Vitamin Shoppe, Inc. (NYSE:VSI), a multi-channel, specialty retailer and manufacturer of nutritional products, today announced preliminary results for the three months ended September 24, 2016. Total net sales in the third quarter were $314.9 million, essentially flat with the same period of the prior year. Reported fully-diluted earnings per share in third quarter 2016 were $0.48, flat with third quarter 2015. Results in third quarter 2016 and 2015 include approximately $1.4 million and $1.6 million (pre-tax) respectively, of net costs related to certain reinvention initiatives. Excluding these items in both periods, adjusted EPS was $0.50 and $0.52, in third quarter 2016 and third quarter 2015, respectively. (The items affecting comparability of results are detailed and reconciled in Table 4 at the end of this press release.)
Commenting on the quarter’s results, Colin Watts, Chief Executive Officer of the Vitamin Shoppe stated, “Third quarter results were generally in line with our expectations. Product margins improved as we reduced our promotional activity in the quarter, but the top line continues to be soft with lower comparable store sales.”
“We are pleased by the progress we made during the quarter with our Reinvention plan, including continued growth of our Private Brands, a high level of engagement for our Loyalty program and the opening of our fully redesigned Vitamin Shoppe test-format store, integrating several elements of our work to reinvent our customer experience. While still early, we are pleased with customer response since the re-opening. We also made good progress with cost savings and margin improvement initiatives related to cost of goods sold and store level expenses which will yield operating margin benefits in 2017 and beyond,” concluded Mr. Watts.
Third Quarter 2016 Results
Total sales of $314.9 million in the quarter increased 0.3% over the same period of the prior year. Total comparable sales were down 1.9% in the quarter driven by a 2.3% decline in retail store comparable sales partially offset by a 1.7% increase in e-commerce comparable sales. Manufacturing third party sales increased 11.2% from the same period of the prior year. The Company opened five stores in the quarter and closed two.
Cost of goods sold, which includes product, distribution, manufacturing and store occupancy costs, increased $3.6 million, or 1.7%, to $212.8 million for the three months ended September 24, 2016, compared with $209.2 million for the three months ended September 26, 2015.
Gross profit of $102.1 million was down 2.5% from $104.7 million in third quarter 2015. Gross profit as a percentage of net sales was 32.4% in third quarter 2016, compared to 33.4% in 2015. The decrease was primarily due to occupancy and supply chain deleverage as well as lower gross margins for Nutri-Force and was partially offset by improved product margins.
Selling, general and administrative expenses (SG&A), including operating payroll and related benefits, advertising expense and depreciation and amortization, increased $0.5 million, or 0.6%, to $81.9 million for the quarter ended September 24, 2016, compared with $81.4 million for the quarter ended September 26, 2015. SG&A includes approximately $2.3 million of professional fees related to implementation of the Company’s cost reduction initiatives as well as a $0.9 million reversal of lease liabilities related to the closure of the Canadian stores. SG&A for third quarter 2015 included total costs of $1.6 million related to reinvention costs and integration related expenses. Excluding these items for both periods, SG&A as a percent of revenue was 25.6% in third quarter 2016 and 25.4% in third quarter 2015. (For further information on adjustments see Table 4 at the end of this release.) The increase in the SG&A rate was driven by deleverage in store payroll and advertising, partially offset by leverage from Nutri-Force as well as lower corporate costs.
Income from operations in third quarter 2016 of $20.3 million compared to $23.4 million in the same period of the prior year. As a percentage of net sales, income from operations was 6.4% for third quarter 2016 compared with 7.4% for third quarter 2015. Adjusted for the items noted in the preceding paragraph, income from operations as a percentage of sales was 6.9% in third quarter 2016 and 8.0% in third quarter 2015. (See Table 4).
Net income was $11.4 million for third quarter 2016 compared to $14.1 million in the same period of the prior year. Reported earnings per diluted share were $0.48 in third quarter 2016, flat with third quarter 2015. EPS, on an adjusted basis (for the items described in Table 4), was $0.50 for third quarter 2016 and $0.52 for third quarter 2015.
Balance Sheet and Cash Flow
Cash and equivalents at September 24, 2016 were $2.0 million. At quarter end, the Company had $6.0 million drawn on the revolving line of credit and a convertible notes liability of $119.4 million.
Capital expenditures were $10.2 million in the quarter. Funds were primarily expended on new stores, supply chain, digital and other IT investments.
During the quarter, the Company repurchased 0.2 million shares of its common stock, or 1.0% of the shares outstanding, for a total purchase price of $5.0 million.
- Management is providing the following outlook for 2016:
- Total comparable sales growth flat to slightly negative
- The opening of 27 new stores
- GAAP fully diluted earnings per share narrowed to the range of $1.89 – $1.99 (See Table 5) and adjusted earnings per diluted share in the range of $2.10 to $2.20 for the full-year of 2016
- Capital expenditures of approximately $40 million
About the Vitamin Shoppe, Inc. (NYSE:VSI)
Vitamin Shoppe is a multi-channel, specialty retailer and contract manufacturer of nutritional products based in Secaucus, New Jersey. In its stores and on its website, the Company carries a comprehensive retail assortment including: vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and beauty aids. In addition to offering products from approximately 850 national brands, the Vitamin Shoppe also carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt®, ProBioCare®, Next Step® and Betancourt Nutrition® brands. The Vitamin Shoppe conducts business through more than 750 company-operated retail stores under The Vitamin Shoppe and Super Supplements retail banners, and primarily through its website, www.vitaminshoppe.com. Follow the Vitamin Shoppe on Facebook at http://www.facebook.com/THEVITAMINSHOPPE and on Twitter at http://twitter.com/VitaminShoppe.