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The Vitamin Shoppe sells Nutri-Force

As The Vitamin Shoppe focuses on omnichannel retail goals, it grows online, loses in bricks and mortar, and sells off manufacturing.

Online sales remain a bright spot as The Vitamin Shoppe continues to struggle.

Sales were 3.2 percent lower for the first quarter ending March 31 at $296 million, compared with $305.8 million in the same period of the prior year. Comparable store sales, too, were down 3.6 percent in the quarter. 

Digital sales, however, grew 20.7 percent. CEO Colin Watts attributed the growth to several online initiatives, new talent in this department and the autodelivery program.

He looks forward to additional growth of a Vitamin Shoppe pilot that sends product refill reminders to customers who might not be willing to commit to automatic shipping. With one click, a shopper can choose to receive the product via mail or at a local store. Watts expects the program to roll in the second half of the year.

"I am pleased with the consistent and steady improvement in the business as the initiatives we have executed are beginning to take hold,” said Watts, who will leave the company at the end of the month. “We saw an improvement in underlying sales trends, an increase in both new customer acquisition and traffic while also realizing ongoing product margin improvement."  

On May 7, Vitamin Shoppe sold its manufacturing business, Nutri-Force, to Chandler-based Arizona Nutritional Supplements, a contract and private label supplement manufacturer. It was a $15 million deal. As part of this transaction, the parties have entered into a long-term supply agreement. Watts noted, too, that the company has committed to innovation efforts for The Vitamin Shoppe. The majority of the production from Nutri-Force will be transitioned to the ANS facilities in Arizona through the rest of the year.

Additional first-quarter highlights include:

  • Cost of goods sold, which includes product, distribution and store occupancy costs, decreased $3.9 million, or 1.9 percent, to $202.9 million for the three months ended March 31, compared with $206.8 million for the three months ended April 1, 2017.  
  • Gross profit of $93.1 million was 5.9 percent or $5.9 million lower than $99.0 million reported in first quarter 2017. 
  • Reported gross profit as a percentage of net sales was 31.5 percent in first quarter 2018, compared to 32.4 percent in the same period of 2017.
  • Gross profit as a percentage of sales was 32 percent.
  • Selling, general and administrative expenses (SG&A), including operating payroll and related benefits and advertising expense, as a percent of revenue was 30.2 percent in first quarter 2018 and 26.2 percent in first quarter 2017.

Updated guidance to exclude the Nutri-Force business is:

  • Full year comparable sales of negative low- to mid-single digits.
  • Full year gross margin rate of 30.5 percent to 31 percent. The company expects improved product margins offset by higher delivery costs and fixed cost deleverage.
  • 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 percent. This excludes discrete items estimated at $500,000 to $1 million.
  • Full year capital expenditures of approximately $30 million, including the opening of two new stores.
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