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Based in Lakewood, CO, Natural Grocers by Vitamin Cottage (NGVC) scheduled a $100 million IPO with a market capitalization of $308 million at a price range mid-point of $14 for Wednesday July 25, 2012.

Seven other IPOs are scheduled for the week of July 23. The full IPO calendar is available here.

NGVC filed an updated [S-1] July 12, 2012, and the joint managers are SunTrust Robinson Humphrey and Piper Jaffray and the co-managers are William Blair/ Canaccord Genuity

SUMMARY
Natural Grocers is a rapidly expanding specialty retailer of natural and organic groceries and dietary supplements. As of March 31, 2012 NGVC had 53 stores open in 12 states.

For the six months ended March 2012 revenue was up 26% to $160 million from $126 million the prior year. Net income increased to $3.5 million from $1.6 million.

Based upon operating experience and research conducted for NGVC by customer analytics firm The Buxton Company, NGVC believes the entire U.S. market can support at least 1,100 Natural Grocers stores, including over 180 additional Natural Grocers stores in the 12 states in which NGVC currently operates or has signed leases.

In fiscal year 2011, NGVC opened ten new stores, and plans to open a total of ten new stores in fiscal year 2012.

VALUATION

annualizing March '12 qtr

Cap (MM)

Price/

Sales

Price/

Earnings

Price/

BookValue

Price/

TangibleBV

Profit %

Natural Grocers (NGVC)

$308

0.91

22

5.4

5.4

4.1%

The Fresh Market (THM)

$2,670

2.05

35

18.0

18.0

5.8%

Whole Foods Market (WFM)

$17,000

1.59

36

4.9

5.2

4.4%

Glossary of financial terms

CONCLUSION
In only 12 states, NGVC shows very good sequential quarterly growth. IPOdesktop believes NGVC's success formula can be implemented in other states as well.

IPOdesktop recommends NGVC on the IPO, based on its successful track record, and because NGVC is priced at a discount to publicly held leaders in the industry, Whole Foods and The Fresh Market.

BUSINESS
Natural Grocers is a rapidly expanding specialty retailer of natural and organic groceries and dietary supplements.

STORE EXPANSION
NGVC significantly expanded from 27 stores in three states as of September 30, 2008 to 55 stores in 11 states as of June 30, 2012, including Colorado, Idaho, Kansas, Missouri, Montana, Nebraska, New Mexico, Oklahoma, Texas, Utah and Wyoming.

NGVC successfully opened six, six and ten new stores during the fiscal years ended September 30, 2009, 2010 and 2011, respectively, and six new stores in the nine months ended June 30, 2012.

NGVC plans to open four new stores in the remainder of fiscal year 2012.

GROWTH PLAN
In addition, NGVC has established effective site selection guidelines, as well as scalable procedures, to enable us to open a new store within approximately nine months from the time of site selection.

Based upon operating experience and research conducted for NGVC by customer analytics firm The Buxton Company, NGVC believes the entire U.S. market can support at least 1,100 Natural Grocers stores, including over 180 additional Natural Grocers stores in the 12 states in which NGVC currently operates or have signed leases.

In fiscal year 2011, NGVC opened ten new stores, and plans to open a total of ten new stores in fiscal year 2012. NGVC intends to target new store openings at or above these levels over the near term.

RECENT DEVELOPMENTS
Based on preliminary unaudited financial results, net sales for the three months ended June 30, 2012 were $86.7 million, which increased $19.1 million, or 28.3%, compared to net sales of $67.6 million in the three months ended June 30, 2011.

The $19.1 million increase in net sales was driven by a $10.4 million increase in non-comparable stores sales and an $8.7 million, or 13.0%, increase in comparable store sales. The increase in comparable store sales was due to an 8.6% increase in transaction count and a 4.4% increase in average transaction size at comparable stores.

Comparable store average transaction size increased to $34.96 in the three months ended June 30, 2012 from $33.48 in the three months ended June 30, 2011. "Non-comparable stores" refers to stores that have been open for less than thirteen months.

Net sales for the nine months ended June 30, 2012 were $246.4 million, which increased $52.0 million, or 26.7%, compared to net sales of $194.4 million in the nine months ended June 30, 2011.

The $52.0 million increase in net sales was driven by a $30.4 million increase in non-comparable stores sales and a $21.6 million, or 11.1%, increase in comparable store sales.

The increase in comparable store sales was due to a 6.9% increase in transaction count and a 4.2% increase in average transaction size at comparable stores.

Comparable store average transaction size increased to $34.98 in the nine months ended June 30, 2012 from $33.57 in the nine months ended June 30, 2011.

NGVC also expects gross margin percent for the three and nine months ended June 30, 2012 to be similar to gross margin percent levels recorded for the three and nine months ended June 30, 2011 which were 29.2% and 29.3% respectively.

STORE CONCENTRATION
As of June 30, 2012, NGVC has store concentration in Colorado and Texas, operating 30 stores and ten stores in those states, respectively, or a total of 72.7% of our stores.

COMPETITION
Competition varies by market and includes conventional supermarkets such as Kroger and Safeway, mass or discount retailers such as Walmart (WMT) and Target (TGT), natural and gourmet markets such as Whole Foods (WFG) and The Fresh Market , specialty food retailers such as Sprouts and Trader Joe's, warehouse clubs such as Sam's Club and Costco (COST), independent health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers.

PRINCIPAL STOCKHOLDERS PRE-IPO
Isely Family Group, 96.3%

USE OF PROCEEDS
NGVC expects to net $45 million from the sale of 3.6 million shares, with proceeds allocated to repay debt, for working capital and general corporate purposes.

Shareholders intend to sell 3.5 million shares, or almost 50% of the IPO.

Source: IPO Preview: Natural Grocers By Vitamin Cottage