Shares of Natural Grocers by Vitamin Cottage (NGVC, Financial) have surged 41% in the last three months. This is quite an impressive growth when it comes to a food company like this. The specialty retailer of organic food has been performing quite well for some time now. It managed to beat the analysts’ earnings expectations in all the last four quarters. It reported a blockbuster quarter this time also. The third-quarter numbers were ahead of the Street’s expectations, sending its share prices higher. Let’s take a closer look at the numbers.
The details of a spectacular quarter
The top line of the company jumped 17.8% to $135.7 million, as compared to the previous year’s quarter. Revenue was higher than the analysts’ estimate of $135.4 million. One of the bright spots during the quarter was the same store sales metric, which grew 3.7% during the period. The comp sales are an important metric since it excludes the effect of any new store openings or closures during the quarter. Growth in this metric was driven by an increase of 1.4% in daily average transaction and a jump of 2.3% in the overall transaction size of each customer.
Further, the retailer opened three new stores during the quarter, which added to the revenue base. Also, the company is remodeling its stores in order to make it more appealing to the customers.
The gross margin of the company shrunk to 28.6% from 29.1% last year. This decrease was mainly due to an increase in the occupancy costs and a shift in sales mix to lower margin products. These factors affected the margins of the company. However, the bottom line did increase. Earnings surged to $0.14 per share from $0.11 per share in the prior year. This was in line with the estimate of $0.14 per share.
What drives revenue higher?
The strength of Natural Grocers’ business lies in its products. With the growing health consciousness of people, demand for natural products has increased. People look for organic products which are low on calorie and are healthy in nature. Thus, there has been a shift to such products and retailers who offer such items have grown over time.
Therefore, other similar retailers such as Whole Foods Market (WFM, Financial) and Sprouts Farmers Market (SFM, Financial) have also performed well during the same timeframe. In the last three months, shares of Whole Foods and Sprouts Farmers have increased 23% and 2.1%, respectively. However, Natural Grocers has registered the highest increase of 41.3%.
Thus, Natural Grocers provided a bright outlook for the current year, which made investors happy. It now expects same store sales to grow between 5% and 8%. Earnings are expected to be between $0.63 per share and $0.66 per share. Further, it plans to open 18 new stores during the year. In addition, it will remodel two stores and relocate three stores.
Wrapping it up
The organic food industry is on an uptrend and investing in any of the players should be rewarded in the long run. However, it is important to choose the best performing company, which will maximize the returns. Natural Grocers is performing well and a bright outlook as well as plans to expand its business looks interesting. Moreover, it has done better than other industry peers. Therefore, investors should watch this company closely.
