Natural Grocers by Vitamin Cottage — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance

• Net sales increased 1.8% year-over-year to $334.7 million for the third quarter of fiscal 2026, driven by a $4.0 million increase in comparable store sales and a $3.1 million increase in new store sales, partially offset by a $1.1 million decrease from closed stores.
• Daily average comparable store sales grew 1.2% in the third quarter, comprised of a 3.1% increase in transaction size and a 1.8% decrease in transaction count; on a two-year basis, comparable store sales increased 8.6%.
• Gross profit decreased $0.3 million to $98.0 million, with gross margin declining to 29.3% from 29.9% in the prior year period due to unfavorable sales mix, higher merchandise inventory shrink, and freight costs.
• Store expenses increased 0.7% to $72.2 million, representing 21.6% of net sales, down from 21.8% in the prior year.
• Administrative expenses decreased to $9.5 million from $10.9 million in the prior year, or 2.8% of net sales versus 3.3%, largely due to a $2.0 million business interruption insurance recovery gain related to a distributor's cybersecurity incident.
• Operating income was $15.0 million, down from $15.6 million in the prior year, resulting in an operating margin of 4.5% compared to 4.7%.
• Net income was $11.1 million ($0.48 diluted EPS), compared to $11.6 million ($0.50 diluted EPS) in the prior year.
• Adjusted EBITDA was $22.5 million, down from $24.4 million in the prior year.
• For the first nine months of fiscal 2026, net sales increased 1.3% to $1,007.7 million, and net income rose to $35.8 million ($1.54 diluted EPS) from $34.6 million ($1.49 diluted EPS).
• Cash from operations for the first nine months was $55.1 million, with net capital expenditures of $40.3 million.

Guidance and Future Outlook

• The company refined its fiscal 2026 outlook, reducing the projected number of new stores from 6-8 to 6-7 and relocations/remodels from 2-3 to 2.
• Daily average comparable store sales growth guidance was narrowed to 1.5% to 2.0%, down from the prior 1.5% to 2.5% range.
• Diluted earnings per share guidance was adjusted to $2.07 to $2.11, down from $2.07 to $2.15.
• Capital expenditures guidance remains unchanged at $45 million to $50 million.

Business Segments and Product Lines

• The company opened three new stores during the third quarter and relocated one store, bringing the total store count to 172 across 22 states as of June 30, 2026.
• Two additional stores were opened subsequent to the quarter-end.
• Pre-opening expenses were $1.3 million for the quarter, up from less than $0.1 million in the prior year.
• The company's business model focuses on strict quality guidelines, including 100% certified organic produce, exclusively pasture-raised dairy, and free-range eggs, alongside an "Always Affordable" pricing strategy.

Market and Competitive Landscape

• Management noted a challenging consumer environment but highlighted accelerating comparable store sales growth from 0.5% in the second quarter to 1.2% in the third quarter.
• The company was named the 2026 Sustainability Retailer of the Year by Produce Business, reflecting its commitment to sustainability and regenerative agriculture.
• A cybersecurity incident affecting the company's primary distributor in June and July 2025 impacted year-over-year comparability regarding product margin mix and shrink.

Risks and Challenges

• Gross margin pressure was driven by unfavorable sales mix, higher merchandise inventory shrink, and increased freight costs.
• The company faces risks related to global, national, regional, or local political, economic, inflationary, interest rate, labor market, competitive, and supply chain factors, as detailed in its forward-looking statements.

Management Commentary and Tone

• Co-President Kemper Isely expressed confidence in the company's long-term growth, citing accelerating new store unit growth, consumer focus on health and wellness, and a differentiated offering.
• Management emphasized the momentum of its new store unit growth strategy and its ability to deliver compelling value to customers.

Other Key Points

• The company declared a quarterly cash dividend of $0.15 per common share, payable on September 2, 2026, to stockholders of record on August 17, 2026.
• As of June 30, 2026, the company held $17.5 million in cash and cash equivalents with no outstanding borrowings on its $70.0 million revolving credit facility.
• Administrative expenses for the first nine months included the $2.0 million insurance recovery gain, while lower compensation expenses were partially offset by higher technology expenses.
• The company hosts an earnings conference call and webcast to discuss these results.