The growth prospects of the grocery stores industry are anticipated to be bolstered by the rising demand for premium quality groceries as disposable incomes rise. Given the inelastic demand the industry enjoys and improved supply chain, investors could consider investing in quality grocery stocks Natural Grocers by Vitamin Cottage, Inc. (NGVC), Village Super Market, Inc. (VLGEA), and Marks and Spencer Group plc (MAKSY).
Various consumer-oriented features of grocery retail stores, such as fair price, quality, variety of products, and convenience, help them stay competitive in the defensive industry. The global grocery retail market is projected to reach $14.77 trillion by 2030, growing at a CAGR of 6.9%.
According to a market report, global retail sales in 2024 are expected to reach $31.10 trillion, marking a 4.9% increase year-over-year. This is also the first-time retail sales are anticipated to cross the $30 trillion mark. Also, these figures show that the growth of online shopping is set to outpace overall retail sales by nearly two times.
The online grocery market is projected to expand as consumers prefer digital shopping channels. Automation, robotics, and IoT are expected to revolutionize supply chain management, enhancing efficiency and reducing costs.
The online grocery market is expected to be worth $377.4 billion in 2023. Further, the market is projected to reach $3.4 trillion by 2033, growing at a CAGR of 24.6%.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Grocery/Big Box Retailers stocks, beginning with the third choice.
Stock #3: Natural Grocers by Vitamin Cottage, Inc. (NGVC)
NGVC retails natural and organic groceries and dietary supplements. It runs 164 stores in 21 states, a bulk food repackaging facility, and a distribution center. The company also provides science-based nutrition education programs.
On November 1, 2023, NGVC announced the official Grand Opening of its new store in Loveland, CO, on Wednesday, November 15, 2023.
NGVC’s trailing-12-month ROCE margin of 14.23% is 21.8% higher than the industry average of 11.68%. Its trailing-12-month asset turnover ratio of 1.71x is 105% higher than the industry average of 0.84x.
NGVC’s net sales for the fourth quarter ended September 30, 2023, rose 7.6% year-over-year to $295.08 million. Its gross profit rose 11.3% year-over-year to $84.35 million. Its net income increased 172.2% year-over-year to $5.88 million. The company’s net income per share of common stock increased 160% year-over-year to $0.26.
Street expects NGVC’s revenue to be $1.19 billion for the year ending September 2024.
NGVC’s shares have gained 70.4% over the past year to close the last trading session at $16.29.
NGVC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B in Value, Stability and Quality. It is ranked #2 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what is stated above, we’ve also rated NGVC for Growth and Momentum. Get all NGVC ratings here.
Stock #2: Village Super Market, Inc. (VLGEA)
VLGEA is a nationwide chain of supermarkets that offers various goods, such as prepared foods, frozen goods, dairy products, meat, produce, and seafood. Additionally, it offers non-food items through retail and online stores, including general merchandise, liquor, pharmacy products, and health and beauty products.
VLGEA’s trailing-12-month ROCE margin of 12.30% is 5.3% higher than the 11.68% industry average. Its trailing-12-month asset turnover ratio of 2.29x is 174.2% higher than the 0.84x industry average.
In the fiscal fourth quarter that ended July 29, 2023, VLGEA’s sales stood at $553.81 million, up 5% year-over-year. The company’s gross profit rose 8.6% year-over-year to $161.06 million, and operating income came in at $20.21 million, representing an increase of 12.2% year-over-year. Moreover, its adjusted net income increased 26.7% year-over-year to $15.57 million.
Shares of VLGEA have gained 27% over the past six months to close the last trading session at $25.93.
It’s no surprise that VLGEA has an overall rating of A, which equates to Strong Buy in our proprietary rating system. VLGEA has an A grade for Value and Stability and a B in Quality. It is ranked #3 in the same industry.
In addition to the POWR Ratings highlighted above, one can access VLGEA’s Momentum, Growth, and Sentiment ratings here.
Stock #1: Marks and Spencer Group plc (MAKSY)
MAKSY operates various retail stores. It operates through five segments: UK Clothing & Home; UK Food; International; Ocado; and All Other.
On November 4, 2023, MAKSY announced that it would open nine new stores, investing £80 million in sustainable bricks and mortar retail and supporting over 2,200 local jobs across the UK.
MAKSY’s trailing-12-month gross profit margin of 36.95% is 9% higher than the industry average of 33.89%. Its trailing-12-month asset turnover ratio of 1.36x is 63.3% higher than the industry average of 0.84x.
During the half year that ended September 30, 2023, MAKSY’s sales increased 10.8% year-over-year to £6.16 billion ($6.70 billion). Profit for the year increased 24.1% year-over-year to £206.90 million ($225.08 million), while its adjusted EPS increased 62.8% year-over-year to 12.7 pence.
Analysts expect MAKSY’s revenue to increase 10.4% year-over-year to $16.24 billion for the fiscal year ending March 2024. Its EPS is expected to be $0.54 for the same year.
Over the past year, the stock has gained 108.1% to close the last trading session at $6.44.
MAKSY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Sentiment, Growth, Stability, and Quality. It is ranked first in the Grocery/Big Box Retailers industry. Click here to access the additional MAKSY ratings (Momentum).
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MAKSY shares were unchanged in premarket trading Monday. Year-to-date, MAKSY has gained 109.24%, versus a 21.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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