Vitamin Shoppe Acknowledges Difficult Second Quarter

The specialty retailer may not be out of the woods yet, with one research firm predicting that the “road to recovery will be lengthy."

Josh Long, Associate editorial director, Natural Products Insider

August 6, 2015

2 Min Read
Vitamin Shoppe Acknowledges Difficult Second Quarter

Vitamin Shoppe, Inc., the specialty retailer and contract manufacturer of nutritional products, increased its total sales in the second quarter, but the company acknowledged facing challenges over the three-month period that ended in June.

Although net sales rose 5.3 percent over the prior-year period to US$322.3 million, sales fell short of Wall Street forecasts of $327.9 million, The Record in North Bergen, New Jersey reported. Same-store retail sales declined 0.6 percent and comparable ecommerce sales were down 6 percent.

The retailer (NYSE: VSI) attributed overall sales growth to gains from new store sales and a full quarter of manufacturing revenues from a June 2014 acquisition. The company opened 13 stores in the second quarter and closed four.

“As expected, the second quarter was a difficult one for us, reflecting both external and internal challenges," Vitamin Shoppe CEO Colin Watts said in a press release. “Although our comparable sales for the quarter were at the lower end of our expectations, we achieved improved comparable sales results as the quarter progressed."

Vitamin Shoppe reported adjusted earnings per share of 56 cents, beating a Wall Street analysts’ consensus of 54 cents. Net income ($14.2 million) was lower than the year-ago period ($16.9 million).

“It is possible fundamentals have bottomed, and 2Q represents an inflection point, but the road to recovery will be lengthy because the initiatives to ‘reinvent’ VSI … will take time to implement, resonate and gain traction," Deutsche Bank Securities said in an Aug. 6 research note.

The note referenced Vitamin Shoppe initiatives to develop products and differentiate itself.

Vitamin Shoppe’s Watts has asked the retailer to examine “what motivates consumers, how shoppers interact with supplements’ retailers, and how the company can reinvent the customer experience to drive profitable sales in-store and on line," Barclays Capital analyst Meredith Adler said in an Aug. 6 research note.

Adler said it was too early to know whether Vitamin Shoppe’s strategy will succeed. She cited “unknowns about the growth rate of the industry, the place within it of stores and ecommerce, and even what customers really want when buying supplements."

For the six-month period that ended on June 27, 2015, Vitamin Shoppe’s sales have climbed 7.3 percent to $659.2 million from $614.1 million. Retail sales have increased 4.5 percent to $566.2 million, but direct sales have fallen 3.9 percent to $65.2 million thanks to weaker ecommerce business. Thanks to its $86.1 million acquisition of Nutri-Force, manufacturing revenues have increased to $46.5 million from just $5 million during the first six months of 2014.

Shares of Vitamin Shoppe opened Thursday at $37.45 and were down 5 cents in afternoon trading on the New York Stock Exchange. Over the last 52 weeks, the stock price has ranged from a high of $49.04 (Nov. 14, 2014) to a low of $34.08 (July 28, 2015).

Founded in 1977, Vitamin Shoppe owns more than 700 stores throughout the United States, Puerto Rico and Canada.

About the Author(s)

Josh Long

Associate editorial director, Natural Products Insider, Informa Markets Health and Nutrition

Josh Long directs the online news, feature and op-ed coverage at Natural Products Insider, which targets the health and wellness industry. He has been reporting on developments in the dietary supplement industry for over a decade, with a focus on regulatory issues, including at the Food and Drug Administration.

He has moderated and/or presented at industry trade shows, including SupplySide East, SupplySide West, Natural Products Expo West, NBJ Summit and the annual Dietary Supplement Regulatory Summit.

Connect with Josh on LinkedIn and ping him with story ideas at [email protected]

Education and previous experience

Josh majored in journalism and graduated from Arizona State University the same year "Jake the Snake" Plummer led the Sun Devils to the Rose Bowl against the Ohio State Buckeyes. He also holds a J.D. from the University of Wyoming College of Law, was admitted in 2008 to practice law in the state of Colorado and spent a year clerking for a state district court judge.

Over more than a quarter century, he’s written on various topics for newspapers and business-to-business publications – from the Yavapai in Arizona and a controversial plan for a nuclear-waste incinerator in Idaho to nuanced issues, including FDA enforcement of the Dietary Supplement Health and Education Act of 1994 (DSHEA).

Since the late 1990s, his articles have been published in a variety of media, including but not limited to, the Cape Cod Times (in Massachusetts), Sedona Red Rock News (in Arizona), Denver Post (in Colorado), Casper Star-Tribune (in Wyoming), now-defunct Jackson Hole Guide (in Wyoming), Colorado Lawyer (published by the Colorado Bar Association) and Nutrition Business Journal.

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