Natural Grocers By Vitamin Cottage (NGVC 10.62%), a natural and organic grocery retailer known for its strict product standards, released fiscal third-quarter earnings on August 7, 2025. The company reported diluted earnings per share of $0.50 (GAAP) for Q3 FY2025, beating analyst expectations of $0.49 (GAAP). However, Revenue (GAAP) was $328.7 million in Q3 FY2025, below the consensus estimate of $335.0 million (GAAP). The period saw strong gains in profitability and comparable store performance, despite a temporary supply chain disruption from a distributor’s cybersecurity incident that reduced sales by approximately $3.5 million to $4.0 million. Overall, the quarter reflected solid customer demand and operational improvements, following underlying trends in health and wellness-focused consumer behavior.
| Metric | Q3 FY2025 | Q3 FY2025 Estimate | Q3 FY2024 | Y/Y Change |
|---|---|---|---|---|
| EPS – Diluted (GAAP) | $0.50 | $0.49 | $0.40 | 25.0% |
| Revenue (GAAP) | $328.7 million | N/A | $309.1 million | 6.3% |
| Adjusted EBITDA | $24.4 million | $22.2 million | 9.9% | |
| Operating Margin | 4.7% | 4.2% | 0.5 pp | |
| Daily Average Comparable Store Sales Growth | 7.4% | N/A | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
Business Overview and Recent Strategic Focus
Natural Grocers operates a network of 169 stores in 21 states, specializing in groceries, dietary supplements, and household products with a strict focus on natural and organic standards. The company’s commitment to only selling USDA certified organic produce and excluding artificial additives sets it apart in grocery retail.
Recent years have seen the business focus on key areas: upholding strict product standards, expanding free nutrition education programs, scaling its smaller-footprint, efficient store model, and promoting environmental practices. By combining quality, education, and disciplined growth, it aims to drive steady store traffic and customer loyalty.
Quarterly Performance: Key Details and Developments
The quarter’s performance reflected both operational gains and short-term disruption. GAAP earnings per share exceeded estimates and Diluted earnings per share rose 25% year over year. Revenue (GAAP) increased 6.3% from the prior-year period but Revenue (GAAP) fell short of consensus, hampered by a one-time cybersecurity incident affecting United Natural Foods (the main distributor). Management estimated this incident reduced daily average comparable store sales by 1.0–1.5 percentage points and sales by $3.5–$4.0 million, and diluted EPS by $0.04–$0.05.
Comparable store sales--or "comps"--are a measure of sales in stores open for more than one year, useful for tracking growth independent of store openings. Daily average comparable store sales grew 7.4%, driven by a 4.8% jump in transaction count and a 2.4% increase in average transaction size. This points to both more customers and larger baskets per visit. On a two-year basis, comps were up 14.6%.
Profitability also improved. Gross margin climbed by 70 basis points to 29.9%, with promotions boosting product margins. Adjusted EBITDA rose to $24.4 million, a gain of 10.1% from last year. Operating margin increased to 4.7%, up from 4.2% in the third quarter of fiscal 2024, while operating income (GAAP) reached $15.6 million. Net income (GAAP) grew 26.0% to $11.6 million.
Store expenses rose by 6.1% but fell as a percentage of sales to 21.8%. Administrative expenses increased by 14.7%, reaching 3.3% of sales, attributed to investments in technology and higher compensation.
Only one remodel was completed after the close of the quarter, and the company ended the period with 169 locations. Due to a more cautious stance, new store opening plans for FY2025 were trimmed from 3–4 to 2, while plans for FY2026 remain in line with past expansion rates, with six to eight new stores expected.
No material updates were made to the nutritional education and sustainability programs this quarter. However, ongoing education initiatives--such as free classes and in-store coaching--remain a core pillar of strategy. The Npower loyalty program, which reached 81% penetration in sales in Q2 FY2025, and the company’s branded products, continue as important drivers of engagement and differentiation.
The retailer’s main categories are fresh organic produce, pasture-raised dairy and eggs, naturally raised meats, dietary supplements, and private-label groceries meeting its highest standards.
On the balance sheet, liquidity remains solid, with $13.2 million in cash at quarter’s end and no outstanding borrowings. Capital expenditures for the first nine months of FY2025 were $22.9 million, primarily for store development and remodels.
The company declared a quarterly dividend of $0.12 per share, payable September 17, 2025.
Outlook and Areas for Investors to Watch
Management raised its fiscal 2025 guidance, citing confidence in consumer demand and operational execution. The new targets call for comparable store sales growth of 7.25–7.75% (previously 6.5–7.5%) for FY2025. and diluted EPS (GAAP) of $1.90–$1.95 (prior $1.78–$1.86) for FY2025. Planned capital expenditures were trimmed to $30–33 million for FY2025, reflecting the pullback in new store projects. For FY2026, six to eight new store openings are planned.
Key areas for investors to monitor include the pace of new store expansion and trends in administrative spending, as well as progress in core customer loyalty and educational initiatives.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
