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NYSE: NGVC

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

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  1. NYSE: NGVC 11/29/2012 Turner Novak

  2. Buy 75 shares @ $19.88 • $1,491 • 3.77% of portfolio

  3. Company Overview • Founded in 1955 • Lakewood, CO • Family owned

  4. Product Overview • Natural & organic groceries • Dietary supplements • Do not sell any products that are known to contain artificial or hydrogenated ingredients

  5. Product Overview

  6. 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

  7. Store Overview • 30 stores in Colorado • 10 stores in Texas • Room for growth nationally

  8. Store Overview • https://www.facebook.com/photo.php?v=10151185402704466

  9. 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

  10. Historical Price

  11. Jeff’s Slide • 7% Institutional ownership on November 13th • 36% Institutional ownership on November 28th

  12. Adjusted Net Income and EPS

  13. Adjusted Net Income and EPS

  14. 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

  15. Cash Flow & Capital Investments • Cash flow is being re-invested in the company • Cash generated from the IPO will increase capital investments

  16. Strengths

  17. 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

  18. 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

  19. 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

  20. Weaknesses

  21. Inventory Costs • Higher inventory costs than non-organic grocery stores • Leads to higher profits, as long as inventory is sold

  22. Opportunities

  23. 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

  24. Growth of US Vitamin/Supplement Use

  25. Growth of US Organic Food Sales • Projected 12.2% CAGR in 2010-2014

  26. 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

  27. US Food Sales • Organic food consists of only 4% of total US food sales • Large opportunity for growth

  28. 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

  29. Threats

  30. 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

  31. 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

  32. Competitors • Major Competitors • Whole Foods Market • Other Competitors • Costco • Safeway • Krogers

  33. 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

  34. Buy 75 shares @ $19.88 • $1,491 • 3.77% of portfolio

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