Natural Grocers by Vitamin Cottage (NYSE: NGVC)
With 168 stores in 21 states, chances are you’ve heard of organic grocery chain Natural Grocers. But with healthy daily average comparable-store growth of 6.2% in its most recent quarter and plans to continue steadily expanding its base — the company plans to build 4 to 6 new stores this year and remodel the same number — I think (Steve here) it’s only a matter of time before this sub-$400 million market cap company no longer meets the criteria of a small-cap stock. Natural Grocers is holding up incredibly well despite macro concerns that have so many other companies curbing their growth plans.

Sure, Natural Grocers shares rallied more than 15% yesterday on the heels of its far better-than-expected earnings performance (for its fiscal Q1 ended Dec. 31 — a feat achieved with the help of sales growth, astute pricing initiatives, and operating leverage kicking in — but I think long-term investors would do well to start building a position even at these levels.

Arhaus, Inc. (NASDAQ: ARHS)

Arhaus, Inc. stands as a beacon in the home furnishings market with a market cap of just under $1.7 billion today. The fast-growing lifestyle brand has effectively embraced an omni-channel approach, and satisfies customers’ desire to support a business that not only directly designs and sources products from leading manufacturers and artisans around the world, but also embraces responsible sourcing and a borderline fanatical focus on client-first service.

Arhaus’ revenue growth is modest — sales climbed just 1.9% in its latest quarter, to $326 million. But it’s also a solidly profitable business that enjoys steady, strong demand from its target client base and is investing to drive sustained, profitable growth over the long term.

As a lifestyle brand and premium retailer, Arhaus offers an expansive assortment of furniture, lighting, textiles, décor, and outdoor products. Founded in 1986, headquartered in Boston Heights, Ohio, and now trading below its $13-per-share IPO price from 2021, Arhaus is committed to delivering distinct and artistic home furnishings through an omni-channel model that includes showrooms, an e-commerce platform, and in-home designer services. This approach not only caters to a wide range of customer preferences but also positions Arhaus for continued success in the luxury home furnishing space.

The Vita Coco Company, Inc. (NASDAQ: COCO)

After rallying more than 80% in 2023, short-sighted traders have opted to take profits in The Vita Coco Company, driving shares of the world’s largest coconut/plant waters company down 23% year to date in 2024.

We think that pullback has given long-term investors an attractive entry point. Vita Coco is also a certified Public Benefit Corporation (B-Corp) — a for-profit business whose fiduciary obligations include promoting both shareholder value and social good. Known for its coconut water under the Vita Coco brand, it has diversified its offerings to include coconut oil, milk, and plant-based energy drinks, catering to a global consumer base seeking healthier beverage options. The Vita Coco Company's commitment to innovation and sustainability positions it as an attractive investment for those looking to capitalize on the growing trend of health-conscious consumers.

Vita Coco commands an incredible 51% market share of the coconut water segment in the U.S. and 81% in the U.K., so we fully expect new market entrants to attempt to muscle their way into its niche. But even if its top-line growth stagnates (revenue in Q3 2023 climbed “just” 11% year over year, to $138 million), it’s also enjoying significant operating leverage as it scales; net income more than doubled year over year last quarter to $15 million, while adjusted EBITDA soared 125% to $27 million.

Even if valuation premiums contract as its growth slows, we think it’s only a matter of time until Vita Coco resumes its uptrends as the market takes note of this $1.15 billion (market cap) business with enviable profitability.

Today's top three consumer products stocks showcase diverse opportunities within the consumer goods sector: Natural Grocers, with its steady comparable-sales growth and methodical location expansion; Arhaus, Inc., redefining luxury home furnishings with a focus on sustainable sourcing and client service; and The Vita Coco Company, Inc., tapping into the health-conscious consumer market with its innovative coconut-based beverages.

Each company represents a unique entry point into market segments with high growth potential and solid profitability, appealing to investors seeking variety and resilience in their portfolios.