase comparable-store sales by between 7.5% and 8.5%. In the 12 months to the end of September, comparable-store sales were up 11.6%. Net sales grew 27.2% to $336.4m.
Net income, meanwhile, was up 89.6% at $6.6m.
Natural Grocers by Vitamin Cottage Reports Fiscal 2012 Fourth Quarter and Full Year Results and Provides 2013 Outlook Nov 15, 2012
LAKEWOOD, Colo., Nov. 15, 2012 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today reported results for the fourth quarter and fiscal year ended September 30, 2012 and provided its outlook for fiscal year 2013.
An Introduction
In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. (NGVC) and its subsidiaries (collectively, the Company) in conformity with U.S. generally accepted accounting principles (GAAP), the Company has presented selected results:
on an adjusted basis in order to reflect the impact of certain compensation charges related to the July 25, 2012 initial public offering (IPO); and on a pro forma basis to reflect the purchase of the 45% noncontrolling interest in Boulder Vitamin Cottage Group, LLC (BVC), which owned five stores in Colorado.
Such adjustments to financial results and EBITDA are non-GAAP financial measures. The Company describes the use of non-GAAP financial measures at the end of this press release. In addition, reconciliations of GAAP measures to adjusted results and EBITDA are presented in schedules to this press release.
Highlights
Comparable store sales increased 13.0% for the fourth quarter and increased 11.6% for fiscal year 2012. Net sales increased 28.2% to $89.9 million for the fourth quarter and increased 27.2% to $336.4 million for fiscal year 2012. Net income attributable to NGVC increased 6.0% to $973,000 for the fourth quarter and increased 89.8% to $6.6 million for fiscal year 2012 with diluted earnings per share of $0.30. Adjusted pro forma net income attributable to NGVC (which illustrates net income as if the Company owned 100% of BVC for the periods presented and excludes stock-based and incentive compensation expenses associated with the IPO) increased 64.0% to $1.8 million for the fourth quarter with diluted earnings per share of $0.08 and increased 92.0% to $8.0 million for fiscal year 2012 with diluted earnings per share of $0.36. EBITDA increased 7.7% to $4.3 million for the fourth quarter and increased 45.0% to $21.9 million for fiscal year 2012. Adjusted EBITDA (which excludes $1.4 million of stock-based and incentive compensation expenses associated with the IPO) increased 42.7% to $5.7 million for the fourth quarter and increased 54.2% to $23.3 million for fiscal year 2012.
"We are pleased to report these strong results to our shareholders following our first quarter as a public company," stated Kemper Isely, Co-President. "Our 2012 fiscal performance reflects strength in both new store openings and comparable store sales increases, which together demonstrate the strong foundation of people and systems we have in place to support disciplined sustainable growth."
Operating Results
Fourth Quarter Fiscal Year 2012 compared to 2011
During the fourth quarter, net sales increased 28.2% to $89.9 million due to an increase of $10.8 million in sales from new stores and a 13.0% increase in comparable store sales. Comparable store transaction count increased 7.9% quarter over quarter.
Gross profit increased 29.0% to $26.4 million. Gross margin increased to 29.3% from 29.2%, quarter over quarter with product margin staying relatively flat. The increase in gross margin is due to a decrease in occupancy costs as a percentage of sales at comparable stores.
Store expenses as a percentage of sales decreased to 21.3% from 21.9%. The decrease was primarily driven by a decrease in salary related expenses at comparable stores, partially offset by an increase in salary related expenses at new stores, all as a percentage of related sales.
Administrative expenses increased 62.9% to $4.4 million, in part due to the $1.1 million stock-based compensation expense and the $286,000 incentive compensation expense associated with the IPO. Excluding the stock-based and incentive compensation expenses associated with the IPO, administrative expenses as a percentage of sales were 3.4% compared to 3.9% in the prior comparable quarter.
Pre-opening and relocation expenses increased $367,000 to $862,000, due to the timing of new store openings, the relocation of one store and the relocation of the bulk food repackaging facility and distribution center.
Interest expense decreased by less than $1,000, as a result of a $40,000 decrease in interest expense due to the payoff of the term loan and all outstanding amounts under the revolving credit facility in July 2012, offset by a $39,000 increase in interest expense as a result of two new stores that were accounted for as capital lease finance obligations.
Other expense increased to $301,000 primarily due to asset disposals in conjunction with the relocation of one store.
Net income attributable to noncontrolling interest decreased $359,000 to a net loss of $74,000 compared to net income of $285,000 in the prior comparable quarter as a result of the purchase of the remaining noncontrolling interest in BVC in July 2012. The fourth quarter includes approximately one month of operations for 45% of BVC combined with increased expenses due to BVC's share of IPO costs.
Net income attributable to NGVC increased 6.0% to $973,000 and EBITDA increased 7.7% to $4.3 million.
Pro forma net income attributable to NGVC decreased 15.5% to $927,000 or $0.04 diluted earnings per share. Adjusted pro forma net income attributable to NGVC increased 64.0% to $1.8 million or $0.08 diluted earnings per share. Adjusted EBITDA increased 42.7% to $5.7 million.
Fiscal Year 2012 compared to 2011
For fiscal year 2012, net sales increased 27.2% to $336.4 million due to an increase of $41.3 million in sales from new stores and an 11.6% increase in comparable store sales. Comparable store transaction count increased 7.0% year over year. Mature store sales increased 7.6%. For fiscal 2012, mature stores are stores open during or before fiscal 2007.
Gross profit increased 28.0% to $99.1 million. Gross margin increased to 29.4% from 29.3%, with product margin staying relatively flat. The increase in gross margin is due to a decrease in occupancy costs as a percentage of sales at comparable stores.
Store expenses as a percentage of sales decreased to 21.4% from 21.8%. The decrease was primarily driven by a decrease in salary related expenses, and to a lesser extent, a decrease in advertising expense, partially offset by an increase in depreciation expense, all as a percentage of sales.
Administrative expenses increased 22.5% to $12.7 million, in part due to the $1.1 million stock-based compensation expense and the $286,000 incentive compensation expense associated with the IPO, as well as an increase in general and administrative positions in fiscal year 2012 to support store growth. Excluding the stock-based and incentive compensation expenses associated with the IPO, administrative expenses as a percentage of sales were 3.4% compared to 3.9% in the prior year.
Pre-opening and relocation expenses increased $209,000 to $2.2 million due to the relocation of one store and the relocation of the bulk food repackaging facility and distribution center.
Interest expense decreased $101,000 or 15.0% due to the repayment of all outstanding amounts under the term loan and revolving credit facility in July 2012. The decrease in interest expense as a result of the repayments was partially offset by a $39,000 increase in interest expense as a result of two new stores that were accounted for as capital lease finance obligations.
Other expense increased $325,000 primarily due to asset disposals in conjunction with the relocation of one store.
The Company's effective income tax rate for fiscal 2012 was 34.6% compared to 32.0% in the prior year. The increase was primarily due to changes in nontaxable net income attributable to noncontrolling interest, and to a lesser extent, different state income tax rates.
Net income attributable to noncontrolling interest decreased $278,000 to $828,000 as a result of the purchase of the remaining noncontrolling interest in BVC in July 2012. Fiscal year 2012 includes approximately ten months of operations for 45% of BVC combined with increased expenses due to BVC's share of IPO costs. The prior year includes twelve months of operations for 45% of BVC.
Net income attributable to NGVC increased 89.8% to $6.6 million and EBITDA increased 45.0% to $21.9 million.
Pro forma net income attributable to NGVC increased 71.2% to $7.2 million or $0.32 diluted earnings per share. Adjusted pro forma net income attributable to NGVC increased 92.0% to $8.0 million or $0.36 diluted earnings per share. Adjusted EBITDA increased 54.2% to $23.3 million.
Balance Sheet and Cash Flow
During the fourth quarter, the Company generated $7.2 million in cash from operations and invested $11.7 million in capital expenditures primarily for new stores and the relocation and expansion of the bulk food repackaging facility and distribution center. For fiscal 2012, the Company generated $25.2 million in cash from operations and invested $25.3 million in capital expenditures primarily for new stores.
In connection with the IPO, the Company received $58.1 million in proceeds, net of underwriting fees, repaid the outstanding $26.4 million on the term loan and revolving credit facility, purchased the remaining 45% noncontrolling interest in five of the Colorado stores for $10.1 million and paid $2.5 million in expenses associated with the IPO.
The Company ended the fiscal year with $17.3 million in cash and cash equivalents and $1.8 million in available for sale securities, as well as $21.0 million available under the revolving credit facility. On October 31, 2012 the Company amended the revolving credit facility and reduced the amount available from $21.0 million to $15.0 million.
The Company entered into four capital leases during fiscal year 2012. Two opened during the fourth quarter of fiscal 2012, and two are scheduled to open in the first quarter of fiscal 2013.
Growth and Development
In fiscal year 2012, the Company opened ten stores, including four stores in the fourth quarter.
As of September 30, 2012, the Company had 59 stores located in 12 states.
The Company plans to open 12 stores in fiscal year 2013 and expects to remodel three existing stores. On October 30, 2012, the Company opened a store in Missoula, MT.
The Company has signed leases for six stores scheduled to open in fiscal year 2013 in Helena, MT; Denton, TX; Omaha, NE; Lubbock, TX; Medford, OR; and Kalispell, MT.
Store Level Economics
Historically, new stores opened since January 1, 2005 required an upfront capital investment of approximately $1.9 million. The Company anticipates that fiscal 2013 new stores will require an upfront capital investment of approximately $2.3 million consisting of capital expenditures of approximately $1.8 million (net of tenant allowances), initial inventory of approximately $300,000 (net of payables) and pre-opening expenses of approximately $180,000. It is projected that these stores will experience higher than historical first year sales. The Company continues to target approximately four years to recoup the initial net cash investments and approximately 35% cash on cash returns by the end of the fifth year following the opening.
