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Lawsuit: Vitamin Shoppe Misled Investors, Omitted Impacts of Competition

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NORTH BERGEN, NJVitamin Shoppe, Inc. insiders sold more than $30 million in common stock at inflated prices by misleading investors, a lawsuit that seeks to be certified as a class action alleges.

Vitamin Shoppe, a specialty retailer of nutritional products, is accused of failing to disclose that competition from online retailers was hurting its business because competitors were reducing prices on popular supplements.

The company further neglected to reveal that its sales growth was suffering due to a new discount program from GNC, the lawsuit, filed in the U.S. District Court for the District of New Jersey, contends. Levi & Korsinsky, the securities law firm that filed the complaint, also claims same-store sales trends were in decline, a fact Vitamin Shoppe didn't divulge.

Due to the omissions, Vitamin Shoppe's stock was trading at artificial prices, the complaint alleges.

The lawsuit was filed on behalf of investors who purchased Vitamin Shoppe stock between May 8, 2012 and Feb. 25, 2013.

A deadline of July 8 has been imposed for shareholders to request that the court appoint someone as lead plaintiff, the law firm said.

Details of the lawsuit were revealed in a press release posted at The Wall Street Journal. INSIDER was unable to immediately obtain a copy of the complaint.

Other lawsuits have been filed as well in recent weeks. For instance, the law firm of Robbins Geller Rudman & Dowd LLP recently filed a complaint, alleging that Vitamin Shoppe and certain of its officers and/or directors violated federal securities laws. The complaint names as defendants Vitamin Shoppe and several executives, including Vitamin Shoppe Chief Executive Anthony Truesdale. Another lawsuit was announced last month by Ryan & Maniskis LLP.  

Earlier this year, Vitamin Shoppe wasn't involved in any litigation. In a May 5, 2013 filing with the Securities and Exchange Commission (SEC), Vitamin Shoppe listed "None" under legal proceedings.

Representatives for Vitamin Shoppe didn't respond to a request for comment on the Levi & Korsinsky lawsuit.

Shares of Vitamin Shoppe (VSI) opened Thursday at $45.57 on the New York Stock Exchange. Over the past 52 weeks, the stock price has ranged from a high of $65.93 (Feb. 19, 2013) to a low of $46.13 (May 8, 2013). A day earlier, Vitamin Shoppe reported results for the first quarter during which the company acknowledged April sales were slower than it had anticipated. Vitamin Shoppe still reported a 12.5% increase in sales ($279.1 million) over the prior-year period ($248.1 million).

Vitamin Shoppe has enjoyed immense growth over the years, reflecting escalating demand for vitamins and dietary supplements. From fiscal year 2005 to fiscal year 2012, net sales more than doubled to $950.9 million, according to the company's website. As of April 19, 2013, Vitamin Shoppe operated 622 stores in 42 states, the District of Columbia, Puerto Rico and Ontario, Canada.

The company recently acquired Super Supplements, Inc., a specialty retailer operating in the Northwest, for roughly $50 million. Vitamin Shoppe previously projected the deal would contribute $75 million in 2013 revenues and be neutral to slightly positive to earnings per share.

Earlier this month, Vitamin Shoppe shareholders elected its 10-member board of directors and ratified the appointment of Deloitte & Touche LLP as the company's public accounting firm for the 2013 fiscal year.

Shareholders also approved executive compensation in a non-binding advisory vote. Last year, Vitamin Shoppe's CEO, Truesdale, received a base salary of $675,000 and a $1.2 million "incentive" award that the company said reflected his "personal accomplishments" and growth in 2012 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), according to a proxy statement on file with the SEC. Annual adjusted EBITDA ($124.4 million) beat the company's target of $110.6 million, the filing stated.

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