Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in 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 call is being recorded. I'd now like to turn the conference over to Ms. Jessica Thiessen, Assistant Treasurer for National Grocers. Natural Grocers. Ms. Thiessen, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage second quarter fiscal year 2022 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 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, Jessica, and good afternoon, everybody. We are pleased to report strong results for the second quarter of fiscal 2022. Like many retailers, during this period, we experienced challenges related to the pandemic, labor availability, and supply chain constraints. We believe our second quarter results demonstrated the strength of our business model to effectively respond to a dynamic operating environment. We were able to grow daily average comparable store sales by 4.3%, gross margin by 50 basis points, and diluted earnings per share by 33.3%. While comp sales was positively impacted by retail price inflation, it is important to note that transaction count comp has had a year-over-year increase for four consecutive quarters. Our second quarter comp sales was up a strong 13.5% relative to 2019, or pre-pandemic levels, reflecting consumers' continuing demand for our differentiated offering. Our unwavering commitment to our founding principles including offering the highest quality natural and organic products at always affordable prices, coupled with free science-based nutrition education, remain a key element of our success. These principles are particularly relevant as consumers are demonstrating a sustained commitment to prioritizing health and wellness. Our unique approach to marketing and promotional activity continues to drive high levels of customer engagement and sales growth. For example, in the second quarter, we offered a 21 Days to a Healthier You program, which featured a free series of nutrition education classes, each with an accompanying seven-day challenge. The program was developed by our nutrition education experts and covered several key topics, including eating for health and vitality, kicking sugar cravings, and a healthy approach to detoxifying. Customers who attended the in-person or live virtual class led by the store's nutritional health coach received a customized coupon book featuring Natural Grocers brand products curated to support participants in achieving each nutritional challenge. This cross-functional program is a good example of our differentiated marketing and offering. Our NPower loyalty program continued to grow, evidencing our deep and ongoing engagement with our customers. We ended the quarter with more than 1.6 million loyalty members, a year-over-year increase of 19%. The second quarter net sales penetration for NPower was 73%, consistent with the first quarter, and up from 70% a year ago. Aligned with our company branding, our natural grocers brand products, FUSE, premium quality products with affordable prices, creating a key point of differentiation that drives loyalty and sales growth. Our National Grocers brand products accounted for 7.7% of net sales in the second quarter, up from 7.3% in the second quarter of last year. During the quarter, we launched eight new branded products, including a line of truffles made in France and additional dietary supplements. Three weeks ago, we opened a store in Canyon City, Colorado, and we are very pleased with the community's response to our first store in their market. Opening new stores and relocating stores has been challenging over the last two years due to delays related to the construction process and equipment availability. Accordingly, our fiscal 2022 new store opening schedule has always been back and waited to reflect these challenges. We are pleased with our progress on the fiscal year 2022 stores, and we remain on track to open four to five new locations and relocate two stores. In future years, we expect to return to opening between six and eight new stores per year, subject to improving construction conditions. In closing, I want to thank every member of our Good4U crew for their execution of our operating strategies, including a commitment to exceptional customer service, which was instrumental in driving our strong quarterly results. With that, let me turn the call over to Todd to discuss our financial results and guidance.