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Earnings On Deck: Can NGVC Continue To Grow?

|About: Natural Grocers by Vitamin Cottage, Inc. (NGVC), Includes: AMZN

Going public a little over a year ago for $15/share, Natural Grocers by Vitamin Cottage (NYSE:NGVC) has experienced strong buying interest; it currently sits at approximately $35/share, well over a 100% gain since its IPO. What justifies such strong upward trajectory? For those that follow Feria, you know that we like to put a company under a growth microscope and examine the drivers that might lead to future returns.

NGVC is a natural, organic food retailer in the mold of a Whole Foods (WFM) or Trader Joe's. It operates over 60 stores in 13 states, with plans to open 3 stores in the current fiscal quarter, 6 stores for the rest of the fiscal year 2013, and 4 stores for fiscal 2014. Although we would like to see further storefront expansion going forward in 2014, NGVC is growing at a moderate clip, and management remains focused on "affordable pricing, nutrition education, and customer service" as means to strong comparable-store sales growth. In fact, the last earnings report 11.6% increase in comparable-store sales growth in the first half of fiscal 2013 from 2012, as net sales increased over 25% compared to the year-ago quarter. NGVC has also maintained positive comparable-store sales growth for the last 40 quarters, quite a feat.

As a point of comparison, Whole Foods operates approximately 350 stores and has already opened over 15 new stores year to date. NGVC is clearly operating on a smaller scale as Whole Foods, which gives it the "underdog competitor" aura that satisfies itself on nipping away at such a large competitor (Whole Foods market capitalization is a hefty $20 billion compared to Natural Grocers' $780 million). If Whole Foods can serve as an example of the type of organic food market that exists in the US, Natural Grocers could benefit by continuing to grow and exploit the sector.

As earnings approaches, several points of interest will become clearer for the market. First, can NGVC maintain its consistent comparable-store sales growth? The ability to attract a larger crowd or a crowd that is willing to spend more money at an existing store remains a challenge for any retailer, of groceries or otherwise. Secondly, the growing number of stores will continue to be important; management noted that its real estate portfolio selection for 2014 was close to complete, so an update on the outlook of store openings will provide color into this important factor for NGVC's growth. Feria would like you to listen intently on comparable-store sales growth, store expansion, and the (probable) increases in net sales during the earnings call for clarity on NGVC's growth story.

Disclosure: I am long WFM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.