Natural Grocers: Executing On Margins, But Decelerating Growth Needs To Be Monitored

My last write-up on Natural Grocers (NYSE:NGVC) was generally positive, as I expected to see the company’s efforts to boost the in-store assortment (especially supplements) and its loyalty program pay off in higher sales, not to mention the company’s very competitive price position versus rivals like Sprouts (SFM) and Whole Foods (owned by Amazon (AMZN)). Since then, the shares are up more than 30% - not a bad return and a little better than that of Sprouts.

I’m not quite as bullish at this point, though. Traffic has started decelerating at the stores, comps are getting more challenging for the supplements business, and I’m concerned about more challenges to margins given those traffic trends. I still see Natural Grocers as capable of high single-digit revenue growth over the long term with improving margins, but with fair value in the high teens, I don’t see quite the same upside at this point.

 

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Natural Grocers: Executing On Margins, But Decelerating Growth Needs To Be Monitored