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NYSE: NGVC. 11/29/2012 Turner Novak. Buy 75 shares @ $19.88 $1,491 3.77% of portfolio. Company Overview. Founded in 1955 Lakewood, CO Family owned. Product Overview. Natural & organic groceries Dietary supplements

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nyse ngvc

NYSE: NGVC

11/29/2012

Turner Novak

slide2

Buy 75 shares @ $19.88

  • $1,491
  • 3.77% of portfolio
company overview
Company Overview
  • Founded in 1955
  • Lakewood, CO
  • Family owned
product overview
Product Overview
  • Natural & organic groceries
  • Dietary supplements
  • Do not sell any products that are known to contain artificial or hydrogenated ingredients
store overview
Store Overview
  • Efficient and flexible small-store format offering affordable prices and friendly environment
  • Nutrition coaches in every store
  • Free science-based nutrition education to help customers make well-informed nutrition choices
store overview1
Store Overview
  • 30 stores in Colorado
  • 10 stores in Texas
  • Room for growth nationally
store overview2
Store Overview
  • https://www.facebook.com/photo.php?v=10151185402704466
competitive advantage
Competitive Advantage
  • Nutrition coach in every store
    • Free education sessions to customers in their stores
    • Customers are informed on health conscious decisions, and are already in the store to purchase products
  • Stores concentrated in 1 regional area
    • Low distribution costs
    • Plans to expand rapidly within the region
jeff s slide
Jeff’s Slide
  • 7% Institutional ownership on November 13th
  • 36% Institutional ownership on November 28th
capital structure
Capital Structure
  • Paid off all long-term debt with cash raised from IPO
  • Available $15 million line of credit
  • Remaining long-term liabilities consist of deferred rent, lease, and income tax liabilities
cash flow capital investments
Cash Flow & Capital Investments
  • Cash flow is being re-invested in the company
  • Cash generated from the IPO will increase capital investments
customers
Customers
  • Loyal customer base
  • 7.0% increase in # of customers in FY 2012
  • 4.3% increase in average Total paid per customer in FY 2012
growth
Growth
  • Sales increased 27.2% for fiscal year 2012
  • Organic sales growth of 11.6% for fiscal year 2012
  • Positive organic growth for over 5 years
growth1
Growth
  • Net Income increased 89.9% in FY 2012
  • Net Income increased 64.0% in Q4 excluding costs of their IPO
  • Adjusted FY 12 EPS of $0.36
  • Projected FY13 EPS of $0.46-$0.49
inventory costs
Inventory Costs
  • Higher inventory costs than non-organic grocery stores
    • Leads to higher profits, as long as inventory is sold
growth opportunities
Growth Opportunities
  • Analysts’ project the 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
    • 38 states with no presence, 48 states with small presence
  • US demand for vitamins and supplements has increased every year for the past 10 years
growth of us organic food sales
Growth of US Organic Food Sales
  • Projected 12.2% CAGR in 2010-2014
growth of us organic food sales1
Growth of US Organic Food Sales
  • Organic US food industry grew 7.7% in 2010
  • Total US food industry grew 0.6% in 2010
  • Test scenarios show organic growth will outpace total US food sales by at least 5.1% in economic downturns
us food sales
US Food Sales
  • Organic food consists of only 4% of total US food sales
  • Large opportunity for growth
organic food channels
Organic Food Channels
  • Mass retailers – Meijer, Costco, Safeway, etc.
  • Natural Retailers – NGVC, Whole Food Stores
  • Other – Internet, Farmers Markets, etc.
  • Room for growth in existing organic food market
risks
Risks
  • What could go wrong?
    • New store openings are not as successful as openings in the past 3 years
    • Payback period just under 4 years, however stores opened this year are projected to do better than new stores opened in the past
    • Recent legal proposals in Colorado affect the way consumers spend money
consumer demand
Consumer Demand
  • Organic foods are more expensive than non-organic
    • Also have higher margins
  • Eating organic/gluten-free is a lifestyle
  • Studies show that those who buy organic will do so no matter what the price is
competitors
Competitors
  • Major Competitors
    • Whole Foods Market
  • Other Competitors
    • Costco
    • Safeway
    • Krogers
investment thesis
Investment Thesis
  • High growth potential
    • 89.47% Adjusted EPS growth in 2012
    • Consistent organic sales growth for over 10 years
  • Zero long-term debt
    • Available $15 million Line of Credit
  • Great cash flow
    • Operation Margin higher than Grocery Stores industry average
  • Business model matches consumer trends
slide35

Buy 75 shares @ $19.88

  • $1,491
  • 3.77% of portfolio