As more Americans get more health conscious, the trend toward buying organic, locally-sourced food is increasing. Even as the U.S. economy struggled, the trend toward specialty grocers increased. Americans still want to be healthy and have found that quality food is worth the money. This trend is benefiting grocers Whole Foods Market, Inc. (NASDAQ:WFM), The Fresh Market Inc (NASDAQ:TFM), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC).
The organic grocer every Fool knows
Whole Foods Market is the largest of the natural and organic foods supermarkets. The company owns 349 stores in the United States, Canada, and the United Kingdom. Whole Foods pretty much invented the organic supermarket and is the first company everyone thinks of when it comes to natural foods.
Whole Foods Market, Inc. (NASDAQ:WFM) just did something that companies are rarely doing these days. Whole Foods split their stock 2-for-1. I always like when a company splits its stock as that makes the company’s shares cheaper. This further shows how well-run Whole Foods is as an organization. The grocer has a pristine balance sheet with $1.08 billion in cash and only $27 million in debt. This also helps explain why the stock is up over 3,000% since it went public in 1992.
Whole Foods Market, Inc. (NASDAQ:WFM) continues to expand and increase market share. Currently, the company has 85 stores in the process of opening, relocating, or renovating. Last year the company opened 25 new stores and is on pace to beat that amount with 17 already opened this year.
The rising competitor
Besides privately-held Trader Joe’s, the closest publicly-traded competitor to Whole Foods Market, Inc. (NASDAQ:WFM) is The Fresh Market. Its 130 stores are less than half of Whole Foods, but it is in the same key markets as Whole Foods. By being in only 25 states, there’s plenty of room for expansion for The Fresh Market.
The Fresh Market Inc (NASDAQ:TFM) has been focused on expansion. Last year the company opened 16 new stores. Expansion is being ramped up this year with the planned addition of 22 new stores and five renovations. Based on past store openings, The Fresh Market has been able to recoup its investment in new stores in two to three years per location. The grocer also entered four new states – California, Kansas, Oklahoma and New Hampshire.
I like the fact that The Fresh Market Inc (NASDAQ:TFM) is a specialty retailer. Its stores are smaller than Whole Foods Market, Inc. (NASDAQ:WFM) and the grocer is more focused on perishable items than Whole Foods. With a smaller store emphasis, The Fresh Market doesn’t require the large demographics that Whole Foods does.
In the latest earnings report, the company reported profits increased 15% and sales jumped 13%. This was better than Wall Street was expecting. Management increased its expectations for the rest of the year. The company’s plan is working.
The new kid on the block
Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) has been run by the Isely family since it was founded in 1955. Each store not only sells natural and organic groceries, but also dietary supplements. The company has over 60 stores in 13 states and is looking to expand. Even though the grocer has been in business longer than Whole Foods Market, Inc. (NASDAQ:WFM) or The Fresh Market Inc (NASDAQ:TFM), Natural Grocers has not been as aggressive in expansion as the other two. Look for that to change as Natural Grocers has the smallest market cap of the three and the most room for growth. Plans are to open 13 new stores this year.
Natural Grocers reported that last year same-store sales grew 11.3%. That’s the highest among the organic grocers. Going forward, management is targeting same-store sales growth in the high single digits. The company is in great shape to grow with only $16 million in debt.
