Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen, and welcome to the Natural Grocers' first quarter fiscal year 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. As a reminder, today's conference call is being recorded. At this time, I'd like to turn the conference call over to Mr. David Coulson, Vice President and Treasurer for Natural Grocers. Mr. Colson, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage first quarter fiscal year 2021 earnings conference call. On the call with me today are Kemper Isley, co-president, and Todd Dissinger, chief financial officer. As a reminder, certain information provided during this conference call are forward-looking statements based on current expectations and assumptions and are subject to risk and uncertainties. Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks and uncertainties 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. Thank you for taking the time to join us today. We are pleased with our strong start to fiscal 2021. We continue to see positive operating trends as we effectively navigate the challenges of the COVID pandemic and related government mandates. We remain focused on our founding principles, which have been instrumental to our success and differentiate us from our competition. These principles include supporting our communities and delivering the highest quality natural foods and supplements at always affordable prices. In the first quarter, we saw continued momentum across our business, consistent with our expectations. Customers continued to practice social distancing and follow pandemic safety guidelines, resulting in increased consumption of food at home. We generated 15.2% net sales growth. We achieved 12.7% daily average comparable store sales growth, driven by an increased transaction size. We saw further gross margin expansion driven by cost leverage, an improved product margin, and an inflationary tailwind. And we delivered strong earnings growth with a 94.4% increase in net income. We saw positive results from many of our key initiatives. Our NPower program continues to support our customer loyalty efforts. We realized 69% net sales penetration and ended the quarter with 1.3 million members. The NPower platform enables us to refine and optimize our marketing to members through email campaigns capable of generating customer-specific offers. We also saw further acceptance of our Meal Deals Feed Your Family of Four campaign, which is well-timed for consumers in this uncertain economic environment. This campaign provides simple recipes and shopping lists for healthy, tasty, and affordable meals for under $16. These recipes feature Natural Grocers branded products, which provides great value to our customers. Our National Grocers branded products grew by 23.5% and represented a 7.5% penetration of net sales during the first quarter. We launched two new categories, including 11 new SKUs during the quarter. Our prepackaged bulk offerings are delivering strong growth and resonates with our customers who are focused on preparing healthy meals at home. Out of stocks have remained at levels consistent with the third and fourth quarters of fiscal 2020. which represents an improvement over the levels we experienced at the end of the second quarter of last year. During the first quarter, we launched two new programs, our virtual nutrition education program, which includes personalized sessions with our nutritional health coaches, guest presenter series, and cooking classes. The Rooted in Community Gratitude Giveaway program, which honors community members who spread acts of kindness and good cheer. Throughout the first quarter, we continued to focus on the health and safety of our Good4U crew and our customers. We pride ourselves in providing a clean, safe, and convenient shopping experience to the communities we serve. In support of our commitment to our crew, we continued to pay bonuses to our store and distribution center crew in the first quarter. In addition to the $1 per hour permanent wage increase implemented in March 2020, The year-over-year incremental cost of these wage and bonus enhancements were approximately $3.5 million in the first quarter. I would like to thank our Good For You crew for their continued diligence and commitment. Their positive energy is a driving force behind our business, and their well-being, along with ensuring a safe shopping experience, is our number one priority. With that, let me turn the call over to Todd to discuss our financial results and guidance.