News Releases

Vitamin Shoppe, Inc. Announces Fourth Quarter 2017 Results
- Alexander Smith Appointed Executive Chairman
- Chief Executive Officer Colin Watts to Leave in May

SECAUCUS, N.J., Feb. 27, 2018 /PRNewswire/ --

Fourth Quarter 2017 Highlights:

  • Total Comparable Sales (4.6%), or (3.2%) adjusted for the holiday timing
  • Digital commerce increases 15.3%
  • GAAP loss per share of $0.75, impacted by restructuring charges and changes in tax law.  Adjusted loss per share of $0.17

Vitamin Shoppe, Inc. (NYSE: VSI), an omni-channel, specialty retailer and manufacturer of nutritional products, today announced preliminary results for the three months ended December 30, 2017.  Total net sales in the fourth quarter were $268.8 million compared to $304.9 million in the same period of the prior year.  Reported basic and fully diluted loss per share in fourth quarter 2017 was $0.75, compared to basic and fully diluted earnings per share loss of $0.50 in fourth quarter 2016.  Results in fourth quarter 2017 include a $15.3 million tax charge to revalue the net deferred tax assets based on changes under the Tax Reform Act of 2017.  In addition, the fourth quarter 2017 includes net pre-tax expenses of $0.8 million associated with the closure of the New Jersey distribution center and a net pre-tax $3.7 million reduction in previously recorded Nutri-Force restructuring costs.  Fourth quarter 2016 results include a $39.2 million pre-tax impairment charge associated with Nutri-Force goodwill and other intangible assets and a $3 million tax benefit from the closure of the Canadian stores.  Adjusting for these items in both periods, adjusted EPS loss for fourth quarter 2017 was $0.17 and adjusted EPS for fourth quarter 2016 was $0.37. (Refer to Table 4 at the end of this press release.) 

The Company also announced that Chief Executive Officer, Colin Watts, will be leaving the Company.  To ensure a smooth transition, Mr. Watts intends to stay with the Company and continue to serve as Chief Executive Officer through the end of May.  Effective immediately, Alex Smith, who has been serving as Chairman, has been appointed Executive Chairman.  The Board has commenced a search for Mr. Watts' successor.

Commenting on today's announcement, Alex Smith, Executive Chairman of the Vitamin Shoppe Board stated,   "Overall, 2017 yielded disappointing results.  Over the past couple quarters, Vitamin Shoppe has begun a turnaround and signs of progress are already visible. We have also reached a mutual agreement with our CEO, Colin Watts to transition the business to new leadership by May.  During this time, the entire organization will be committed to implementing the New Base Plan developed by management.  In my new role as Executive Chairman, I will work closely with our leadership team in that effort while we execute our search for a new CEO."

Colin Watts, Chief Executive Officer of the Vitamin Shoppe stated, "I am encouraged by the early signs of traction from critical initiatives, as shown by the improving quarterly comps, strong Digital Commerce growth, success of Spark Auto Delivery and growth in new customers in Q4.  Our New Base Plan will establish The Vitamin Shoppe brand as consumers' Wellness Authority and create a platform for future growth and profitability.  I look forward to working closely with Alex in my last few months to help implement the plan and facilitate an orderly transition for the company."  

Fourth Quarter 2017 Results

Total sales of $268.8 million in the quarter were 11.8% lower than the same period of the prior year.  Total comparable sales were down 4.6% in the quarter or down 3.2% adjusting for the timing of the Christmas holiday.  The Company opened three stores in the quarter.  Manufacturing sales to the Vitamin Shoppe were $8.9 million while third party sales decreased 41.0% from the same period of the prior year as the Company continues to streamline this business.

Cost of goods sold, which includes product, distribution, manufacturing and store occupancy costs, decreased $21.9 million, or 10.7%, to $182.8 million for the three months ended December 30, 2017, compared with $204.7 million for the three months ended December 31, 2016.  During the quarter, the Company recorded $0.8 million in net expenses related to the closure of the New Jersey distribution center and a net benefit of $3.3 million in restructuring costs for the Nutri-Force turnaround.  With respect to Nutri-Force, the Company is also exploring strategic alternatives, including the potential sale.

Gross profit of $86.0 million was 14.1% lower than $100.2 million in fourth quarter 2016.  Reported gross profit as a percentage of net sales was 32.0% in fourth quarter 2017, compared to 32.9% in the same period of 2016.  Excluding the special items mentioned above, gross profit was $83.5 million in the quarter and the adjusted gross profit as a percentage of sales was 31.1%.  The fourth quarter 2017 year over year decrease was primarily due to deleverage in occupancy and supply chain from lower sales as well as additional investments in pricing and promotions.  This was partially offset by improvements in margin from favorable category and private brands mix shifts, lower costs through new vendor partnerships and improvements from Nutri-Force. 

Selling, general and administrative expenses (SG&A), including operating payroll and related benefits and advertising expense, was $87.1 million for the quarter ended December 30, 2017, compared with $83.2 million for the quarter ended December 31, 2016.  SG&A as a percent of revenue was 32.4% in fourth quarter 2017 and 27.3% in fourth quarter 2016.  This deleveraging is mainly driven by a combination of store payroll, advertising, other store operating costs and increases in corporate costs. 

Operating loss in fourth quarter 2017 of $1.8 million compared to an operating loss of $22.7 million in the same period of the prior year.  Adjusted for the items noted in the preceding paragraphs, the operating loss was $4.7 million in fourth quarter 2017 compared to operating income of $16.5 million in fourth quarter 2016.

Income taxes reflect an additional $15.3 million of tax expense resulting from the change in valuation of deferred tax assets and liabilities under the new tax laws.

Reported net loss was $17.6 million for fourth quarter 2017 compared to net loss of $11.6 million in the same period of the prior year.  Reported loss per share was $0.75 in fourth quarter 2017, compared to earnings per share loss of $0.50 in fourth quarter 2016.  Earnings per share loss, on an adjusted basis (for the items described in Table 4), was $0.17 in fourth quarter 2017 compared to earnings per share of $0.37 for the fourth quarter 2016.

Balance Sheet and Cash Flow

Cash and equivalents at December 30, 2017 were $2.0 million.  At year end, the Company had $12.0 million borrowed on its revolving line of credit and a convertible notes liability with a total face value of $143.8 million

Capital expenditures were $11.7 million in the quarter and $55.0 million for the full year.  Funds were primarily expended on the new distribution center, new and remodeled stores, supply chain, digital and other IT investments as well as additional office space to accommodate closing of the North Bergen facility.

2018 Outlook

The Company is providing guidance around the key levers that drive the business.  Specifically:

  • Full year comparable sales of low to mid negative single digits, improving sequentially
  • Full year gross margin rate flat with 2017, benefitting from higher product margins and improvement at Nutri-Force, partially offset by fixed cost deleverage
  • Increase in SG&A expenses of 2.0% - 2.5% over 2017.  This excludes expenses associated with CEO change.
  • Combined Federal, State and Local tax rate of 28%.  This excludes taxes associated with permanent book to tax differences estimated at $0.5 million to $1 million
  • Full year capital expenditures of approximately $30 million, includes the opening of 2 new stores.

Non-GAAP Financial Measures 
Adjusted information is non-GAAP financial information. These supplemental non-GAAP measures should not be considered superior to, or a substitute for, and should be considered in conjunction with the GAAP financial measures presented.  The Company believes such non-GAAP financial information facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of, or are unrelated to the Company's and our business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. These adjustments are consistent with how management views our businesses. Management uses such non-GAAP financial information in making financial, operating and planning decisions and evaluating the Company's and each business segment's ongoing performance. A reconciliation of adjusted financial information to the most directly comparable financial measures calculated and presented in accordance with GAAP is shown in Tables 4.

Webcast
Management will host a conference call to discuss the fourth quarter 2017 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 presentation to accompany the call will be available on the Company's website immediately prior to the webcast.  A telephonic replay will be available beginning at 11:30 a.m. ET on February 27, 2018 and can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 for international callers.  The passcode for the replay is 8209168.  The telephonic replay will be available until 11:59 p.m. ET on March 6, 2018.  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 an omni-channel, specialty retailer and contract manufacturer of nutritional products based in Secaucus, New Jersey.  In its stores and on its website, the Company carries a comprehensive retail assortment including: vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and beauty aids.  In addition to offering products from approximately 900 national brands, the Vitamin Shoppe also carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt®, ProBioCare®, Next Step® and Betancourt Nutrition® brands.  The Vitamin Shoppe conducts business through more than 775 company-operated retail stores under The Vitamin Shoppe and Super Supplements retail banners, and through its website, www.vitaminshoppe.com.  Follow the Vitamin Shoppe on Facebook at http://www.facebook.com/THEVITAMINSHOPPE and on Twitter at http://twitter.com/VitaminShoppe.

Forward Looking Statements 
This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, those that contain words such as "outlook", "believes", "expects", "potential", "continues", "may", "will", "should", "seeks", "predicts", "intends", "plans", "estimates", "anticipates", "target", "could" or the negative version of these words or other comparable words.  These statements are subject to various risks and uncertainties, many of which are outside our control, including, among others, strength of the economy, changes in the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, implementation of our strategy, 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, management changes, maintaining appropriate levels of inventory, changes in tax policy, ecommerce relationships, disruptions of manufacturing, warehouse or distribution facilities or information systems, political environment and other specific factors discussed herein and in other Securities and Exchange Commission (the "SEC") filings by us (including our reports on Forms 10-K and 10-Q filed with the SEC).   We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes with certainty and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

 

 

TABLE 1

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)




Three Months Ended


Fiscal Year Ended



December 30,


December 31,


December 30,


December 31,



2017


2016


2017


2016










Net sales


$         268,770


$         304,865


$      1,178,694


$      1,289,243

Cost of goods sold


182,766


204,705


821,137


862,887

Gross profit


86,004


100,160


357,557


426,356

Selling, general and administrative expenses


87,051


83,230


345,494


340,752

Goodwill, intangible assets and store fixed-assets impairment charges


786


39,612


274,876


40,027

Income (loss) from operations


(1,833)


(22,682)


(262,813)


45,577

Interest expense, net


2,489


2,546


9,701


9,523

Income (loss) before provision (benefit) for income taxes


(4,322)


(25,228)


(272,514)


36,054

Provision (benefit) for income taxes


13,256


(13,614)


(20,363)


11,090

Net income (loss)


$         (17,578)


$         (11,614)


$       (252,151)


$           24,964










Weighted average common shares outstanding









   Basic


23,339,565


23,357,556


23,137,977


23,875,540

   Diluted


23,339,565


23,357,556


23,137,977


24,067,686

Net income (loss) per common share









   Basic


$             (0.75)


$             (0.50)


$           (10.90)


$              1.05

   Diluted


$             (0.75)


$             (0.50)


$           (10.90)


$              1.04

 

 

TABLE 2

VITAMIN SHOPPE, INC. AND SUBSIDIARY

SEGMENT DATA, KEY PERFORMANCE INDICATORS AND STORE INFO

($ in thousands)

(Unaudited)




Three Months Ended


Fiscal Year Ended



December 30,


December 31,


December 30,


December 31,



2017


2016


2017


2016

Net sales:









Retail 

$             261,901


$             293,222


$          1,146,500


$          1,239,226


Manufacturing

15,721


21,989


81,607


87,684


Segment net sales

277,622


315,211


1,228,107


1,326,910


Elimination of intersegment revenues

(8,852)


(10,346)


(49,413)


(37,667)

Net sales

$             268,770


$             304,865


$          1,178,694


$          1,289,243










Income (Loss) from operations:









Retail 

$               10,485


$               32,100


$               85,016


$             148,552


Manufacturing

5,338


(41,405)


(18,305)


(44,223)


Corporate costs

(17,656)


(13,377)


(329,524)


(58,752)

Income (Loss) from operations

$                (1,833)


$             (22,682)


$            (262,813)


$               45,577










Decrease in total comparable net sales

(4.6)%


(2.2)%


(6.5)%


(0.9)%

Decrease in comparable store net sales

(7.0)%


(1.8)%


(6.9)%


(1.5)%

Increase (Decrease) in VS.com comparable net sales

(14.3)%


7.0 %


(12.3)%


7.3 %










Gross profit as a percent of net sales

32.0 %


32.9 %


30.3 %


33.1 %

Income (Loss) from operations as a percent of net sales

(0.7)%


(7.4)%


(22.3)%


3.5 %










Capital Expenditures

$               11,706


$                 8,840


$               55,020


$               40,068

Depreciation and Amortization 

$               10,996


$                 9,968


$               39,204


$               38,780










Store Data:









Stores open at beginning of period 

784


774


775


758


    Stores opened 

3


3


15


26


    Stores closed 

(2)


(2)


(5)


(9)


Stores open at end of period

785


775


785


775










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

2,737


2,709


2,737


2,709

 

 

TABLE 3

VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)



December 30,


December 31,


2017


2016

ASSETS




Current assets:




  Cash and cash equivalents

$                  1,985


$                   2,833

  Accounts receivable, net of allowance of $827 and $1,061 in 2017 and 2016, respectively

3,435


7,367

  Inventories

234,400


241,736

  Prepaid expenses and other current assets

39,634


33,717

     Total current assets

279,454


285,653

Property and equipment, net

150,033


139,132

Goodwill

-


210,633

Other intangibles, net

19,417


79,489

Deferred taxes

37,278


16,847

Other long-term assets

2,571


2,430

Total assets

$              488,753


$               734,184





LIABILITIES AND STOCKHOLDERS' EQUITY 




Current liabilities:




  Revolving credit facility

$                12,000


$                 11,000

  Accounts payable

46,945


65,606

  Deferred sales

5,710


5,209

  Accrued expenses and other current liabilities

59,568


52,290

     Total current liabilities

124,223


134,105

Convertible notes, net

126,415


120,874

Deferred rent

40,832


37,489

Other long-term liabilities 

1,916


1,720





Commitments and contingencies








Stockholders' equity:




  Preferred stock, $0.01 par value; 250,000,000 shares authorized and no shares issued




   and outstanding at December 30, 2017 and December 31, 2016

-


-

  Common stock, $0.01 par value; 400,000,000 shares authorized, 24,220,509 shares issued and




     24,021,948 shares outstanding at December 30, 2017, and 23,585,240 shares issued and 23,424,055




     shares outstanding at December 31, 2016

242


236

  Additional paid-in capital

88,823


80,727

  Treasury stock, at cost; 198,561 shares at December 30, 2017 and 161,185 shares at December 31, 2016

(7,010)


(6,430)

  Retained earnings 

113,312


365,463

           Total stockholders' equity 

195,367


439,996

Total liabilities and stockholders' equity

$              488,753


$               734,184

 

 

TABLE 4

VITAMIN SHOPPE, INC. AND SUBSIDIARY

SUPPLEMENTAL OPERATING DATA

(Unaudited)


Amounts in millions except per share data












Figures may not sum due to rounding













Gross




Goodwill,
Intangible Assets
and Store
Fixed-Assets
Impairment


Operating 


Net


Diluted


Profit


SG&A


Charges


Income (Loss)


Income (Loss)


EPS













Three months ended December 30, 2017:












As Reported

$           86.0


$           87.1


$                   0.8


$                 (1.8)


$               (17.6)


$           (0.75)

Nutri-Force restructuring costs (1)

(3.3)


0.4


-


(3.7)


(2.2)


(0.10)

Distribution center closing costs (2)

0.8


(0.0)


-


0.8


0.5


0.02

Impact of Tax Reform Act (3)

-


-


-


-


15.3


0.66













As Adjusted

$           83.5


$           87.4


$                   0.8


$                 (4.7)


$                  (3.9)


$           (0.17)













Three months ended December 31, 2016:












As Reported

$         100.2


$           83.2


$                39.6


$              (22.7)


$               (11.6)


$           (0.50)

Impairment charges on goodwill and intangible asset (4)

-


-


(39.2)


39.2


23.2


0.99

Canada stores closing costs (5)

-


-


-


-


(3.0)


(0.13)













As Adjusted

$         100.2


$           83.2


$                   0.4


$                 16.5


$                    8.6


$            0.37













Fiscal year ended December 30, 2017:












As Reported

$         357.6


$        345.5


$              274.9


$             (262.8)


$              (252.2)


$        (10.90)

Impairment charges on goodwill and intangible asset (6)

-


-


(270.0)


270.0


234.2


10.12

Nutri-Force restructuring costs (1)

7.2


(5.1)


-


12.3


7.5


0.32

Store impairment charges (7)

-


-


(3.8)


3.8


2.3


0.10

Distribution center closing costs (2)

2.8


(0.3)


-


3.1


1.9


0.08

Impact of Tax Reform Act (3)

-


-


-


-


15.3


0.66













As Adjusted

$         367.6


$         340.1


$                   1.1


$                 26.4


$                    9.1


$            0.39













Fiscal year ended December 31, 2016:












As Reported

$         426.4


$         340.8


$                 40.0


$                 45.6


$                 25.0


$            1.04

Impairment charges on goodwill and intangible asset (4)

-


-


(39.2)


39.2


23.2


0.96

Cost reduction project (8)

-


(3.8)


-


3.8


2.3


0.10

Canada stores closing costs (5)

(0.2)


(2.1)


-


1.9


(1.1)


(0.05)

Super Supplements conversion costs (9)

(0.2)


(1.3)


-


1.0


0.6


0.03

Reinvention strategy costs (10)

-


(0.5)


-


0.5


0.3


0.01













As Adjusted

$         426.0


$         333.1


$                   0.8


$                 92.0


$                  50.3


$            2.09













(1)   The costs represent restructuring costs related to the turnaround of Nutri-Force.

(2)   Costs related to the closing of the North Bergen, New Jersey distribution center.

(3)   Tax expense resulting from the change in valuation of deferred tax assets under the Tax Reform Act of 2017.

(4)   Impairment charge on the goodwill of Nutri-Force of $32.6 million and the customer relationships intangible asset of Nutri-Force of $6.6 million.

(5)   Charges primarily related to lease terminations and a $3.0 million tax benefit in the fiscal quarter ended December 2016 resulting from the write-off of the
        Canada investment.

(6)   Impairment charges on the goodwill of the retail segment of $210.6 million and the Vitamin Shoppe tradename of $59.4 million.

(7)   Impairment charges on the fixed assets of retail locations.

(8)   Outside consulting costs relating to a project to identify and implement cost reduction opportunities.

(9)   Costs primarily related to the closure of the Seattle distribution center.

(10) The costs represent outside consultants fees in connection with the Company's "reinvention strategy".

 

SOURCE Vitamin Shoppe, Inc.

For further information: Analysts and Investors: Kathleen Heaney, 646-912-3844 OR 201-552-6430, [email protected]; Media: Crystal Carroll, 201-552-6328, [email protected]

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