NBTYs 2Q Profits Take a SpillNBTYs 2Q Profits Take a Spill
April 28, 2010
RONKONKOMA, N.Y.NBTY Inc. (NTY.N) posted a quarterly profit that missed market expectations by a wide margin, hurt by increased spending on television advertising, sending the U.S. nutritional supplements maker's shares plunging 22 percent. Sales in the quarter grew 18 percent to $705.2 million, while advertising, promotion and catalog expenses jumped 54 percent to $50.9 million.
"The earnings miss can almost entirely be attributed to an unexpected $18 million boost in television advertising during the second quarter, which management noted they do not expect to recur in future quarters," Wedbush analyst Rommel Dionisio said.
NBTY said the additional TV spend in support of its supplements Nature's Bounty, Osteo Bi Flex, Ester C and Pure Protein, should result in a boost to branded sales in the full year. But the company also warned that it would see future gross margin pressure in its private label business.
"Because of the increasing competitive nature of the private label business, we anticipate gross profits for (this) business to decrease for the remainder of fiscal 2010," said chief executive Scott Rudolph.
Dionisio cut NBTY to "neutral" from "outperform" citing potential deceleration of industry growth. According to Dionisio, industry growth levels, which were above trend are now starting to crack as swine flu concerns moderate, cut his price target on the stock to $41 from $56.
Sales growth of mass-market vitaminslike the ones sold by the companyhave historically trended up 5 percent to 6 percent, but accelerated to 14 percent to 15 percent during last year's swine flu, Dionisio said.
Shares of the Ronkonkoma, New York-based company were trading down 20 percent at $37.60 Tuesday on the New York Stock Exchange. They touched a low of 36.38 earlier. For the second quarter, the company earned $46.7 million, or 73 cents a share, compared with $23.1 million, or 37 cents a share, a year ago.
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