Lower comparable sales but improved gross margin shaped a quarter of mixed results for Vitamin Shoppe, CEO Colin Watts told investors and analysts on an earnings call Wednesday.
Category challenges continued to impact overall business growth, he said, driven by falling sales in sports nutrition, weight management and on-the-go nutrition. However, several core and new categories thrived, including digestive aids (led by probiotics), aromatherapy, the Protein Pantry category launched in October, and a return to growth for vitamins/minerals/supplements. Watts said Vitamin Shoppe will shortly begin testing two additional new categories.
Here are highlights from the three months ending March 26:
- Net sales were near flat at $336.8 million.
- Comparable sales were down 1.9 percent. Retail stores saw a 2.6 percent decline in comp sales, while ecommerce increase 3.9 percent.
- Diluted earnings per share were $0.59, compared with $0.63 in the first quarter of 2015. Adjusted earnings per share came to $0.67 per share, beating analysts’ expectations.
- Gross margin improved 40 basis points, driven by higher product margins from favorable category mix shift and higher private brands penetration.
- NutriForce sales fell 6 percent. “The business is not yet performing at a level we would like, but we are seeing growth in third-party orders, productivity is improving and the Vitamin Shoppe SKU transition is beating our original plan,” Watts said.
As it continues to work through the three-year strategic plan it laid out in February, the retailer has put in place several initiatives to create a more seamless customer experience and improve product assortment. Those have included upgrading its loyalty program to feature quarterly rewards and launching an order online, pick up in-store program. While it’s still early, Watts noted that online orders are beating expectations in their first few months. This quarter also market the first quarter of online traffic growth in more than 18 months for Vitamin Shoppe, driven by mobile.
Revenue from Vitamin Shoppe’s private brand portfolio also saw a 7 percent lift in the first quarter, and Watts said the company is putting more emphasis and focus behind its private brands, including more training for staff and more in-store sampling and promotions. “You can expect to see new innovations and stronger store-level displays for our private brand business as we go through the year,” Watts noted, including a major month-long promotion coming in the second quarter.