Once The COVID-19 Tailwind Fades, Natural Grocers Will Have Some Challenges

It is perhaps in poor taste to talk about companies or industries benefiting from the COVID-19 pandemic, but the reality is the shift in consumer behavior patterns has meant considerably higher volumes for grocery retailers, and with that, better margins as well. In the case of Natural Grocers by Vitamin Cottage (NGVC) (“Natural Grocers”), that has sent comps from the low single-digits into the double-digits, while boosting gross and operating margins.

The COVID-19 boost won’t last, though, and when it fades, Natural Grocers will still face the same challenges as before – an increasingly crowded space where it’s hard to stand out, and a relatively weak core profitability versus its peers. I wasn’t very bullish on Natural Grocers a year ago, and the shares fell another 15% or so before the COVID-19 pandemic sent shoppers and investors toward the grocery stores. I don’t think the shares are particularly expensive now, but I do think this is a difficult place to generate long-term alpha.

Read more here: 

Once The COVID-19 Tailwind Fades, Natural Grocers Will Have Some Challenges