Stocks viewed as defensive relative to the pandemic have started seeing some weakness of late, but Natural Grocers by Vitamin Cottage (NGVC) (“Natural Grocers”) has been holding up very well, rising almost 30% since my last article and outperforming grocery store peers since the election by a comfortable margin (from 20% outperformance to Sprouts (SFM) to over 30% outperformance to Kroger (KR) and Royal Ahold (OTCQX:ADRNY).
I like Natural Grocers back in late August, but I thought there’d be a better opportunity to buy, and the shares did fall another 20% or so before bottoming out and rallying on good quarterly comps-store growth and gross margin numbers. The margins in particular have impressed me, particularly with Natural Grocers able to maintain their positive pricing gaps with Sprouts and Amazon’s (AMZN) Whole Foods.
I have more confidence in Natural Grocers now than I did in late August, and I like the company’s more deliberate pace of store expansion. I also like margin-improving decisions like expanding its alcohol assortment, as well as the positive momentum in the rewards program. I can see these shares heading toward $20, though I do still have lingering long-term concerns on gross margins.
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Natural Grocers Seeing Stronger Customer Loyalty, Better Margins
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