Vitamin Shoppe, Inc. Announces Fourth Quarter 2017 Results
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SECAUCUS, N.J., Feb. 27, 2018 /PRNewswire/ -- Fourth Quarter 2017 Highlights:
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:
Non-GAAP Financial Measures Webcast About the Vitamin Shoppe, Inc. (NYSE:VSI) Forward Looking Statements
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
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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
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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
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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
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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
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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
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Total liabilities and stockholders' equity $488,753 $734,184
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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, Operating Net Diluted
Intangible Assets
and Store
Fixed-Assets
Impairment
Profit SG&A Charges Income (Loss) Income (Loss) EPS
------ ---- ------- ------------ ------------ ---
Three months ended December 30, 2017:
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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:
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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
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Fiscal year ended December 30, 2017:
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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
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Fiscal year ended December 31, 2016:
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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
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(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".
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Company Codes: NYSE:VSI |