Secaucus, NJ – Vitamin Shoppe announced it had completed the sale of Nutri-Force, its manufacturing business, for approximately $15 million, during its first quarter 2018 earnings call. The buyer is Arizona Nutritional Supplements (ANS), a contract and private label manufacturer of vitamins, minerals and supplements located in Chandler, AZ.
The Vitamin Shoppe has a long-term relationship with ANS, and is currently one of the company’s contract private brand manufacturers. Both parties have entered into a long-term supply agreement.ANS has committed to specific innovation investments on behalf of the Vitamin Shoppe. The transition will occur over the next six months.
In other highlights of the call, total net sales in the first quarter were $296 million compared to $306 million in the same period of the prior year. Reported basic and fully diluted loss per share in first quarter 2018 was $0.17, compared to fully diluted earnings per share of $0.35 in first quarter 2017.
The retailer also reported encouraging continued improvement with its SPARK Auto Delivery Program (ADP), and overall digital commerce increases of nearly 21%. “We are improving our customer acquisition trend, and are encouraged, but cautious,” Brenda Galgano, CFO of Vitamin Shoppe, said. SPARK ADP offers a 10% discount, delivers paying rewards members a sample box four times per year, free shipping, flexible delivery and a wellness plan.
Galgano also cited solid cash flow generation in the quarter, partially caused by a slowdown in new store openings – two new openings this year, and ten store closures. “The cash flow generated in the quarter, coupled with our expectations for the remainder of the year, gave us the confidence to opportunistically purchase $45 million face value of our convertible debt due December 2020 at a discount to par value. Total purchase price of $34 million was funded with excess cash and a draw down on our revolving line of credit. We ended the first quarter with approximately $35 million drawn on the revolver, which we subsequently reduced to approximately $25 million in April.” Galgano further commented, “We continue to review and prioritize our capital needs. We are committed to making the required investments to position us for long-term success and will continue to evaluate capital allocation alternatives consistent with the recent past.”
Said Colin Watts, CEO of the Vitamin Shoppe, “I am pleased with the consistent and steady improvement in the business as the initiatives we have executed are beginning to take hold. We saw an improvement in underlying sales trends, an increase in both new customer acquisition and traffic while also realizing ongoing product margin improvement.” As WholeFoods reported during their last earnings call, Watts will be leaving the Vitamin Shoppe at the end of May.
Looking towards the future, officials expect:
- Full year comparable sales of negative low to mid single digits.
- Full year gross margin rate of 30.5% – 31.0%.
- SG&A expenses between $340 million and $345 million. This excludes expenses associated with CEO change.
- Combined Federal, State and Local tax rate of 28%. This excludes discrete items estimated at $0.5 million to $1 million.
- Full year capital expenditures of approximately $30 million, and includes the opening of two new stores.
The Vitamin Shoppe has been besieged with slumping sales, but recently earned the StellaService Elite Overall Award for top of the line customer service for the third year in a row.