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No. of Recommendations: 10
I recently bought a small stake here, thought I would put it out for thoughts as many of you are more into this space than I am.

Quick summary, I'll stay more qualitative now:
1) High valuation
2) High historical growth - store level, SSS, and unit growth
3) Competes in what I would describe at the intersection of Costco (constant markup / price lead business model) / Trader Joe's (small footprint stores) / Whole Foods (Organic)
4) Spends limited money on marketing, doesn't do sales / promotions in general.
5) 1/5 of store space or so dedicated to vitamin, rest of store is all organic / non-additive foods / good.
6) Business appears to be quite high ROIC, prices seem excellent for what they sell
7) name recognition is lacking, but I think there is a tailwind as their value will attract customers long term
8) Insider controlled with >50% owned by insider family.

My interest here is a fundamental view that constant markup / honest / value driven businesses succeed in commodity retail... I think they generate a long tail of goodwill with customers, and basically compete against firms that have a trouble competing directly on price.

Specifically in the organic space, the main competitors (with the possible exception of TJ's if you think they are a direct competitor), at least in my area (New Seasons, WFM, Market of Choice) don't really sell "organic" they sell two things:
1) Access to organic
2) Place for yuppies to shop where they feel good and don't see real poor people

I think #2 is really the 'value' that New Seasons / Market of Choice / WFM sell. And there is a lot of demand. I just think the long term market for value priced organics is much larger and also nearly incompatible with where NS / WFM / et al are targeting today... so I think NGVC can scoop up a lot of that business.

On valuation, NGVC I think has 20% growth for a while in front of it, and you can buy the co for $6m / location today. Sub $600m cap, 1x revenue, ~30x forward earnings (I know, did someone hack my fool account????? W... T... F... ????).

I thought about this name for a while and realized that if I was thinking about it, I should just buy... I never buy fast growers, and this is a company I think I get why they will experience under the radar growth for a long time with consumers. I think 300-500 locations is a good target for these guys... seems that 7-8m revenue / location is doable, and I'd bet they can do >3-3.5% net margins on that. I think there is a long SSS tailwind as well, so I think revenues can exceed that at the store level... although I don't have a good feel for how their locations incrementally get worse over time...

Feel free to add thoughts, tell me I'm wrong, or share anything really.

TIA,

Ben
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"although I don't have a good feel for how their locations incrementally get worse over time..."

I meant by this their new locations added not being as productive as the first 100... not degradation of each location over time.
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I have a starter position in this name.
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Hacker buying a FG is good enough for me - bot a dink and will look at it later.
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one small comment

If this is true:

On valuation, NGVC I think has 20% growth for a while in front of it...

then this

Sub $600m cap, 1x revenue, ~30x forward earnings

Is not much to pay. Esp in Inning 2.

You B engineer. 20% compounds fast and hard
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No. of Recommendations: 1
Thanks for the comments guys.

Yeah Martian, I can do the math, it's always a question of how confident are in forecasting the growth. In NGVC's case, I'd be pretty surprised if their 3-5 year revenue CAGR was <15%. I think the income levels that fall out if you flash forward to a five year forward pro-forma are "good" and the company seems well run.

I've convinced myself enough as I mentioned that I will scale up if it gets cheaper.

Me / You / Naj all in a single name? Has it ever happened? Maybe Goog / MSFT back in the day... kind of funny.
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"Maybe Goog / MSFT back in the day... kind of funny."

Ahh... and our lovely XOM as well!!
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Ben-

I looked at this name last year and I couldn't figure out why to buy it vs Whole Foods. (there are none in my area).

You stated:
Specifically in the organic space, the main competitors (with the possible exception of TJ's if you think they are a direct competitor), at least in my area (New Seasons, WFM, Market of Choice) don't really sell "organic" they sell two things:
1) Access to organic
2) Place for yuppies to shop where they feel good and don't see real poor people

I think #2 is really the 'value' that New Seasons / Market of Choice / WFM sell. And there is a lot of demand. I just think the long term market for value priced organics is much larger and also nearly incompatible with where NS / WFM / et al are targeting today... so I think NGVC can scoop up a lot of that business.


Looking at the store in pictures it seems like its a cross between my local Co-op and a whole foods but about 1/4 to 1/3rd the size of a whole foods. Sales per Sq/foot are similar.

You state that this is a lower priced version of whole foods. Do you have any stats on that? I've read antecdotal reports that their prices are 7-10% cheaper than Whole Foods which is midway between my estimates that whole foods is 20-25% higher than my local grocer. I'm intrigued but can someone confirm they are filling the gap (and I agree its a large gap) that Whole foods has left for it.
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No. of Recommendations: 4
Morrie,

"<I.You state that this is a lower priced version of whole foods. Do you have any stats on that? I've read anecdotal reports that their prices are 7-10% cheaper than Whole Foods which is midway between my estimates that whole foods is 20-25% higher than my local grocer. I'm intrigued but can someone confirm they are filling the gap (and I agree its a large gap) that Whole foods has left for it."

I don't have industry / 3rd party data to confirm, but I have a preponderance of anecdotal data.

Of all the like-for-like items (of which is probably the minority of what NGVC sells, but...) they are cheaper than Fred Meyer (Krogers subsidiary, and a pretty decent competitor in my area, good selection / cost tradeoff, big history and sourcing in the area) by 5-15% from what I'm seeing (organic apples, certain cheeses, milks, juices, eggs, etc). I have seen larger discounts vs other more organic focused vendors (New Seasons which is where I shop generally for this stuff... which is similar to WFM in terms of pricing)... I haven't done much checking at market of choice and WFM though.

I think if you just price around inside a NGVC, you would get sticker shock (I did) but the interesting thing is that they sell quite a variety of different very high quality things, but like for like with WFM, from what I've seen, I think 7-10% is probably a bit low, but maybe that is right. (WFM sports 5-6% GM points better than NGVC, and has for 5 years... that's what, 40 vs. 55% markup right?... I think their accounting is comparable). I think this gives NGVC a bad first impression to some (that and they cut costs on lighting and heating / cooling where it makes sense...). (Funny story a buddy visited their headquarters and said they didn't turn the AC on until like above 85 to keep costs down... real cheap skates. :)... that can be both good and bad of course, but kind of funny)

I know some other folks who have done checks and they see better pricing... I think in general 7-10% may be common, but I think WFM makes more on a few items as well which may make certain checks show way higher #'s.

I should say I actually think WFM has a good business, but I think NGVC is going to be able to grow easier going forward as I think it's really hard for WFM to give up those 6 points of GM (it's large, they make a ton of money, very public profile) while it's simpler for them to just let NGVC eat around the edges. NGVC can sacrifice the urge as COST has done so well to monetize their current customers to gain long run high ROIC growth that is IMO more attractive as a base of business. I think the founding family controlling the company also prevents short(er) term thinking which IMO is damaging in this specific case.

If you want to forward along any pricing data from 3rd parties, or anecdotes you hear, please do so. Also, I've been imploring my friends to give me their shopping experiences at various places and asking my wife to widen her shopping net and report back. :)

I don't mean to sound like I'm pitching this idea hard, it's a small position, just trying to articulate why I think it's interesting.
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No. of Recommendations: 9
Don't own any of the organic/natural supermarket plays but I have looked at them.

Quick summary, I'll stay more qualitative now:
5) 1/5 of store space or so dedicated to vitamin, rest of store is all organic / non-additive foods / good.


NGVC stores are both smaller than their publicly-traded competitors (WFM, TFM, SFM) and devote significant space to vitamins and supplements.

NGVC states that vitamins and supplements make up about 23% or so of their sales. I wonder whether this devotion to vitamin and supplements will affect their growth: will the marginal consumer for natural/organic be attracted to a small store with a high vitamin sales mix? Does NGVC pull "true blue" organic customers (and are there enough to sustain years of growth in a given market)? Vitamins and supplements to me seem more susceptible to internet competition.

I pulled up 10-Ks and did a search for "supplements" (not supplement - otherwise one finds supplementary data).

NGVC - 65 matches for supplements; 60 of those matches were for "dietary supplements."

SFM - 35 matches for supplements.

WFM - only a single hit each for supplements or vitamins. It may be news to some but WFM only does 30% of their sales outside of prepared foods and bakery in organic . Of course, lots of prepared foods too available at WFM.

TFM - again a single hit for vitamins and supplements.

****

What has scared me away from NGVC or WFM or SFM at higher valuations (although some have come down recently) is that everyone seems to be expanding in this area.

Admittedly, dollar stores gave rabbits a run for their money for reproduction and many of those stocks have done well.

But traditional grocery stores, Wal-Mart, Whole Foods and now new Whole Foods concept, Trader Joes, Wegmans, etc. plus Sprouts and The Fresh Market and NGVC and all planning to expand further into organic, natural, etc.

Why won't there be additional margin pressure for industry players?

ET
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ET -

Agree with your concerns.

Also have Vitamin Shoppe expanding. Of course they do not do groceries.

sw
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"But traditional grocery stores, Wal-Mart, Whole Foods and now new Whole Foods concept, Trader Joes, Wegmans, etc. plus Sprouts and The Fresh Market and NGVC and all planning to expand further into organic, natural, etc.

Why won't there be additional margin pressure for industry players?"


This is hard for me to answer... I think it's a risk. I'm not sure if it's a long term risk, as I view over-saturation of the category in the near term to hurt those with the fattest margins most... but it's a risk to margins / volumes for sure.

I guess my simple answer is that I view the healthy food category as a secular growth story. So I guess I view the expansion of both pure players, and existing guys like WMT / KR / etc selling more "organic" etc as a "to be expected" kind of move.

I'm placing my bet here basically because I think in this case, for a chunk of the market, a price focused well run firm will do well. The road I'm sure will be bumpy though.

Hope that kind of gets to your point.

I would likely never make this a big position unless the valuation was very compelling, or margins were well below my expectation long term, and / or the environment was decidedly negative for the sector.
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No. of Recommendations: 2
If this seems too much like ball-busting I'll stop but I really enjoy exploring potential stock purchases.

I'm placing my bet here basically because I think in this case, for a chunk of the market, a price focused well run firm will do well

This is not a fully developed response ... however, I'm not sure I agree with your characterization of market conditions or NGVC.

1) If a shopper is truly price sensitive/tight budget, he may be forgoing organic or natural food anyway.

2) Price sensitive natural or organic food shoppers may look to Wal-Mart or Kroger/traditional supermarkets, which I would guess would have price advantages over NGVC.

3) I have never been to a NGVC store but they seem more "hard core" than competitors.

https://www.naturalgrocers.com/products/about-our-products/w...

For instance, the "What We Won't Sell" list is quite comprehensive and seems to me geared toward true believers.

4) Admittedly NGVC also stresses their "Everyday Affordable Prices."

https://www.naturalgrocers.com/products/about-our-products/e...

However, I don't know (perhaps others do) whether NGVC's price are sufficiently lower than competitors so they can rightly be characterized as "price-focused." Any comparison to Costco I think is questionable. Heavy vitamins/supplement mix and a substantial list of Not Gonna Sell items suggest to me a hard-core audience.

I guess my simple answer is that I view the healthy food category as a secular growth story. So I guess I view the expansion of both pure players, and existing guys like WMT / KR / etc selling more "organic" etc as a "to be expected" kind of move.

I also view the healthy food category as a secular growth story. I personally appreciate the NGVC approach, their owner-operator management, and their better-than-many-competitors balance sheet. Their 10-k disclosure is also welcome.

However, I also once owned NDN - 99 Cents Only Store - which had owner operator management (Dave Gold story!), a long runway, compelling success in their home market, and enjoyed a secular growth tailwind.

And then ... Houston, we have a problem.

ET
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No. of Recommendations: 3
"1) If a shopper is truly price sensitive/tight budget, he may be forgoing organic or natural food anyway."

Agree, I guess it is hard to say the portion of folks who want organic (and are will to pay anything extra) but aren't interested in paying another 10-15% to buy it through WFM...

"2) Price sensitive natural or organic food shoppers may look to Wal-Mart or Kroger/traditional supermarkets, which I would guess would have price advantages over NGVC."

This concerns me less for NGVC than it would for WFM. I think the cheapness of WMT selling organic eggs is clear, but I don't (from what I've seen) see them undercutting NGVC much... but it starkly shows to customers the markup charged to them by the WFM's of the world... but I agree, as the frequent items bought are sold through mainstream grocers, it potentially reduces a trip to NGVC that otherwise might be there. I think the issue is that it's not always clear what is "organic" at normal grocers, and I think they intentionally try to confuse their consumers about this fact, at least in my experience. I think maybe the idea that knowing what you are getting when going into NGVC is something I consider powerful relative to their mainstream brethren...

"3) I have never been to a NGVC store but they seem more "hard core" than competitors."

Absolutely agree. I prefer hardcore businesses... If you turn some folks off I'm less concerned, than if you don't stay true to what you do well. Again, I personally think this is where comparisons to COST (and IBKR as well) specifically are more apt. Everyone I've ever known who shopped at COST always b1tched about it... but once you shop there, you tend to keep shopping there, and some who complain at first later change their tune. Certainly some never shop there, and that's ok. I don't want to stretch the comparison to NGVC too much, but I think folks who shop at NGVC are likely to continue, and incremental sales to existing customers, and completely new customers are more likely than they are at WFM for example (hence my SSS long tail originally). I may be wrong, but I think hardcore is good, as long as it's rational... so few companies have any kind of clear direction and values that I think it's refreshing to consumes once they realize it's authentic.

I guess this covers #4 in your comments as well.

"However, I also once owned NDN - 99 Cents Only Store - which had owner operator management (Dave Gold story!), a long runway, compelling success in their home market, and enjoyed a secular growth tailwind."

Wasn't aware / don't remember the NDN story, but surely there are many ways the NGVC investment could turn out poorly, agree.

Thanks for the thoughts and things to ponder.
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No. of Recommendations: 1
Ben-

Thanks for your reply. I got the 7-10% discount compared to Whole Foods from a google search trying to find comparisons between Whole Foods and them. I may take a small dink position on this.

This would be a store my wife would like to shop at. I live in Madison, Wi. We have Whole Foods, thriving farmers markets, tons of CSAs (that consumers can get subsidies from their HMO for!), 1 Trader Joes and a few Coops. This store reminds me of the Willy Street Co-op in Madison (2 locations). Large vitamin and bulk items. The co-op only sells organic OR local and they do very well. My wife would do 100% of her shopping there if she could but their costs are 10% higher than Whole Foods and we don't shop at Whole Foods as its too expensive.

We have three young kids so we have to budget. We have a CSA for veggies, most of the meat we buy isn't organic but is grass fed. The problem is we fit this stores profile for meat, veggies, etc but there is a bunch of stuff that they won't sell. My kids still love crackers, cookies, etc, Kraft Mac and Cheese so we still get those. Annie's is not ok. I'd guess that of my kids classmates - 25% are like my wife, 10% are hardcore than us and the rest are not interested/can't afford it. My wife gets together with 10-15 women 2x a month for book club (drinking) and she comes home and thinks she's a horrible mom as the others are 100% organic.

We may be a little more organic than most as we did cloth diapers. I was ok with it as we saved a bunch of money after 3 kids.
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No. of Recommendations: 7
NGVC - 10x pretax CF
estimate 30% CF growth into 2018
reinvests in 35% cash on cash return
No debt.
Undiscovered name [until now!]
entire store 100% organic
prices often 20% less than WFM
avoids low-margin offerings like bakery, gets 35% from high-margin like vitamins, supplements, body items, etc
Isley family own ~55-60%
record of operational excellence
prospective 20% sq/ft growth limited by CF to expand instead of debt
stores cost around 2.5m upfront

culture is important [look at the firms that actually mean this - GS, SBUX, COST, old GE, add your example]

relatively recent IPO - 3 years ago
lean cost structure - they prefer to open the windows in conf rooms rather than run the AC
insiders sold in 40s bought in 20s, my kinda investors

My target is 40-handle.
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and unless it fell to $16 again.
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No. of Recommendations: 2
Value line gives a p/e of 46.7. Cash flow of $30.6 MM for 2014. Company spent 36 million on cap ex, so FCF is negative.

Comp store increases are decreasing:

2012....11.3%
2013.....11.1%
2014.....5.6%

Like the strong insider ownership, but does not qualify as a VO candidate since multiple family members are involved.

NPM and ROE are not particularly good, even for a grocery store.

sw
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No. of Recommendations: 3
I've been in and out and back into this one over the past year--so far profitably. Since there are none in my area, I hadn't been inside a store until a quick trip this past weekend:

http://boards.fool.com/store-visit-31759807.aspx

It left me with some concerns about future prospects--which I already had to begin with. The Eugene, OR store was not real busy on a Sunday morning, and I didn't really care for the decor. It did have a good selection of products at what I thought were good prices (extremely good to a southern Californian!). It started as a Mom and Pop outfit (literally) in Golden, CO in 1955, and existed on a small scale for most of the time since, but IPO'd in 2012 to fund expansion. I think management is unproven at the scale of business expansion that they are trying to achieve, but so far so good. They are at 95 stores, and targeting 1100.

I'm holding, but a little nervously.
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Bloomberg PE - 36.4
Google PE - also 36.4.

Bloomberg is the gold standard. Just type in the ticker and bloomberg in google and it will give you the right number for PE.

trades just under 1 p/s.

comp stores increased from 5.6 to 5.9% for h1. They definitely had a hiccup and that's why stock fell 60%+, no doubt. As always, stocks are a bet on the future, don't drive looking through the rear-view window!

Company spent 36 million on cap ex, so FCF is negative.

As you would expect to find from a small, fast-growing firm, check history Sprint, Comcast, Mirage Resorts, ESPN for more details.

Last 6 months CF Ops 24.3m, CapEx -17m. Not sure how Jan 2014 stats are relevant, honestly.

Of course, it will all come down to execution. I see downside of $16 and upside of 2.5-3x that number. I like those odds, not everyone will.
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No. of Recommendations: 15
Somehow missed the october 2014 bottom around $15. Included them in a sweep of organic stores march 2014 and they were $40 which I thought was completely uninteresting. If I'd been paying attention, $15 would have been a lot more intriguing. C'est la vie. Missed another one.

NGVC was wedged between Sprouts and Whole Foods. They are a minnow compared to WFM who had $15 billion in sales in 2014 compared to $521 million for NGVC.

What has been amazing about WFM were comps, the margins, sales/SF and the ROIC. The mighty WFM has been in a slump for a couple of years as comps drop off and growth slows and investors continually predict their demise due to high prices and competition from Walmart and Krogers not to mention every other organic grocer on the planet. With NGVC's high price last March and the numbers that didn't live up to WFM, i passed. Should have stayed vigilant

I wanted to see a few things happen before committing $$. Needed the margins to expand and I thought the increasing supplement revenue would get them there. It hasn't. Supplements are down as a % of revenue. GNC even though it's kind of a crap business manages around 18% op margins and 10% net--much higher than groceries.

2014 2013
===========================
grocery 67% 56%
supplements 23% 33%
body care 10% 11%

Like to have comps stay in the high single digits or ideally in double digits but they have dropped way off here. And was hoping the sales per SF would improve. They weren't bad --WFM was around $1000/SF Sprouts was in the mid $500's and NGVC was a respectable $729.

All the changes I was waiting to see are in decline rather than improving. That would have been OK at $15 but at $25 not so sure.

They are also suffering from competition in the space.

Growth is dependent on store increases and they do have room to expand. Most stores are in CO and then spread out to adjacent states.Comps have dropped from a more impressive 10.8% in 2013 to 5.6% in 2014 and Q1 2015.

Margins are not expanding much


growth 2014 2013 2012 2011 2010
==================================================
revenue 20.9% 28.0% 27.2% 16.6% 10.1%
gross 20.5% 26.9% 28.0% 15.3% 11.6%
operating 27.0% 59.1% 61.8% -17.9% 8.8%
net 27.7% 58.7% 89.8% -20.5% 24.6%
growth stores 20.8% 22.0% 20.4% 25.6% 18.2%
comp sales 5.6% 10.8% 11.6% 4.9% 2.1%

Margins

gross 29.1% 29.2% 29.4% 29.3% 29.6%
operating 4.7% 4.4% 3.6% 2.8% 4.0%
net 2.6% 2.5% 2.0% 1.3% 1.9%

Now have 87 stores


2014 2013
============================================
same store sales increase $24,000 $36,100
new store sales increase $66,000 $58,200

total increase revenue $90,019 $94,270

same store revenue $454,674 $372,455

same store revenue/store $6,314.9 $6,312.8
new store revenue/store $4,400.0 $4,476.9

traffic increase 2.30% 5.90%
transaction size 3.20% 4.90%
basket size $36.09 $35.96

comps declined due to competition
ROIC is 10 WFM is around 15.
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No. of Recommendations: 2
Now at 99 stores.

Q was pretty good, stock had dribbled down since my post, but up nicely today. Volatile overall.

I added some more on the slide, but still not a huge position for me. I still think one to tuck away for a long time though.
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No. of Recommendations: 4
Bad Q. Margins down, comps down to the 1% range.

Stock obliterated.

All FYI.

I own, have purchased more today. Decent sized position now, not huge though, and probably won't be.

Ben
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No. of Recommendations: 1
gotta admit, I bailed out a while ago (wish I'd done the same with the frustratingly irritatingly maddening SYNT) - the explanation from the previous call on why 2H would accelerate seemed fishy (sales initiatives; stronger results from busier stores as they lap competition, timing of Easter) but we'll see how that goes; looks far more interesting now - I just hope they don't panic and do a stupid buyback...
--

you have any thoughts on the organic space in general? I don't know much - follow WFM is all - but it seems to have run into a wall...
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No. of Recommendations: 3
"you have any thoughts on the organic space in general? I don't know much - follow WFM is all - but it seems to have run into a wall..."

I don't think my thoughts have changed much since ET I discussed up thread. I think the business of more organic / natural is probably in a long term uptrend, but I think it's likely going to go through mini cycles and will likely get punished in recessions.

My view is that a natural trend will be the more cost effective purveyors will be the winners long term and that is why I like NGVC (in addition to insider ownership and limited B/S leverage).

You bailed wisely. Let me know if you join my shame train again. :)

Ben
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No. of Recommendations: 0
You bailed wisely.

in retrospect, I apologize for how that sounded - been dealing with my share of equity blowups lately and didn't mean to imply I had any ability to hop, skip and jump away from the occasional thing that doesn't quite go in the direction desired; besides, the story is always ongoing....
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"in retrospect, I apologize for how that sounded - been dealing with my share of equity blowups lately and didn't mean to imply I had any ability to hop, skip and jump away from the occasional thing that doesn't quite go in the direction desired; besides, the story is always ongoing...."

I took it as no more than I think you intended.

I have developed a thick skin enough such that if you taunted me about me amazingly bad timing to earn a nice 50% drawdown I probably wouldn't have minded any way. :)

I always appreciate to hear why others sell and buy, so I appreciate it, and I'm truly happy you missed the down day!
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frustratingly irritatingly maddening SYNT

I looked at it and bought a small position and after some thinking decided it was a value trap and sold. The company is not going to use its cash, and it is not similar to other Indian offshore outfits and will have muted growth. You may want to take a look at INFY.
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I looked at it and bought a small position and after some thinking decided it was a value trap and sold.

I'd be curious as to why specifically before I respond. Why did you feel it was a value trap?

thx for any response
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No. of Recommendations: 4
I'd be curious as to why

I thought, Syntel will continue to struggle to grow, as there is a heavy concentration of top customer's, the financial industry had a higher IT investment for the last few years and it will taper off, the margins will be impacted because Syntel have to change the mix shift and have more on-site resources, lastly the utilization is high (yeap, at some point it is bad, because you don't have bench to go after new business and attrition rates are high for Indian IT outsourcing companies), and lastly I think I was somewhat overly influenced by this, the bulk of the cash sitting in the balance sheet is actually in India, and it is not going to be of any use for M&A, or shareholder returns in the forms of dividends or buyback.

While the founder may have relinquished CEO post, he still has a very high stake and say on the company, and therefore no bold moves or change in direction (which is not necessarily bad). Also, any strategic moves will be considered only if it benefits the founders. The best case scenario is the company being bought out by one of the Indian firms.

Therefore the only way to unlock the value is a buyout of the company, otherwise it is not going anywhere.
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No. of Recommendations: 0
thanks for your reply!

I'm going to wait to respond. As a holder, my inclination is to respond with counter-arguments (to some degree), but i want to read what you've written a couple times in a couple days to think about it so I don't knee-jerk a reply with a justification that might not be - justified.
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No. of Recommendations: 1
Gotta admit, I feel gutless but it seems a hard evaluation

If they make 60c, then it trades for 23x - fast grower valuation
still tough comps rest of year
CapEx still high - they are adding debt now (mid 50s CapEx)
competition not going away

Course some seems transitory
cannibalization - supposed to roll off Q1 next year
weather always a swing factor
competition on their best stores - unless there is still more, then how bad could this be

And if they can have 100, they can have - what - 1000?
What stays my hand is the results at WFM - there is clearly a malaise there, but i realize this could easily be short-term thinking - or the area could just reset again and grow from there

Yet, if you wait for clarity
by then it would be up a lot

hard, hard

last time it dove like this it roared sharply higher but the environment seemed better then

hard
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No. of Recommendations: 2
"And if they can have 100, they can have - what - 1000?"

Honestly, this to e is the dominant aspect of the investment. The business seems to have decent economics, and management that is highly incentivized, and a very low history of nice growth.

I truly can't speak to all the nuances of competition with intellectual rigor, but from my read, this is a cycle, not a secular shift. Clearly incremental units will not be quite as profitable on a standalone basis, but at 100+ stores, there is clearly still more benefit to scale than the alternative.

Worth what you paid. ;-)

In 1 year if this is comping at 4-5%, the stock is perhaps a double. I don't see a lot of scenarios where the stock is down in 2-3 years... but PE is still high, so it could happen.
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Keyboard freaking out:

Honestly, this to me is the dominant aspect of the investment. The business seems to have decent economics, and management that is highly incentivized, and a very long history of nice growth."
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2c

I'm an owner again. Just a dink. You know this, but because I think it can be valuable to write things down.

things I liked
-in Q1 'non-oil' states store comps were up 3.3%. Not sure how relevant this is but it seemed a positive factoid
-eventually they lap their own store cannibalization
-at some point, you have to decide if the prior illustrious history is more important than the weaker results; given the current price, I'm at that point
-this year is next year's compares

things I didn't like
-that stupid buyback. I really hope it is just an announcement and not a reality. Borrowing money to do it is nuts.
-they seem determined to keep the pedal on the gas as far as store growth - you just wonder if the current growth is too fast and given current weakness you would think they would dial it down a bit
-CapEx is fat - see above

And I thinking like you - any happier news in comps and margins more than likely pushes this back up sharply in short order.
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Fully agree Rocky. Also their underlying trading profitability is very good and there is always the possibility of a buy out.
Ant
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No. of Recommendations: 5
Just poking my head back in here... have discussed this a bit on Twitter with ET, but hadn't circled back.

The stock went to hell after my initial pitch... (under $5) on comps that flattened to zero and declining gross margin coupled with AMZN's acquisition of WFM.

I did buy more on the decline and even got a large added stake at under $5, and added more in $7... let some go at $9, $13, and have mostly let the rest run.

This has been an overall good investment, but the volatility was quite high.

Strangely, the results were fairly mild given the share movement (both on the downside and the upside) and further, the equity isn't levered with debt, so the valuation move mostly captures the valuation change of the firm.

Anyway, I now have a fairly large position due to some growth, but results do not appear to be improving dramatically. Now kind of no-mans-land for me... although I still like the company's direction, their financials are not setting anyone's imagination on fire, and you could argue they are now statistically quite expensive @ $22 / share.
- SSS for Q4 were 6%+, but GM only 26.3%
- forecasts for '19 are 2-4% range, with $0.33-0.40 EPS (assuming flat GM)
- store growth was moderated as they worked on operating goals and other issues, store openings are ~6% next year (forecast).

I think their forecast is pretty conservative... to me the key is if they can expand GM even a bit and get some operating leverage.

One side note, this stock is a textbook if bad liquidity. The moves of the shares (both down and up) have been simply stunning, and mostly, not really clearly related to some fundamental news. Friday the shares traded in a 40% *range* from prior close. stunning... read the earnings call and try to figure that out. :)

Ben
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