Natural Grocers by Vitamin Cottage, Inc. (NGVC) Q2 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2016 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 now like to turn the conference over to Ms. Ashley MacLeod, Director of Finance and Investor Relations for Natural Grocers. Ms. MacLeod, you may begin. Ashley MacLeod - Director-Finance & Investor Relations: Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage second quarter and first half fiscal 2016 earnings conference call. On the call with me today are Kemper Isely, our Co-President; and Sandra Buffa, our Chief Financial Officer. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements. All forward-looking statements are based on current expectations and assumptions that 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 detailed in the company's most recently filed Forms 10-Q and 10-K. The company undertakes no obligation to update forward-looking statements. Our press release is available on our website and a recording of this call will be available on our website at investors.naturalgrocers.com. Now, I will turn the call over to our Co-President, Kemper Isely. Kemper Isely - Chairman & Co-President: Thank you, Ashley. Good afternoon, everyone. As we noted in our preliminary second quarter fiscal 2016 release two weeks ago, we faced several challenges during the second quarter that impacted our comparable store sales growth and pressured our earnings. During the second quarter of fiscal 2016, net sales increased 12.5% to $177.4 million, and daily average comparable store sales increased 1%. The comparable store sales growth was driven entirely by average ticket as transaction count was consistent with the second quarter of 2015. Looking further at our comps, we estimated 200 basis point impact during the second quarter of fiscal 2016 from internal competition, which reflected a roughly 50% increase from internal competition versus the prior year. The magnitude of that increase was higher than we had forecasted. The high rate of internal competition reflected pressure on some of our higher volume mature stores, which increased the impact. As we look forward, we expect to see a moderation in this pressure during quarter four, although our recently revised outlook now reflects the higher forecasted impact from internal competition than previously. Further, our comparable store sales growth continues to reflect the impact of regional economic weakness in markets sensitive to the drop in oil and gas prices. We saw pressure in Oklahoma, Colorado, Wyoming and Texas, each of these markets underperformed the consolidated comparable store sales performance. Additionally, as we indicated in the preliminary results conference call, we experienced an approximately 30 basis point impact from the winter snowstorm in Colorado ahead of the Easter holiday. The impact of the increasingly competitive natural and organic food retailing environment is difficult to measure. However, we continue to track the direct impact from openings of new specialty grocery locations in our trade areas. While we saw a decrease in the number of store months with new specialty retail competition versus a year ago, we recognized that the marketplace is evolving with increasing availability of natural and organic foods in virtually all channels of distribution. Our focus on nutritional supplements and nutrition education is one of our key differentiators in this competitive marketplace. During the second quarter, supplements, along with body care, posted comps above our reported comp, which we believe reflects our focus on nutrition education. We continue to focus on our directed sales initiatives, outstanding customer service and operational excellence and are excited about the future impact of our recent marketing initiatives under the leadership of Kevin Miller, who joined us last quarter as new our Vice President of Marketing. Our new marketing strategy is to communicate our strength and differentiators by educating consumers and engaging in compelling manner that strongly positions us as the grocery store of choice for natural and organic products. We are deploying a grassroots marketing campaign to highlight our authentic positioning as an innovator in the marketplace and to create grassroots buzz from the ground up. We also remain pleased with the initial results from {N}power, our customer appreciation program. Additionally, we are pleased with the performance of our monthly calendar of events, including the recent Earth Day event. Turning to margins, which Sandra will discuss in detail in a moment, the impact of the sales variance versus budget was evident. Our gross margin decreased 60 basis points due to higher occupancy costs. However, our point-of-sale margins expanded modestly. Both store expenses and administrative expenses face deleverage given the sales variance. We're looking closely at our expense levels and making adjustments to reflect our new sales forecast. Specifically, we have initiatives focused on labor and shrink, as well as optimizing our inventory levels. We are essentially looking at every expense from paper clips to travel and pride ourselves on our ongoing cost controls. Moving to new store growth, we opened five new stores during the second quarter, including our first in Iowa, expanding our geographic footprint in Arizona and Arkansas, and added two new stores in Texas. Thus far, in the third quarter, we have opened one store in Spokane, Washington. Our new stores are performing in line with expectations and we remain on track with our new store pipeline. We're quite comfortable with the current pipeline of leases and will continue to evaluate our site selection and growth plans over the coming years. Now, I will turn the call over to Sandra to highlight our financial results for the second quarter of fiscal 2016.

Thank you, Kemper. Good afternoon, everyone. Net sales in the second quarter of fiscal 2016 increased 12.5% to $177.4 million. Daily average comparable store sales increased 1%, driven by a 1% increase in average transaction size. Daily average mature store sales decreased 1.3%, reflecting the increased internal competition and regional economic pressures. Gross profit margin declined 60 basis points, primarily due to increased occupancy costs as a percent of revenue. Store expenses increased 19.4% to $38.8 million in the second quarter. As a percentage of sales, store expenses rose 130 basis points in the second quarter compared to the prior comparable period. The increase reflects the sales variance to our prior forecast, as we were unable to adequately adjust variable and semi-variable expenses, such as labor, and saw a modest deleverage in depreciation expense. Administrative expenses as a percentage of sales increased 20 basis points as the result of investments in Home Office staff to support growth. While incentive compensation was not funded during the quarter, we did increase our Vitamin Bucks program, which impacted labor expense levels. Pre-opening and relocation expenses increased $600,000 during the second quarter compared to the prior comparable period due to the number and timing of new store openings. During the second quarter of fiscal 2016, we opened five new stores compared to four new stores in the second quarter of fiscal 2015. Net income was $3.6 million with diluted earnings per share of $0.16 in the second quarter of fiscal 2016. EBITDA was $12.6 million or 7.1% of sales. We ended the second quarter with $5.6 million in cash and cash equivalents and $20.4 million available on our revolving credit facility. Now I will turn the call back to Kemper to discuss our new store growth and outlook for fiscal year 2016. Kemper Isely - Chairman & Co-President: Thank you, Sandra. We opened five new stores in the second quarter, bringing our total count to 112 stores in 19 states at the end of the period. As of today, we have opened an additional store in Spokane, Washington during quarter three and have signed leases for 12 of the remaining 13 new stores we plan to open in the second half of fiscal 2016 in Arizona, Idaho, Missouri, Nevada, North Dakota, Texas and Utah. We also have 12 signed leases for stores planned for opening after fiscal 2016. We remain confident with our unit growth planned in new store performance. Moving to our outlook. We are reiterating the updated outlook we issued on April 20 during fiscal 2016. We expect to open 23 new stores resulting in 22.3% unit growth, achieved daily average comparable store sales growth of zero to 1.5%, deliver EBITDA margin of 6.7% to 7%, achieve net income margin of 1.6% to 1.8%, and achieve diluted earnings per share of between $0.50 and $0.56. We now expect capital expenditures in the range of $52 million to $54 million versus our prior range of $54 million to $56 million for fiscal 2016. CapEx for new stores, relocations and remodels is approximately 90% of the total. We anticipate cash on hand, cash generated from operations and availability under our credit facility will be sufficient to support our capital requirements. Today, we are also announcing that our board of directors has approved a new two-year program to repurchase up to $10 million of the company's common stock. This share repurchase authorization reflects our strong balance sheet, cash flow and modest debt leverage of less than one times EBITDA, enabling us to return value to our shareholders, while also continuing to invest in the company's long-term growth. We are confident in the strength of our business and believe that the current valuation of our shares does not fully reflect our growth opportunities. This program also demonstrates our commitment to delivering shareholder value. Repurchases under the company's new authorization will be made from time-to-time and the share repurchase program does not obligate the company to acquire any particular amount of common stock and may be suspended, modified or discontinued by the company without prior notice. The company expects to finance the share repurchase program through borrowings under its revolving credit facility. While our second quarter sales performance did not meet our expectations, we remain focused on our founding principles and commitment to our core operating strategies. We continue to engage with our communities and increase awareness around our high quality standards. We believe our quality standards make us the leader in the grocery and supplement industry and provide our customers with valuable confidence in what we sell at everyday affordable prices. Now, I'd like to open the lines up for questions. Thank you.

We'll now begin the question-and-answer session. And our first question comes from David Magee of SunTrust. Please go ahead.

Yeah. Hi, everybody. Good afternoon. Kemper Isely - Chairman & Co-President: Good afternoon David.

I wanted to ask about the new store performance. What you say is good, I'm curious if that performance is also satisfactory on an absolute basis versus on a relative basis? Kemper Isely - Chairman & Co-President: I'm not following what you mean by an absolute basis.

Just in terms of total sales dollars as opposed to how those stores are performing relative to the chain, which has been more sluggish, I'm just curious whether you're seeing the same? Kemper Isely - Chairman & Co-President: For the last, I don't know, since we started tracking with Buxton, we are within 4% of the projections that Buxton has given us for the first year of sales. So, we're pretty happy with the sales results at the new stores.

Okay. And then, if you think about marketing picking up here over the next couple of quarters, which of the initiatives do you think will be the most impactful to the numbers. Kemper Isely - Chairman & Co-President: What our new Vice President of Marketing really is getting through the whole organization is the need to create differentiation in our – I'm sorry to create our message of different – of how we're different than our competitors through a grassroots marketing campaign, rather than just buying media time or putting that newspaper advertisements into newspapers. And so for instance, like we just had our campaign called the good4u Challenge and instead of just running radio ads to promote it, we engaged the disc jockeys in the markets and got them on the challenge and it created a lot more excitement and social media buzz for the challenge. It didn't immediately result in greater sales, but what it did was, is it got the message out that we do nutritional education and we educated all of these disc jockeys in these markets about how important diet is and nutritional supplements are and they are really enthused in talking about us on the radio, not just for the 30 seconds of ad, but during other times. And so that's how we're going to get our message up, is to create social media awareness and buzz not just through traditional means of advertising.

Okay. Thanks, Kemper. Good luck. Kemper Isely - Chairman & Co-President: Thanks.

And our next question comes from Sean Naughton of Piper Jaffray. Please go ahead. Sean P. Naughton - Piper Jaffray & Co. (Broker): Hi, good afternoon. Kemper Isely - Chairman & Co-President: Hi, Sean. Sean P. Naughton - Piper Jaffray & Co. (Broker): Hi, Kemper. So, you mentioned something interesting, you said that Colorado, Wyoming, Texas and Oklahoma, kind of were below the company average on comp. And I was just running some quick math, it seems to be about 55% of your stores maybe, it's a little bit more than that in sales. So, it seems like some of the other geographies obviously must have been performing better naturally, but any color you can provide on some of those markets, I know you have a relatively large presence in Oregon and Arizona and some of these others states, how things are going there maybe relative to some of these other markets? Kemper Isely - Chairman & Co-President: Well, in the states that we didn't mention, our comp was up 3.3%. Sean P. Naughton - Piper Jaffray & Co. (Broker): Okay. And so that still would have been pretty far below or below what you're looking for then still at this point. Kemper Isely - Chairman & Co-President: Right. I mean, we had a couple of markets that outperformed, I mean there were some states that really did well, but overall, the remaining comp in non-oil states was up 3.3%. There were a couple of states that shined better, but I don't really want to talk about those. Sean P. Naughton - Piper Jaffray & Co. (Broker): Yeah. It's fair. And then I guess my other question would just be on the gross margin side and specifically on occupancy. Maybe you could help us at least figure out what sort of comp you need to leverage that number? And I guess the reason I ask that is just that even when you were doing some better numbers, that occupancy number seem to de-lever still. So maybe I guess even said another way, what year of the store does it begin to leverage that occupancy number pretty aggressively? Kemper Isely - Chairman & Co-President: Well, the biggest issue with occupancy is that the base of our stores that have lower rent has been decreasing; and until we slow down our growth a little bit, we probably won't see a lot of leverage in the rent line. And so, it will probably be a couple of years out before we see a leverage in that line. As far as comp goes, if we can get our comp backup into the – on our mature stores up into the 3% range, I think we'll see a lot of good leverage on all of those mature stores for sure. Sean P. Naughton - Piper Jaffray & Co. (Broker): Okay. That's helpful. And then last, a quick clarification question. I know you announced the share repurchase plan today. Is any of that figured into the guidance that you provided on the $0.50 to $0.56? Kemper Isely - Chairman & Co-President: No, it's not. Sean P. Naughton - Piper Jaffray & Co. (Broker): Okay. Thank you and good luck. Kemper Isely - Chairman & Co-President: Thanks.

And our next question comes from Joe Edelstein of Stephens. Please go ahead.

Hi. Good afternoon, and thanks for taking the questions. Kemper Isely - Chairman & Co-President: Yes. Good afternoon, Joe.

Wanted to go back to the new store productivity. I was just curious what percentage rate you had calculated for the quarter. By our math, it looks like it has slipped down closer to a 60% rate, well below kind of the 70% that you were trending closer to for last year. And related to that, are you still finding that the main and main, the larger stores really are working? Is it as efficient as you were hoping for? Kemper Isely - Chairman & Co-President: As far as new store productivity goes, some quarters are just stronger than others. The economic conditions that we've been in a lot of our states have perhaps diminished some of our openings a little. Yes, and then, of course, the quarter had delayed openings. So, I mean, we opened three stores out of our five stores in March and one of them at the very end of March. So we didn't get much benefit from that also. And then let's see – I don't remember what the rest of the question was, Joe.

Yes. Just the size of the store. Kemper Isely - Chairman & Co-President: Size of the store.

You've expanded the sizes to incorporate the kitchens, and is that still a format that you're comfortable with? Kemper Isely - Chairman & Co-President: Yes. That's is part of our model and helped us to increase the productivity of our new store substantially from where they were five years ago when we would first open them. And then in the long run it gives the store a lot higher top-end for how much it will produce in 10 years from now without us having to put more money into remodeling it or moving the store. So we think that that is a huge benefit, because our stores that are smaller that we're having to move to bigger stores now because they just can't produce any more out of the smaller format, that's expensive; and with the larger format store we won't have to do that in 10 years from now when leases come up.

Okay. And I think I heard you say that you've got 12 stores – leases that are signed slated for 2017 openings. Do you feel like you need to take a pause before signing any more leases at least to get a better sense that the marketing efforts and the other initiatives can start leading to stabilization and then faster comp growth? Kemper Isely - Chairman & Co-President: No. We intend to keep on pursuing our current growth strategy through 2017. We, of course, will look at that on a quarter-by-quarter basis, but we feel very confident that our stores in the long run will all be as productive and profitable as our mature stores are now. And so, we have confidence in adding to our base at the 20% rate because of that.

The 20% rate is what we should look for, is that what you're confirming there? Kemper Isely - Chairman & Co-President: For this year for sure and we'll evaluate exactly where we'll be at the end for next year. It will be somewhere in that neighborhood for sure or probable.

Okay. Thanks. Thank you. I know there's others, so I'll turn the queue over to them. Thanks. Kemper Isely - Chairman & Co-President: Okay. Thanks.

And our next question comes from Rupesh Parikh of Oppenheimer. Please go ahead. Rupesh Parikh - Oppenheimer & Co., Inc. (Broker): Good afternoon, and thanks for taking my question. Just going back to your commentary on marketing, so to go ahead with – I guess to implement your efforts on the marketing side. How significant are the dollars going to be – I guess the dollars that you intend on spending to drive some of your marketing initiatives? Kemper Isely - Chairman & Co-President: The good thing about social media is that it's a matter of executing, and so it doesn't cost as much as print and television and radio. We have a budget that set out a percentage of sales and we're just reallocating money from one part of our budget to another part of our budget, and we don't intend to exceed where we were budgeted for the year. Rupesh Parikh - Oppenheimer & Co., Inc. (Broker): Okay, great. And then moving on to, I guess, your share buyback program. One of the pushbacks we got with Natural Grocers shares is a lack of float for some investors. So how do you think about balancing the desire of investors to have greater float versus actually going back and buying back shares? Kemper Isely - Chairman & Co-President: That's why we decided that it would be a limited number of shares that we would buy back, so that we didn't think that we would have a gigantic impact on our float levels. It's 3% of the market cap and 6% of the public float. Rupesh Parikh - Oppenheimer & Co., Inc. (Broker): Okay. And my last question. On the expense side, should the business slow further, what are the opportunities you have to further cut cost from here? Kemper Isely - Chairman & Co-President: Well, we're working on many initiatives right now, including getting our labor costs under control and getting our shrink dollar amounts down. It's just two of them. And then, of course, we're looking at every other expense, like we said, from paperclips to travel. For instance, one of the things that we just recently did was is we've been running a lot of cars here in the Denver market, because we have a lot of people that come in and train and so spending thousands of dollars a month on that, and we decided to lease several cars at $139 a month to replace the rental cars that we're spending thousands of dollars a month on. So savings like that are the type of things we do all the time. Rupesh Parikh - Oppenheimer & Co., Inc. (Broker): Okay, great. Thank you.

And our next question comes from Philip Terpolilli of Wedbush. Please go ahead.

Thanks. Good afternoon. Kemper Isely - Chairman & Co-President: Good afternoon.

Just wanted to ask a bigger picture question about just the composure of the store themselves. One of your competitors has been talking with us little bit recently, just about more maybe aggressive behavior, adding some more items that are designed to attract maybe a customer in the middle of the day, grab-and-go, et cetera. I know you've added some of those, but have you looked at maybe the store assortment more carefully in light of the downtick we've been seeing in here comps? Wondering are there certain areas in the store you think maybe worth expanding on or focusing on more? Kemper Isely - Chairman & Co-President: Well, we're always evaluating what parts of our store perform better than other parts of the store. One of the things that we are noticing is that really having too many SKUs of say tuna fish is probably not the best thing to have and to cut back a little bit on the number of SKUs and concentrate more on SKUs that we can turn quicker. Same thing with like our eggs, we found that cutting back a few SKUs on eggs is actually beneficial to the overall egg market in our stores, and we sell more of the ones that we focus on, and cut back on our shrink a little bit because of that. As far as grab-and-go and et cetera, we're always looking to improve that particular aspect in our stores and are always trying different things in regards to that. In our Denver markets we have a pretty robust program and some of our other markets that are smaller and they don't have as many outside options, we're a little bit more limited.

All right. That's helpful. And then just one more question real quick, just on the inflation front. I know that mixture in your stores is a little bit different, but anything you're seeing there with some of the items would be helpful? Kemper Isely - Chairman & Co-President: No. The really good news is the price of almonds has really come down a lot this year. So we're seeing a lot of deflation in almonds, so that's – and we're really happy about that. It's a first time in I think like three years or four years that that's happened. Otherwise, I would say that inflation has been very average. It hasn't been – organic produce there is a lot of demand for it and the prices are holding up very well. The types of meats that we sell, there is a lot of demand for those meats and components that go into them have the other organic grains that go into making organic chickens and so on and so forth, haven't gone down in price, and so the pricing on those has held very firm.

Okay, great. I appreciate it. Thank you.

And our next question comes from Mark Wiltamuth of Jefferies. Please go ahead.

Hi. Good afternoon. I wanted to ask about how things are going in the vitamin supplement section of the store? Kemper Isely - Chairman & Co-President: Well, they're doing really well actually. They actually outperformed our comp growth for the quarter, and we're pretty pleased that our educational efforts are paying off and that we're getting more and more customers to buy more and more supplements that come into our stores.

And are there any specific categories within that area that are interesting, that are moving more? Kemper Isely - Chairman & Co-President: But we always have our Nutrient to Know About on a quarterly basis. So last quarter it would be have been CoQ10 that sold pretty well; and this quarter we have turmeric on sale, the Nutrient to Know About for this quarter is turmeric; and then previous quarters to that were lutein and phosphatidylserine and we had big upticks in all of those when we educated our customers about the benefits of their use.

Okay. And can you talk a little bit about the cadence on self-cannibalization, when does that start to fade for you as you look in the year ahead? Kemper Isely - Chairman & Co-President: We're thinking that we'll start seeing some fading of that at the end of the fourth quarter.

Okay. Thank you very much.

And our next question comes from Scott Mushkin of Wolfe Research. Please go ahead.

Hey, guys. Some of my questions have already been answered, but just wanted to ask if you've seen any kind of change, any kind of thought that things in some of these tougher economy in certain states, any sense that things have bottomed out or maybe going the other way. Just want to get a feel for where you think things are in some of these places you're having a harder time? Kemper Isely - Chairman & Co-President: Well, I don't know whether it's bottomed out yet or not and the sales trends seem to be – they're pretty choppy right now and it's hard to get a cadence of how things are going. We probably will have a better idea of that hopefully by the end of this quarter.

And then just as a follow-up. Whole Foods last night, when they announced their earnings, talked about doubling down on some pretty aggressive price promotions. You guys – it was not every store, but I think about 40% of your stores are pretty darn close to one of theirs. Any thoughts on if they do follow through and any actions you may need to take because you've usually been priced at about a 10% discount to them. I think that's how you kind of price in the marketplace. And just want to get your feel about if they do continue to try to sharpen those prices, what actions you might take? Kemper Isely - Chairman & Co-President: Well, we haven't noticed it in their produce pricing. We only sell organics. We're comparing our organic against their organic, and we've been pretty much 15% below their price on produce consistently for a long time now and haven't noticed a change there. As far as their other price where they're getting, I think that they're doing it in their 365 brand and we don't really have a lot of comparable items to their 365 brand. So I don't see that as an issue. And there are a couple items that we've noticed that they have some good pricing on, but when we notice that we respond to that.

Okay. So we should expect if they do get more aggressive – and again it's always projecting, but that's what they're saying they're going to do, that if you can, if it's in a comparable item, your preference will be to match. Kemper Isely - Chairman & Co-President: We do do that. Yes.

All right. Perfect. Hey, listen, thank you for taking my questions. I really appreciate it. Kemper Isely - Chairman & Co-President: Thanks.

Our next question comes from Shane Higgins of Deutsche Bank. Please go ahead.

Hey. Good afternoon, and thanks for taking the questions. Sorry, if I missed this, Kemper, but did you say where comps were running to be Q-to-date since the last update a couple weeks ago? Kemper Isely - Chairman & Co-President: No. I did not say where comps were running in this quarter, but we're happy that they're running within our new guidance and guidelines.

Okay, great. And just want to switch gears real quick. I know you guys have been focusing on some special events and that you guys did a like a community event around Easter egg hunt back in late March. I was just curious to find out, obviously putting weather aside, how successful those programs were in kind of building awareness about your brand? Did you guys see any uptick on sales or just social media buzz or anything you could detail, that'd be great? Kemper Isely - Chairman & Co-President: Yes. The Easter event was very successful. It promoted family time at our stores and some of our stores got incredible attendance and incredible just goodwill in their communities from hosting those events. I think some of our stores had upwards of 200 kids show up at the stores to do Easter egg hunt, which was pretty cool. And the kids had a lot of fun, the families had a lot of fun, et cetera; and that event we're sure next year will grow bigger because next year Easter is April 16. So hopefully we won't have the same blizzard that we had this year in April, at that time. But anyway, I'm sure it'll be a bigger event for us next year. And then of course we had our Earth Day event just on the Earth Day back in April, and that was hugely successful at a lot of our stores also. We had a lot...

Do you guys have any – sorry. Kemper Isely - Chairman & Co-President: ...lot of nice Facebook time and social media buzz from that event.

Do you guys have plans for similar events in the third quarter and fourth quarter that we should keep an eye out for? Kemper Isely - Chairman & Co-President: Yes, in the third quarter, we're doing the thing called the good4u games, and that's based around nutrition education at all of our stores. We'll be holding that over a four-week period of time and we'll be having two nutrition classes per week at each store focused on what you can eat well to perform well in sporting events, and we'll be giving away about $100,000 worth of groceries as part of those games to our customers. So it should be pretty exciting event, and then we of course have our anniversary celebration in August, which we did last year, which was hugely successful.

Great. And do you expect to see any sales lift around that? I know obviously the environment is tough, but in terms of what your expectations might be around that event, any color you have there would be great. Kemper Isely - Chairman & Co-President: We're really expecting modest sales gains from the good4u games, but we think that it really helps with promoting one of our founding principles, which is nutrition education, and we should get some sales lift from it if we execute well off it. It would be really hard to quantify what that sales lift would be right at this moment.

All right. Got it. Well, good luck. Thanks.

And our next question is a follow-up from Joe Edelstein of Stephens. Please go ahead.

Yes, hi. Thanks for taking the extra question. Just wanted to clarify on the grassroots campaign and really how is that going to be different than some of the requirements that you set out for the NHCs as they try to get out into the local markets themselves. Is this a program that's going to be more directed by your new VP of marketing running it more so from the corporate side? And then probably similarly, as you just answered to the last question, in terms of when can we see these programs start? And do you have plans or goals already set out in terms of how you're planning to track the lift out of these program? Kemper Isely - Chairman & Co-President: Well, to answer your last question first, yes, we have metrics in place to track what the results are from any of our promotional activities, particularly these promotional activities. As far as the grassroots and whether it's going to be come from Home Office or from the store level, you always need to give direction that the stores can execute on from your Home Office in order for it to be successful over 112 store base or 120 some store base by the end of the fourth quarter. And so to that effect Kevin is putting together and has put together a really good team here at the Home Office that will help all of our stores with local store marketing like a guerilla basis. We think we're really happy with how that's working. One of the things that we're doing is opening up each store to having its own Facebook page, so that they can do posts on Facebook at the store level rather than just hear from our corporate office, so that they can really get into the community and get that community involvement going. Some of our stores do a really, really good job of that, and they're performing way above our current comp at the stores that do it well, and so we're studying what those stores do and trying to emulate it throughout our culture. And we may not see the results in the third quarter, but I would say that we'll probably start seeing some of that result come through in the fourth quarter.

Okay, I appreciate that extra detail, Kemper. Kemper Isely - Chairman & Co-President: Sure.

And, ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Kemper Isely for any closing remarks. Kemper Isely - Chairman & Co-President: Yes. Thank you very much for joining us to discuss our second quarter results today. Natural Grocers has a 60-year history of successfully adapting to our ever-changing natural products sales landscape, our value proposition, industry-leading product standards, unrivaled nutrition education, and superior customer service are the foundation of our long-term success. We look forward to speaking to you again on our third quarter conference call. Thanks, everybody, for being on the call today. Good bye.

And, ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.