Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the Natural Grocers First Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will be given at that time. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Mr. David Coulson, Vice President and Treasurer for Natural Grocers. Mr. Coulson, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage first quarter fiscal year 2020 earnings conference call. On the call with me today are Kemper Isley, co-president, and Todd Dissinger, chief financial officer. As a reminder, all statements made on this conference call, other than statements of historical fact, are forward-looking statements. All forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks detailed in the company's most recently filed Forms 10Q and 10K. The company undertakes no obligation to update forward-looking statements. Today's press release is available on the company's website, and a recording of this call will be available on the website at investors.naturalgrocers.com. Now I will turn the call over to Kemper.

Thank you, David, and good afternoon, everyone. We are pleased to report another quarter of continued daily average comparable store sales growth, reflecting our ongoing focus on our customer service and marketing initiatives, while staying true to our founding principles. We are also proud to open our first store in Louisiana, putting us in 20 states. We have steadily maintained store growth, bringing our count at the end of the quarter to 155 stores. Through the first quarter, we are on track to meet our 2020 guidance for comps, new stores, margin, and earnings per share. We saw gains across most product categories during the first quarter, including a 3.4% daily average comparable store sales increase in supplements. Accelerating from the fourth quarter, As we indicated on our last earnings call, we see the supplement product category as an opportunity and an area of focus in fiscal 2020. The comp gain in supplements is attributable to several initiatives in our in-store nutritional education programs. Our NPower program continues to drive loyalty and support our marketing initiatives. With enrollment, growth, and increased NPower penetration contributing to our positive comp in the quarter. As of the first quarter, NPower enrollment increased by 37% year over year, and sales penetration increased to 69% of total sales. Our newly implemented personalized NPower promotions continue to prove effective. adding to our efforts to leverage NPower to enhance the customer experience with personalized offers, recipes, and coupons. We have also recently rolled out new billboard and outdoor creative advertising and expanded our marketing coverage. Our partnership with Steamboat and Winter Park Resorts that started during the fourth quarter of fiscal 2019 has also contributed to our marketing reach, as the impact of this partnership ramped up during the ski season. During the quarter, we reported a 40 basis point decline in gross margin on a year-over-year basis. As Todd will discuss, approximately half of the year-over-year decline simply reflects the change in the lease accounting standard that went into effect at the beginning of the fiscal year. And the remainder of the decrease reflected product mix. In comparison to the second half of fiscal 2019, we saw a meaningful improvement in gross margin trends. we continue to see a relatively stable competitive market and remain confident in our price positioning. As always, we continue to focus on our in-store customer experience to drive sales and build customer loyalty. We pride ourselves on making our customers feel welcomed and valued by providing world-class customer service and quality. Our everyday affordable prices unparalleled nutrition education and superior customer service are some of the foundations of the natural grocer's competitive advantage. We will remain focused on driving growth through new store openings in both existing and new markets, driving consistent comp store sales growth and controlling costs to deliver enhanced profitability, cash flow, and return to our valued shareholders with our quarterly cash dividend. With that, let me turn the call over to Todd to discuss our financial results and guidance.