Key Points
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Sales improved but profitability weakened: Third-quarter net sales rose 1.8% to $334.7 million, with comparable-store sales growth accelerating to 1.2%. Net income fell to $11.1 million from $11.6 million, while adjusted EBITDA declined 7.6% amid lower product margins, higher shrink and freight costs.
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Expansion and digital initiatives continued: Natural Grocers opened three stores during the quarter, including its first Wisconsin location, and remains focused on 4%–5% annual unit growth. It also launched DoorDash delivery, plans to add loyalty integration and is phasing in curbside pickup.
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Fiscal 2026 guidance was narrowed: The company now expects six to seven new stores, 1.5%–2% comparable-store sales growth and diluted EPS of $2.07–$2.11. Capital expenditure guidance remained unchanged at $45 million–$50 million.
Natural Grocers by Vitamin Cottage (NYSE:NGVC) reported a 1.8% increase in third-quarter fiscal 2026 net sales to $334.7 million, as comparable-store sales growth accelerated sequentially despite what management described as a challenging consumer environment.
Daily average comparable-store sales rose 1.2% in the quarter, improving from 0.5% growth in the second quarter. The gain reflected a 3.1% increase in basket size, partly offset by a 1.8% decline in transaction count.
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Chairman and Co-President Kemper Isely said the company continued to see consumer focus on value amid economic uncertainty. He also pointed to continued membership growth in its {N}power Rewards loyalty program. Sales penetration from members increased two percentage points from a year earlier to 84% of sales, while member engagement produced growth in sales, traffic and basket size, according to the company.
“As the value leader in natural and organic grocery retail, we continue to emphasize our always affordable pricing,” Isely said, citing the company’s Even More Affordable campaign for rotating everyday staples and Natural Grocers Brand products.
Profitability and Cash Flow
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Third-quarter net income was $11.1 million, or $0.48 per diluted share, compared with $11.6 million, or $0.50 per diluted share, in the prior-year quarter. Adjusted EBITDA declined 7.6% to $22.5 million.
Gross margin decreased 60 basis points from the prior year to 29.3%. Chief Financial Officer Richard Hallé attributed the decline primarily to lower product margin from an unfavorable sales mix, along with higher inventory shrink and freight expenses.
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Hallé said year-over-year comparisons were affected by a cybersecurity incident involving the company’s primary distributor in the third quarter of fiscal 2025. He also said elevated shrink partly reflected temporary operational effects from an enterprise resource planning system upgrade completed during the previous quarter.
Administrative expenses fell to $9.5 million from $10.9 million a year earlier. The current-quarter result included a $2 million business-interruption insurance recovery related to the distributor cybersecurity incident in June and July 2025.
Pre-opening expenses increased $1.3 million year over year as the company accelerated store openings. Management said those costs reduced diluted earnings per share by about $0.04 during the quarter and are expected to represent $0.08 of full-year earnings per share.
Natural Grocers ended the quarter with $17.5 million in cash and cash equivalents, no outstanding borrowings under its credit facility, and $67.3 million available under its revolving credit facility. For the first nine months of fiscal 2026, cash from operations totaled $55.1 million, while net capital expenditures were $40.3 million, resulting in free cash flow of $14.8 million.
Store Expansion and Digital Initiatives
The company opened three stores during the third quarter, including its first location in Wisconsin, and relocated one store. It has opened six stores so far in fiscal 2026, including two openings in July, and expects to open one additional store in the fourth quarter.
Isely said all six fiscal-year-to-date openings, along with the two stores opened last year, ranked among the company’s strongest opening-day sales performances. In response to an analyst question, he said the Wisconsin store initially set a company record for opening-day sales before a subsequent opening in Rapid City, South Dakota, surpassed it.
Management continues to target annual unit growth of 4% to 5% for the foreseeable future. The company also launched a DoorDash partnership in mid-July, providing delivery access across its store base with in-store pricing on DoorDash orders. Later in August, Natural Grocers expects to integrate {N}power Rewards into DoorDash and enhance online shopping through its website.
The company plans to phase in curbside pickup across all stores in coming months. It also continues to work with Instacart for delivery and pickup at select locations.
Updated Fiscal 2026 Outlook
Natural Grocers refined several components of its fiscal 2026 guidance while maintaining its capital expenditure outlook. The company now expects:
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Six to seven new store openings, compared with its prior forecast for six to eight openings.
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Two store relocations or remodels, compared with a previous expectation of two to three.
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Daily average comparable-store sales growth of 1.5% to 2%, narrowing the prior 1.5% to 2.5% range.
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Diluted earnings per share of $2.07 to $2.11, compared with prior guidance of $2.07 to $2.15.
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Capital expenditures of $45 million to $50 million, unchanged from previous guidance.
Hallé said the company will close stores on Labor Day, resulting in one fewer selling day in the fourth quarter than in the prior year. Management expects most sales that would have occurred on the holiday to shift to adjacent days.
During the question-and-answer session, Isely said the company had not seen significant customer trading down to lower-quality products, arguing that its assortment already emphasizes high-quality products at affordable prices. He said management views the gross-margin pressure as isolated to the third quarter because of unusual comparison factors.
Isely also said the company’s most loyal customers have remained loyal, while some more marginal customers may have pulled back because of household expenses such as gasoline, heating and air conditioning. He said the company believes growing consumer interest in health and wellness could support longer-term demand.
About Natural Grocers by Vitamin Cottage (NYSE:NGVC)
Natural Grocers by Vitamin Cottage, Inc operates a chain of specialty grocery stores focused on natural and organic products. Founded in 1955 by Margaret and Philip Isely in Lakewood, Colorado, the company has built a reputation on strict product standards, including certified organic produce, non-GMO groceries and dietary supplements. Natural Grocers emphasizes whole, unprocessed foods and carries a broad assortment of private-label and national brands that meet its quality guidelines.
The company’s core offerings include fresh fruits and vegetables, bulk foods, vitamins, minerals and nutritional supplements, as well as natural body care and household items.
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