US market can support ‘at least 1,100’ Natural Grocers by Vitamin Cottage stores, says IPO filing

By Elaine Watson

- Last updated on GMT

Natural Grocers by Vitamin Cottage generates just under 30% of its revenues from dietary supplements
Natural Grocers by Vitamin Cottage generates just under 30% of its revenues from dietary supplements

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The US market can support at least 1,100 Natural Grocers by Vitamin Cottage stores, claimed the Colorado-based retailer as it outlined plans to raise up to $115m in an initial public offering (IPO).

The natural foods and supplements chain, which operates 55 stores in 10 states, is growing rapidly, notching up sales of $264.5m in the year to September 31, 2011, up 16.6% v 2010.

It has also clocked up impressive same store sales growth (10.2% for the six months ended March 31, 2012 v the same period in 2011).

Meanwhile, EBITDA (profit before tax, depreciation and amortization) increased 4.1% to $15.1m in 2011.

We intend to continue expanding our store base

While it has modest plans to open 10 new stores in fiscal 2012, it ultimately has the potential to grow to 20 times its current size, according to a document​ filed with the Securities and Exchange Commission on Monday.  

“Based upon our operating experience and research conducted for us by customer analytics firm The Buxton Company, we believe the entire US market can support at least 1,100 Natural Grocers stores.

“We intend to continue expanding our store base through new store openings in existing markets, as well as penetrating new markets.”

10,000-12,000 supplement skus

Proceeds from the IPO will be used to pay debts and provide working capital, said the firm, which plans to apply for listing on the New York Stock Exchange under the symbol NGVC.

The company, which was established in 1955 by Margaret and Philip Isely (parents of the current owners), generates just under 30% of its revenues from dietary supplements and carries 10-12,000 supplement skus.

However, it also sells a large range of natural and organic groceries, setting strict standards for suppliers on its website.

The banned list

Ingredients in food and supplements that it will not permit include high intensity sweeteners ace-K, sucralose and aspartame; artificial colors and flavors; bleached flours; dairy products with rBGH (recombinant bovine growth hormone); hydrogenated and/or partially-hydrogenated oils; irradiated food; non-organic produce and Olestra.

It also prohibits androstenedione; chaparral; colloidal silver; DHEA; EAS sports supplements (because they “contain hydrogenated vegetable oils and artificial sweeteners​”; EDTA; Ephedra in weight loss, energy, or sport nutrition products; human growth hormone; iron oxide; the carb blocker phaseolamin; potassium iodide; pregnenolone and the anti-caking agent magnesium silicate.

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