Natural Grocers' Q1 Earnings Rise Y/Y on Cost Discipline

Shares of Natural Grocers by Vitamin Cottage, Inc. NGVC have declined 9.8% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 0.9% growth over the same time frame. Over the past month, the stock has declined 3.7% compared with the S&P 500’s 0.4% decrease.

For the fiscal first quarter of 2026, Natural Grocers reported earnings per share of 49 cents, up from 43 cents in the same period last year. 

Net sales of $335.6 million represented a 1.6% increase compared to the year-ago quarter. The company attributed the sales growth to a 1.7% increase in daily average comparable store sales, driven by a 1% increase in transaction count and a 0.7% rise in transaction size.

Net income rose 14% year over year to $11.3 million.

Natural Grocers by Vitamin Cottage, Inc. Price, Consensus and EPS Surprise

Natural Grocers by Vitamin Cottage, Inc. price-consensus-eps-surprise-chart | Natural Grocers by Vitamin Cottage, Inc. Quote

Other Key Business Metrics

Gross profit for the quarter remained relatively flat at $98.9 million, increasing less than $0.1 million compared to the prior-year quarter. However, gross margin contracted by 40 basis points to 29.5% from 29.9%, largely due to lower product margins stemming from increased inventory shrink. 

Despite the pressure on gross margin, operational efficiencies provided some relief. Store expenses declined 0.7% to $73 million, and as a percentage of net sales, fell to 21.8% from 22.3%. Administrative expenses decreased more sharply by 5.9% to $10.8 million, driven by the absence of one-time costs incurred in the prior year related to a Chief Financial Officer transition. These cost controls helped lift operating income by 9.7% to $14.6 million, with the operating margin expanding to 4.4%, up from 4% in the year-ago period.

Adjusted EBITDA grew 3.1% to $23.5 million, up from $22.8 million a year ago. EBITDA rose 6.2% year over year to $22.6 million, up from $21.3 million. As a percentage of net sales, EBITDA improved to 6.7% compared to 6.4% in the prior year. Adjusted EBITDA represented 7% of net sales, a slight increase from 6.9%, reflecting continued efficiency in operations despite margin pressures.

Management Commentary

Management noted that the quarterly performance was in line with expectations and reaffirmed its full-year guidance. Co-president Kemper Isely highlighted the effectiveness of the company’s "Always AffordableSM" pricing strategy and the appeal of its high-quality natural and organic product assortment. He emphasized that these elements continue to reinforce the company's competitive position, especially in a period of economic uncertainty. The commentary underlined management’s confidence in its differentiated business model and ongoing ability to attract value-focused consumers.

Factors Influencing the Headline Numbers

Sales performance during the quarter was shaped by a mix of store-level dynamics. Comparable store sales added $5.7 million, and new store sales contributed an additional $2.4 million. These gains were partially offset by a $2.8 million sales decline related to closed store locations. On the profitability side, the contraction in gross margin was the main headwind, driven primarily by inventory shrink that affected product margins. Nonetheless, prudent cost management in both store-level and administrative expenses supported operating income growth and margin improvement.

The company also benefited from lower administrative expenses, which were elevated in the prior-year quarter due to transition costs tied to the chief financial officer position. Additionally, store expenses declined slightly, aided by operational discipline. These factors helped offset the modest increase in sales, enabling the company to post meaningful earnings growth.

Guidance

Natural Grocers reaffirmed its outlook for fiscal 2026. The company continues to project daily average comparable store sales growth in the range of 1.5% to 4%, with earnings per share expected to fall between $2.00 and $2.15. Capital expenditures are anticipated to range from $50 million to $55 million for the year. The company also maintained its target of opening six to eight new stores, along with two to three store relocations or remodels. The reaffirmation of guidance reflects management’s confidence in the company’s strategic positioning and the stability of its operations heading into the remainder of the fiscal year.

Other Developments

During the first quarter, the company relocated one store and invested $9.6 million in net capital expenditures, primarily directed toward new, relocated and remodeled store projects. 

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