Natural Grocers by Vitamin Cottage (NGVC) risk factors, FY2024 10-K

Risks related to our business and operations

1. 01We may not be successful in our efforts to grow profitably
2. 02If we are unable to successfully identify market trends and react to changing consumer preferences in a timely manner, our sales may decrease
3. 03develop and maintain vendor relationships that provide us access to the newest merchandise, and products that satisfy our standards, on reasonable terms
4. 04Our store sales growth and quarterly financial performance may fluctuate for a variety of reasons
5. 05the impact of global health pandemics on our operations and the U.S. economy
6. 06Adverse economic conditions and political instability could adversely affect our business, results of operations and financial condition and could negatively impact our ability to execute our growth strategy
7. 07Inflation or deflation could adversely affect our business
8. 08Widespread health pandemics could materially impact our business, results of operations and financial condition
9. 09We may be unable to compete effectively in our markets, which are highly competitive
10. 10An inability to maintain or increase our operating margins could adversely affect our results of operations
11. 11A reduction in traffic to anchor stores in the shopping areas in close proximity to our stores could significantly reduce our sales and leave us with unsold inventory, which could have a material adverse effect on our business, financial condition and results of operations
12. 12We may experience product recalls, withdrawals or seizures which could reduce our sales and adversely affect our results of operations
13. 13Our future business, results of operations and financial condition may be adversely affected by reduced availability of certified organic products or products that meet our other internal standards
14. 14Disruptions affecting our significant suppliers, or our relationships with such suppliers, could negatively affect our business
15. 15Adverse weather conditions, natural disasters and the effects of climate change could disrupt our supply chain and adversely impact our sales and financial performance
16. 16Acts of violence at or threatened against our stores or the shopping centers in which they are located, including active shooter situations and terrorist acts, could adversely impact our sales, which could materially adversely affect our financial performance
17. 17The current geographic concentration of our stores creates exposure to local economies, regional downturns, severe weather and other catastrophic occurrences
18. 18If we fail to maintain our reputation and the value of our brand, our sales may decline
19. 19Perishable food product losses could materially impact our results of operations
20. 20The decision by certain of our suppliers to distribute their specialty products through other retail distribution channels could negatively impact our revenue from the sale of such products
21. 21Our ability to operate our business effectively could be impaired if we fail to retain or attract key personnel or are unable to attract, train and retain qualified employees
22. 22Any significant interruption in the operations of our bulk food repackaging facility and distribution center or our supply chain network could disrupt our ability to deliver our merchandise in a timely manner
23. 23Higher wage and benefit costs could adversely affect our business
24. 24Union activity among our Crew members or at third party transportation companies could disrupt our operations and harm our business
25. 25Future events could result in impairment of long-lived assets, which may result in charges that adversely affect our results of operations and capitalization
26. 26We have significant lease obligations, which may adversely affect our liquidity and require us to raise additional capital or continue paying rent for store locations that we no longer operate
27. 27Any material disruption to or failure of our information systems could negatively impact our operations
28. 28Claims under our self-insurance program may differ from our estimates, which could negatively impact our results of operations
29. 29If we are unable to protect our intellectual property rights, our ability to compete and the value of our brand could be harmed
30. 30Energy costs are a significant component of our operating expenses and increasing energy costs, unless offset by more efficient usage or other operational responses, may impact our profitability
31. 31Legal proceedings could adversely affect our business, financial condition and results of operations
32. 32Effective tax rate changes and results of examinations by taxing authorities could materially impact our results of operations
33. 33Failure to maintain effective internal control over financial reporting could lead to material misstatements in our financial statements

Risks related to government regulations and policies

1. 34If we or our third-party suppliers fail to comply with regulatory requirements, or are unable to provide products that meet our specifications, our business and our reputation could suffer
2. 35Our sale of products containing cannabidiol (CBD) could lead to regulatory action by federal, state and/or local authorities or legal proceedings brought by or on behalf of consumers
3. 36The activities of our Nutritional Health Coaches and our nutrition education services may be impacted by government regulation or an inability to secure adequate liability insurance
4. 37Consumers or regulatory agencies may challenge certain claims made regarding the products we sell
5. 38The products we sell could suffer from real or perceived quality or food safety concerns and may cause unexpected side effects, illness, injury or death that could result in their discontinuance or expose us to lawsuits, any of which could result in unexpected costs and damage to our reputation
6. 39Our political advocacy activities may reduce our customer count and sales

Risks related to our indebtedness and liquidity

1. 40Our credit facility could limit our operational flexibility
2. 41We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could adversely impact our business
3. 42adversely affecting our ability to borrow additional funds for working capital, capital expenditures, acquisitions, share repurchases, dividends or other general corporate purposes
4. 43Our liquidity needs may require us to raise additional capital through debt or equity financings
5. 44Our share repurchase program may adversely affect our liquidity and cause fluctuations in our stock price
6. 45Our current principal stockholders have significant influence over us, and they could delay, deter or prevent a change of control or other business combination or otherwise cause us to take action with which our stockholders might not agree
7. 46We may not be able to continue paying dividends on our common stock
8. 47If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our common stock or if our operating results do not meet their expectations, our common stock price could decline
9. 48We are a “controlled company” within the meaning of the NYSE Listed Company Manual, and, as a result, rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies
10. 49that the compensation of our executive officers be determined, or recommended to the Board for determination, by a majority of independent directors in a vote by independent directors, or a compensation committee composed solely of independent directors