Vitamin Shoppe Reports 12.3% Sales Increase

Vitamin Shoppe, Inc., a leading specialty retailer and direct marketer of nutritional products has announced its preliminary (unaudited) results for its fiscal second quarter ended June 26, 2010.

"2010 started strong and that momentum continued into the second quarter," said Rick Markee, Chairman and Chief Executive Officer of Vitamin Shoppe, Inc. "Comparable store sales for the second quarter of 2010 increased 8.6%, making this our 19th consecutive quarter of comparable same-store sales growth. Additionally, we continue to achieve operating leverage across our business. Income from operations increased by 27.2% (31.3% excluding expenses associated with the secondary offering) and net income was up 73.8%."

Fiscal Second Quarter 2010 Results

Net sales increased $21.1 million, or 12.3%, to $192.2 million for the three months ended June 26, 2010, compared with $171.1 million for the three months ended June 27, 2009. The increase was the result of the growth in comparable store sales, strong performance from new stores and a 5.1% increase in direct sales driven by further expansion in Vitamin Shoppe's online business.

The Company operated 463 stores as of June 26, 2010, compared with 425 stores as of June 27, 2009. Overall store sales for the three months ended June 26, 2010 rose due to an increase in non-comparable store sales of $7.1 million and an increase in comparable store sales of $13.0 million, or 8.6%.

Cost of goods sold, which includes product, warehouse, distribution and occupancy costs, increased $13.2 million, or 11.4%, to $128.5 million for the three months ended June 26, 2010, compared with $115.4 million for the three months ended June 27, 2009.

Gross profit increased $7.9 million, or 14.2%, to $63.7 million for the three months ended June 26, 2010, compared with $55.8 million for the three months ended June 27, 2009. Gross profit as a percentage of sales was 33.1% for the quarter ended June 26, 2010, compared with 32.6% for the comparable prior year period. The improvement reflects efficiencies in a number of areas including warehouse and transportation costs.

Selling, general and administrative expenses ("SG&A"), including operating payroll and related benefits, advertising and promotion expense, depreciation and amortization, and other SG&A, increased $5.1 million, or 11.8%, to $48.2 million for the three months ended June 26, 2010, compared with $43.2 million for the three months ended June 27, 2009. SG&A as a percentage of net sales decreased to 25.1% for the quarter, compared with 25.2% for the comparable prior year period. Included in SG&A for the three months ended June 26, 2010 are $0.5 million of expenses incurred in connection with a secondary offering of the Company's common stock during the quarter. Excluding such expenses, SG&A as a percentage of net sales showed improvement by decreasing to 24.8% for the quarter, compared with 25.2% for the comparable prior year period. This reflects the ongoing maturation of the store base, leverage on corporate expenses and ongoing attention to financial disciplines.

Income from operations increased $3.3 million, or 27.2%, to $15.4 million for the three months ended June 26, 2010, compared with $12.1 million for the three months ended June 27, 2009. Income from operations as a percentage of net sales increased to 8.0% for the 2010 quarter, compared with 7.1% for the comparable prior year period. Excluding expenses for the secondary offering, income from operations increased 31.3% while income from operations as a percentage of net sales increased to 8.3% for the 2010 quarter, compared with 7.1% for the comparable prior year period.

Net income increased 74% to $7.3 million for the three months ended June 26, 2010, compared with $4.2 million for the three months ended June 27, 2009. Earnings per diluted share increased to $0.26 for the three months ended June 26, 2010, compared with $0.10 for the three months ended June 27, 2009. Net income benefited from lower interest expense versus the same period in 2009, resulting from ongoing debt reduction. Net income for the current quarter includes a pretax loss on extinguishment of debt and fees related to the secondary offering, totaling $1.1 million (or approximately $0.03 per share, net of tax). Excluding these items, earnings per diluted share for the quarter were $0.29.

The Company completed a secondary public offering of 7,171,768 shares of its common stock on May 29, 2010. All of the shares of common stock were sold by certain stockholders of Vitamin Shoppe. The Company did not receive any proceeds from the sale of shares in the offering.

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