Organic and natural product retailers were battered during the recession, as many budget-conscious consumers went cheap or stayed home. As much as consumers loved that picture-perfect organic asparagus or luxurious natural honey bath wash, dollars-and-cents concerns often trumped the need to feel pampered.
As a result, stocks in the sector fell hard between 2008 and 2010. During a 10-week period in 2008, Hain Celestial (NASDAQ:HAIN) and Whole Foods (NASDAQ:WFM) lost half of their value.
But once the economy started to recover, shoppers fondly remembered their products, placing retail store and producer stocks on the comeback trail. Whole Foods’ performance currently is outpacing traditional grocers like SuperValu (NYSE:SVU) and Safeway (NYSE:SWY).
And even with the weak global economy, growth in the sector is likely to continue because of strong demand. Research firm Organic Monitor forecasts global sales of natural and organic beauty products alone to reach $9 billion this year and rise to $14 billion by 2015.
Here are three natural product stocks carving out a winning niche:
1. Whole Foods: The company’s recent fourth-quarter revenue missed Wall Street estimates, but it beat the Street on earnings. While recession worries have tempered analysts’ enthusiasm for the stock in 2012, Whole Foods’ cost-cutting and re-merchandising strategy will make it easier for the grocer to perform well, even in a downturn. Another good omen: same-store sales rose nearly 9% in the quarter.
2. Fresh Market (NASDAQ:TFM): This company grew sales by 13.6% in its recent second quarter and same-store sales climbed 4.6%. Earnings rose to $10.5 million, up from $6.9 million last year. (TFM reports third-quarter earnings on Nov. 30).
3. Hain Celestial: Hain is cashing in on lucrative organic tea brands like Celestial Seasonings and the premium Jason and Alba Botanica natural body care lines. Earlier this month, the company said quarterly sales grew to $294.2 million, up more than 13% from the $258 million it reported last year. Earnings rose to $11.7 million, up from $9.1 million last year.
As of this writing, Susan J. Aluise did not own a position in any of the aforementioned stocks.
