Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the National Grocers' second quarter fiscal year 2023 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 call is being recorded. I'd like to turn the conference over to Ms. Jessica Thiessen, Vice President and Treasurer for National Grocers. Ms. Thiessen, you may begin.

Good afternoon and thank you for joining us for the Natural Grocers by Vitamin Cottage second quarter fiscal year 2023 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 will turn the call over to Kemper.

Thank you, Jessica, and good afternoon everyone. We are pleased with our second quarter results. Sales growth was particularly strong and exceeded our expectations. And as a result, we are raising our comparable store sales guidance for the year. Daily average comparable store sales increased 2.7% or 7% on a two-year basis. The comp exceeded our expectations as we cycled strong pandemic-related trends and a labor strike at one of our competitors in the Denver market in the second quarter last year. Customer count increased 2.7% for the quarter and 4.5% on a two-year basis. Item count per basket was down by less than one item compared to the prior year and in line with recent quarters. We observed minimal trade down in the second quarter. The monthly sales comp accelerated sequentially through the quarter. The comp in April was just under the March comp. Our diluted earnings per share was 26 cents, including a 3 cent impairment charge related to a store closure. Net of the 3 cent per share impairment charge, diluted earnings per share would have exceeded the prior year period earnings per share of 28 cents. During the quarter, we made the decision to close two stores as part of our ongoing efforts to drive higher store productivity. The strength of our sales trends indicates that we have a loyal and resilient customer base that prioritizes our healthy and sustainably focused offerings. We believe that our high product standards, marketing, emphasis on the strong value proposition, always affordable prices, excellent customer service, And a convenient and friendly shopping experience continues to resonate with consumers and position us as a leading destination for natural and organic products in our markets. One contributor to our success is our natural grocers branded products, which represent value and uncompromising quality. In the second quarter, our Natural Grocers brand accounted for 8.1% of total sales, up from 7.7% a year ago. We believe that our Natural Grocers brand has a long runway and we are targeting sales penetration to grow by approximately one percentage point annually. Our team is working hard to identify new products and vendors that meet our rigorous standards. During the second quarter, we were excited to open one new store in McCall, Idaho. We are on track to open four to six new stores and relocate two to three stores in fiscal 2023. Over the next several years, we expect to return to opening between six and eight new stores per year, as we anticipate improving construction and supply chain conditions. During the second quarter, labor availability pressures moderated for the majority of our stores. We provided a $1 per hour wage rate increase for all hourly store crew in the first quarter of fiscal 2023. Following that increase, our company-wide average hourly wage rate for full-time store crew exceeds $20 per hour, including $1 per hour in vitamin bucks. We do not anticipate additional blanket wage increases for the balance of this fiscal year. In February, we released our Fiscal Year 2022 Environmental, Social, and Governance Report. The report tells the story of our legacy as a sustainably focused company and our long record of prioritizing initiatives and practices that positively impact the sustainability of our business and the environment. This year's report highlights our commitment to regenerative agriculture as an important practice with the ability to mitigate climate change. I encourage you to review our latest ESG report as another tool to better understand the differentiation of our business. Lastly, I would like to thank every member of our Good4U crew for their continued hard work and commitment to delivering the highest quality natural and organic products at always affordable prices and excellent customer service. With that, I will turn the call over to Todd to discuss our financial results and guidance.