Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2021 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. Jonathan Dillon, General Counsel for Natural Grocers. Mr. Dillon, you may begin.

Good afternoon, everyone. and thank you for joining us for the Natural Grocers by Vitamin Cottage second 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 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 and uncertainties detailed in the company's most recently filed Forms 10-Q and 10-K. 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'll turn the call over to Kemper.

Thank you, Jonathan, and good afternoon, everyone. Thank you for joining us today. We had a solid performance in the second quarter, executing against our strategic objectives. I'm very proud of how our entire organization performed, delivering on our promise of the highest quality natural foods at always affordable prices, as well as responding to the needs of our communities. While we continue to face challenges stemming from the COVID pandemic and related government mandates, Our focused approach and commitment to our founding principles serve as key points of differentiation in the marketplace. Our second quarter results demonstrate the strength of our model and disciplined operating approach, enabling us to drive solid profitability despite very difficult revenue comparisons and weather-related disruptions. Daily average comparable store sales on a two-year stack basis increased 10%. Daily average comparable store sales for the second quarter were down 7% as we lapped a 17% increase in the second quarter of last year. Our second quarter comparable sales were negatively impacted from the severe cold and ice storms during February by an estimated 70 basis points. Transaction size continued to track positively, rising 8%. which was offset by a decline of 13.9% in the transaction count. Late in the quarter, we saw the transaction count comp turn positive, which continued through April. Earnings per share of 21 cents was in line with our expectations and supports our previously announced full-year guidance range. Our key initiatives remained a focus and continue to drive positive results. Our NPower program continued to strengthen customer engagement and loyalty, driving transaction activity by providing a compelling platform for optimizing marketing, promotions, and enhancing the customer experience. We ended the second quarter with 1.4 million NPower members, up 17% versus a year ago, and up 5% sequentially. Our net sales penetration for NPower was 70% in the second quarter compared to 69% a year ago. We saw a positive customer response to our ongoing marketing events and promotions this quarter, including Resolution Reset, the Valentine's Day promotion, and our Meal Deals campaign. We generated additional engagement with our Keto Reset, first annual Body Care and Beauty Bonanza, and $500,000 Good For You giveaway. The second quarter was an exciting quarter for Natural Grocers brand products. We began a category relaunch in supplements. By the end of the fiscal third quarter, we expect to have over 150 newly formulated supplements under the Natural Grocers brand in our stores. Supplements are an important component of our branded portfolio as they reflect our key principles of nutrition, quality and value and represent a competitive differentiation. In addition, we added six new grocery products to our Natural Grocers branded assortment, including the introduction of bottled kombucha. For the quarter, the sales penetration rate of our Natural Grocers brand products was 7.3%. Supporting our communities and crew are core values at Natural Grocers. During the second quarter, many of our markets in the South Central and Pacific Northwest states experienced severe winter storms. We implemented disaster relief efforts to help many affected communities. For example, in Texas, natural grocers offered free filtered water to communities without access to clean water due to the storms. And we sponsored a company-wide campaign for food banks facing a surge in need. including raising over $100,000 for the Feeding Texas nonprofit organization. We also provided severe weather financial relief in the form of additional pay and bonuses during store closures for our impacted crew members. Throughout the pandemic, we have supported our crew with higher wages and incentives. Our second quarter results included incremental wages of $1.6 million. Before I turn the call over to Todd, I would like to thank our Good4U crew for their unwavering commitment to our mission and communities we support. Our crew continues to be the key to a positive store experience. With that, let me turn the call over to Todd to discuss our financial results and guidance.