The last year hasn't been good for the wholesale/retail side of the "healthy eating" trend, but Natural Grocers by Vitamin Cottage ("Natural Grocers") (NYSE:NGVC) has done far worse than most. Shareholders in Whole Foods (NASDAQ:WFM) and United Natural Foods (NASDAQ:UNFI) are looking back at double-digit share price declines over the past year, but Natural Grocers is down 50% over that time and down about 40% since my last update on the retailer.
At this point, the company has to improve its comps if only to achieve some fixed cost leverage. It would also seem to be a good idea to slow down new store openings to a point where it can self-fund, but then that would eliminate a lot of the near-term growth potential given that the comps are pretty weak. Complicating matters further, new marketing initiatives should help stimulate those comps, but of course these initiatives cost money and have their own impacts on margins.
It's tempting to erase this company from my notes and spreadsheets and move on. There's more and more competition in the healthy eating space, and I have to wonder how much of Natural Grocers' past growth was boosted by the windfall of higher energy prices in markets like Texas and Colorado. The potential for this stock to come back is there, but it's hard for me to be excited about the shares unless and until traffic growth starts making a meaningful contribution to comps again.
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Can Natural Grocers Become A Quality Growth Company Again?