Vitamin Shoppe, Inc. Announces Second Quarter 2014 Results - Board of Directors Authorizes $100 Million Share Repurchase

2Q14 Highlights:

- Total revenue increased 9.6%

- Total comparable sales grew 5.1%

- E-commerce revenues increased 14.9%

- Fully diluted GAAP Earnings per Share of $0.55, or $0.62 per share excluding acquisition related costs

NORTH BERGEN, N.J., Aug. 5, 2014 /PRNewswire/ -- Vitamin Shoppe, Inc. (NYSE: VSI), a  multi-channel specialty retailer of nutritional products, today announced preliminary results for the three months ended June 28, 2014.  Total net sales in the second quarter increased 9.6% to $306.2 million compared to $279.5 million in the same period of the prior year.  Reported fully-diluted earnings per share in second quarter 2014 were $0.55, compared with $0.60 in second quarter 2013.  Excluding non-operating items in both periods, adjusted earnings per share was $0.62 in second quarter 2014 and $0.60 in second quarter 2013.

Commenting on the quarter's results, Tony Truesdale, Chief Executive Officer of the Company stated, "Our products and marketing efforts resonated with consumers and drove traffic to both our stores and website.  I am pleased that new customer growth contributed to another quarter of double-digit e-commerce growth for the company.  These efforts are being reflected in total comparable sales, which were positive for the 35th consecutive quarter.  Additionally, during the quarter we took a significant step to drive future growth with the acquisition of Nutri-Force, a contract manufacturer of vitamins, minerals and supplements.  Being vertically integrated is strategically important to the Vitamin Shoppe and the acquisition brings many long-term benefits to the company."

Mr. Truesdale concluded, "Reflecting our solid financial position and sustainable cash generation, the Board recently authorized a $100 million share repurchase program.  The buyback enables us to return cash to our shareholders.  We still see many exciting opportunities ahead of us and will continue to invest in initiatives to support long-term growth."

Second Quarter 2014 Results

Sales growth in the quarter was driven by: 1) a 4.0% increase in comparable retail store sales, 2) growth from non-comp stores, 3) a 14.9% increase in e-commerce sales, and 4) manufacturing revenue of $4.2 million.  Total comparable sales were 5.1%, including e-commerce sales.

Cost of goods sold, which includes product, warehouse, distribution, manufacturing and store occupancy costs, increased $21.1 million, or 11.6%, to $203.3 million for the three months ended June 28, 2014, compared with $182.2 million for the three months ended June 29, 2013.  The quarter included an additional $1.2 million charge from adjusting Nutri-Force inventory to fair value as part of purchase accounting.

Gross profit increased $5.7 million, or 5.8%, to $102.9 million for 2014 second quarter, compared with $97.3 million for second quarter 2013.  Gross profit as a percentage of net sales was 33.6% for the quarter ended June 28, 2014, compared to 34.8% in second quarter 2013.  The decrease was attributable to; the new distribution center, the impact of the Nutri-Force acquisition, shifts in product category sales mix and higher penetration of e-commerce sales.  

Selling, general and administrative expenses (SG&A), including operating payroll and related benefits, advertising expense, depreciation and amortization, and other SG&A, increased $8.1 million, or 12.1%, to $74.7 million for the quarter ended June 28, 2014, compared with $66.7 million for the quarter ended June 29, 2013.  SG&A includes approximately $2.2 million of acquisition-related transaction and integration costs.  SG&A in second quarter 2013 included transaction and integration related expenses for the Super Supplements acquisition offset by insurance recoveries from Superstorm Sandy.  Reported SG&A as a percentage of net sales was 24.4% for second quarter 2014 compared with 23.9% in second quarter 2013.  Excluding non-operating items for both periods, SG&A as a percent of revenue was 23.7% in second quarter 2014 and 23.8% in second quarter 2013. 

Income from operations in second quarter 2014 of $28.2 million compared to $30.6 million in the same period of the prior year.  As a percentage of net sales, income from operations was 9.2% for second quarter 2014 compared with 10.9% for second quarter 2013.  Adjusted for non-operating costs of goods sold and SG&A items in both periods, income from operations as a percentage of sales was 10.3% in second quarter 2014 and 11.0% in second quarter 2013.

Net income was $16.9 million for second quarter 2014 compared to $18.3 million in the same period of the prior year.  Reported earnings per diluted share were $0.55 in second quarter 2014 compared with $0.60 in second quarter 2013.  Second quarter 2014 includes an estimated $0.07 per share of acquisition-related expenses.  The second quarter 2013 included an estimated $0.02 per share impact related to the Super Supplements acquisition offset by a $0.02 per share insurance recovery from Superstorm Sandy. 

Balance Sheet and Cash Flow

Cash and equivalents at June 28, 2014 were $15.0 million and the company has no debt.  Capital expenditures, excluding acquisitions, were $10.5 million in the quarter.  As previously announced, on June 6, 2014 the Company purchased FDC Vitamins, LLC, doing business as Nutri-Force Nutrition, a contract manufacturer of vitamins, minerals and supplements.  The purchase price was approximately $81 million, excluding contingent consideration, and was funded with available cash.

Outlook

Management expects the following for 2014:

  • Total comparable sales growth, including e-commerce, of 4% - 5% for the year
  • Approximately 60 new stores
  • Depreciation & amortization of approximately $33 million
  • EBIT margin decline of approximately 100 basis points compared to 2013
  • Capital expenditures of approximately $40 million

Subsequent Event

At the most recent Board of Directors meeting, the Board approved a share repurchase program that enables the company to purchase up to $100 million of its shares of common stock over the next three years.  Shares will be repurchased from time-to-time in the open market or in privately negotiated transactions.  The repurchase program does not obligate the Company to acquire any specific number of shares and may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. 

Webcast

Management will host a conference call to discuss the second quarter 2014 results at 8:30 a.m. Eastern Time (ET) today.  Interested investors and other parties may listen to the simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.vitaminshoppe.com.  A telephonic replay will be available beginning at 11:30 a.m. ET on August 5, 2014 and can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for international callers.  The passcode for the replay is 1089298.  The replay will be available until 11:59 p.m. ET on August 12, 2014.  The webcast will also be archived on the company's website at www.vitaminshoppe.com in the investor relations section.

About the Vitamin Shoppe, Inc. (NYSE: VSI)

Vitamin Shoppe is a multi-channel specialty retailer and contract manufacturer of nutritional products based in North Bergen, New Jersey.  In its stores and on its website, the Company carries one of the most comprehensive retail assortments in the industry, including vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and beauty aids.  In addition to offering 900 national brand products, the Vitamin Shoppe also exclusively carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt, ProBioCare , Next Step, Betancourt and Nutri-Force Sports® brands.  The Vitamin Shoppe conducts business through more than 670 company-operated retail stores under The Vitamin Shoppe, Super Supplements and Vitapath retail banners, and primarily through its websites, www.VitaminShoppe.com and www.supersup.com.  Follow The Vitamin Shoppe on Facebook at http://www.facebook.com/THEVITAMINSHOPPE and on Twitter at http://twitter.com/VitaminShoppe.

Forward Looking Statements

Certain statements in this press release are "forward-looking statements."  Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, trade restrictions, availability of suitable store locations at appropriate terms, the availability of raw materials, compliance with regulations, certifications and best practices with respect to the development, manufacture, sales and marketing of the company's products and other factors which are further described in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2013 and in all filings with the Securities and Exchange Commission made by the Company subsequent to the filing of the Form 10-K.  The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law.  

TABLE 1
VITAMIN SHOPPE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)




Three Months Ended


Six Months Ended



June 28,


June 29,


June 28,


June 29,



2014


2013


2014


2013





























Net sales

$         306,218


$         279,483


$       614,054


$       558,570


Cost of goods sold

203,311


182,226


401,678


359,671


Gross profit

102,907


97,257


212,376


198,899


Selling, general and administrative expenses

74,741


66,673


149,963


133,634


Income from operations

28,166


30,584


62,413


65,265


Interest expense, net

100


106


185


211


Income before provision for income taxes

28,066


30,478


62,228


65,054


Provision for income taxes

11,140


12,216


24,793


25,995


Net income 

$           16,926


$          18,262


$         37,435


$         39,059











Weighted average common shares outstanding









   Basic

30,436,210


29,970,366


30,325,447


29,944,861


   Diluted

30,842,733


30,482,586


30,796,499


30,488,751


Net income per common share









   Basic

$              0.56


$              0.61


$            1.23


$            1.30


   Diluted

$              0.55


$              0.60


$            1.22


$            1.28

 

TABLE 2
VITAMIN SHOPPE, INC. AND SUBSIDIARY
SEGMENT DATA, KEY PERFORMANCE INDICATORS AND STORE INFO
($ in thousands)
(Unaudited)




Three Months Ended


Six Months Ended



June 28,


June 29,


June 28,


June 29,



2014


2013


2014


2013

Net sales:









Retail 

$          269,586


$         250,857


$          542,054


$         499,279


Direct

32,443


28,626


67,811


59,291


Segment net sales

302,029


279,483


609,865


558,570


Manufacturing

5,014


-


5,014


-


Elimination of intercompany revenues

(825)


-


(825)


-

Net sales

$          306,218


$         279,483


$          614,054


$         558,570










Income from operations:









Retail 

$            51,737


$           51,054


$          108,436


$         106,229


Direct

5,760


5,236


12,785


11,112


Corporate and other costs

(29,331)


(25,706)


(58,808)


(52,076)

Income from operations

$            28,166


$           30,584


$            62,413


$           65,265










Increase in total comparable net sales

5.1%


3.3%


4.3%


4.4%

Increase in comparable store net sales

4.0%


2.3%


3.2%


3.4%










Gross profit as a percent of net sales

33.6%


34.8%


34.6%


35.6%

Income from operations as a percent of net sales

9.2%


10.9%


10.2%


11.7%










Capital Expenditures

$            10,503


$           11,994


$            19,018


$           23,837

Depreciation and Amortization 

8,407


6,729


16,447


13,064










Acquisition and integration costs

$              2,248


$                946


$              4,006


$             2,991

Insurance recoveries from Superstorm Sandy

$                    -


$                879


$                    -


$             1,079










Store Data:









Stores open at beginning of period 

667


621


659


579


    Stores opened 

12


10


21


23


    Stores acquired




31


    Stores closed 

(1)


(1)


(2)


(3)


Stores open at end of period

678


630


678


630










Total retail square footage at end of period (in thousands)

2,451


2,307


2,451


2,307

 

TABLE 3
VITAMIN SHOPPE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)



June 28,


December 28,


2014


2013

ASSETS








Current assets:




  Cash and cash equivalents

$                15,026


$                 74,036

  Accounts receivable, net of allowance of $864 in 2014

11,497


-

  Inventories

188,510


163,921

  Prepaid expenses and other current assets

42,031


37,228

     Total current assets

257,064


275,185

  Property and equipment, net of accumulated depreciation and amortization of $222,873 and 
    $207,928
 in 2014 and 2013, respectively

131,134


120,142

Goodwill

241,020


210,633

Other intangibles, net

89,792


71,264

Other assets

2,861


4,840

Total assets

$              721,871


$               682,064





LIABILITIES AND STOCKHOLDERS' EQUITY 




Current liabilities:




  Accounts payable

$                29,848


$                 39,106

  Accrued expenses and other current liabilities

62,532


63,738

     Total current liabilities

92,380


102,844

Deferred income taxes

15,034


11,588

Deferred rent

38,091


36,032

Other long-term liabilities 

702


3,260

Commitments and contingencies




Stockholders' equity:




  Preferred stock, $0.01 par value; 250,000,000 shares authorized and no shares issued and     outstanding at  June 28, 2014 and December 28, 2013

-


-

  Common stock, $0.01 par value; 400,000,000 shares authorized, 30,938,110 shares issued and     30,884,883 shares outstanding at June 28, 2014, and 30,531,550 shares issued and
    30,525,234 shares outstanding at December 28, 2013

309


305

  Additional paid-in capital

314,445


302,314

  Treasury stock, at cost; 53,227 shares at June 28, 2014 and 6,316 shares at December 28, 2013

(2,510)


(280)

  Accumulated other comprehensive loss

(102)


(86)

  Retained earnings 

263,522


226,087

           Total stockholders' equity 

575,664


528,340

Total liabilities and stockholders' equity

$              721,871


$               682,064

 

SOURCE Vitamin Shoppe, Inc.



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