Vitamin Shoppe, Inc. Announces Fourth Quarter 2017 Results

Published: Feb 27, 2018

 

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,               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:
    -------------------------------------

    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".

 

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SOURCE Vitamin Shoppe, Inc.

 
 
Company Codes: NYSE:VSI
 

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