Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the Natural Grocers third quarter fiscal year 2023 earnings conference call. At this time, all participants are in 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 like now to turn the conference over to Ms. Jessica Thiessen, Vice President Treasurer for the Natural Grocers. Ms. Thiessen, you may begin.

Good afternoon, and thank you for joining us for the Natural Grocers by Vitamin Cottage third 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 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, everyone. We appreciate you joining us today. We delivered another strong performance in the third quarter, exceeding our expectations. We believe that National Grocers continues to be very differentiated in the market and uniquely relevant to consumers. Our third quarter sales trends were particularly strong. Daily average comparable store sales increased 4.4%, including a 1.9% increase in daily average transaction count. Moreover, strength was broad-based across categories. The monthly sales comp was relatively consistent throughout the quarter. We believe that our strong value proposition, especially our carefully vetted products at always affordable prices, aligns with current trends in the market. Sales also benefited from focused marketing initiatives and leveraging the NPower loyalty program. Our operations and marketing teams have transitioned well post-pandemic to focus on execution. I would like to share a few examples of their initiatives that benefited the third quarter. First, we developed market-specific marketing campaigns that have accelerated sales growth in underperforming stores without diluting margin. Second, effective pricing and promotion contributed to the third quarter gross margin improvement of 130 basis points. Finally, higher labor efficiency partially offset increased wage rates and drove store productivity. Our crew's commitment to operational excellence, ongoing improvement, and exceptional customer service were instrumental in driving our strong third quarter performance. We achieved diluted earnings per share of $0.31 and 82.4% growth compared to the third quarter of last year. The strength of our third quarter results prompted us to raise our comparable store sales and earnings per share guidance for the fiscal year. Todd will cover the results and outlook in more detail. Next. I would like to highlight two milestones achieved during the third quarter. The first milestone relates to our NPower loyalty program. We celebrated reaching 2 million NPower members during the third quarter. The net sales penetration for NPower was 77% in the third quarter, up from 75% a year ago. The continuing growth in membership and sales penetration demonstrates our customers' appreciation of the benefits and value provided by the program. NPower continues to be an effective tool for optimizing promotional activity and driving customer engagement. Examples include personalized emails that tailor promotional offerings to customers' preferences. market-specific marketing campaigns, and value-focused meal deals. On average, a NPower member basket is almost twice the size of a non-member basket. Our second milestone relates to sustainability. Natural Grocers was founded by my parents in 1955. who were inspired by founding principles that many people today would recognize as sustainability principles. As part of our long-standing commitment to the health and well-being of humans, animals, and the planet, we adopted single-use, bag-free checkouts in 2009. Over the past 14 years, we estimate our policy has prevented more than 500 million single-use plastic bags from entering the waste stream and impacting the environment. Additionally, for each customer who brings their own shopping bag, we donate 5 cents to a local food bank, which has amounted to $2 million in donations since the program's inception. I encourage you to review our 2022 ESG report for more information on the practices we have implemented to further reduce packaging and waste throughout our operations. Turning now to new store development. During the third quarter, we relocated our store in Amarillo, Texas. Relocations are an important component of our store development strategy as they enable us to leverage an established market presence with a stronger facility and location. Relocations generally realize double-digit sales growth off a mature sales base. For fiscal year 2023, we are on track to open four new stores and relocate or remodel three stores. Finally, I would like to thank every member of our Good4U crew for their commitment to operational execution and exceptional customer service, which were instrumental in driving our strong third quarter performance. With that, I will turn the call over to Todd to discuss our financial results and guidance.