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Natural Foods Merchandiser

The Vitamin Shoppe counts on new strategy to drive growth

The Vitamin Shoppe counts on new strategy to drive growth

The Vitamin Shoppe CEO Colin Watts outlined the company’s Project Evolve strategic plan Tuesday as the retailer reported the conclusion of a soft year.

Vitamin Shoppe leadership spent much of 2015 working on a three-year strategic plan that Watts called a “customer experience reinvention strategy.” Assisted by retail consulting firm Jackman Reinvents, Project Evolve includes:

A focus on customers with an improved shopping experience and personalization in-store and online. A new mobile app will launch later this year.

Store-level tactics to incent basket building, private brand sales and new customer acquisitions. Vitamin Shoppe also has launched a local marketing toolkit to build regional affiliates, instituted new hiring and training practices, and will add tech support including broadband and a test in which staff will use tablets to increase engagement with customers.

Product changes as Vitamin Shoppe focuses on category management, with a more curated selection, private label line introductions and line extensions, and growth into adjacent categories such as personal care and functional and fortified foods.

Cost optimization and capital allocation also remain focus areas.

Watts attributed Vitamin Shoppe's lackluster results to an industry in a lull, noting that innovation and excitement exists in categories adjacent to vitamins and supplements. But, "frankly, we think we can be a better retailer," he added.

"We are disappointed with top-line performance as industry headwinds and lack of new product innovation impacted comparable sales which, in turn, did not meet our expectations," Watts said via press release before the call with analysts. "There were also some good results in the quarter including improvement in e-commerce sales, private brand penetration and continued progress with product margins and cost controls.”

Fourth-quarter 2015 highlights:

  • Sales increased 1.2 percent, driven primarily by 3.9 percent e-commerce growth. 
  • Retail store comparable sales declined 0.9 percent, and manufacturing third-party sales decreased 13.4 percent. 
  • The company opened 11 stores in the quarter and closed one.
  • Gross profit declined $3.3 million, or 3.5 percent, to $91.3 million in fourth quarter 2015, compared with $94.6 million for fourth quarter 2014. 
  • Gross profit as a percentage of net sales was 31.1 percent in fourth quarter 2015, compared with 32.6 percent in 2014.
  • GAAP fully diluted earnings per share of 22 cents, and adjusted fully diluted earnings per share of 39 cents.

Full year 2015 results included:

  • Opened 50 stores.
  • Total revenue increased 4.4 percent.
  • Total comparable sales were flat.
  • Fully diluted GAAP earnings per share of $1.82, or $2.11 per share excluding certain costs. This compares with earnings per share of $2.00 or an adjusted $2.20 per share, in 2014.
  • Repurchased 4.3 million common shares for a total of $146.1 million.

Vitamin Shoppe management expects the following for 2016 on a 53-week basis:

  • Total comparable sales growth expected to be flat to positive low single digits.
  • Approximately 30 new stores.
  • Earnings per diluted share in the range of $2.25 to $2.45 for the full-year of 2016. 
  • To repurchase approximately 3 percent to 4 percent of outstanding shares during 2016 part of the Company's previously announced share buyback program.
  • Capital expenditures of approximately $40 million.
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