Vitamin Shoppe, Inc. Announces Third Quarter 2018 Results
SECAUCUS, N.J., Nov. 7, 2018 /PRNewswire/ --
Third Quarter 2018 Highlights:
- Total Comparable Sales (1.9%)
- Digital commerce increases 22.1%
- GAAP earnings per share (EPS) from continuing operations of $0.08. Adjusted EPS from continuing operations of $0.04
Vitamin Shoppe, Inc. (NYSE: VSI), an omni-channel, specialty retailer of nutritional products, today announced preliminary results for the three months ended September 29, 2018. Total net sales in the third quarter were $276.6 million compared to $282.4 million in the same period of the prior year.
Reported earnings per share (EPS) from continuing operations in third quarter 2018 was $0.08, compared to a loss per share from continuing operations of $3.60 in the same period of the prior year. Results in third quarter 2018 include $0.6 million pre-tax expenses associated with management realignment and the closure of the New Jersey distribution center and a $1.3 million Federal income tax benefit. Third quarter 2017 results included goodwill and trade name impairment charges totaling $105.7 million pre-tax, and $2.3 million of pre-tax expenses related to the closure of the New Jersey distribution center. Excluding these special items, EPS from continuing operations was $0.04 in third quarter 2018 flat with third quarter 2017. (Refer to Table 4 at the end of this press release for a reconciliation.)
Commenting on the quarter's results, Sharon Leite, CEO stated, "The team is making progress against the priorities outlined earlier this year. Sales and margins are improving and the organization is steadfast in our ability to improve these metrics further. Progress has also been made with our vendors, which has allowed us to test new categories as well as bring new and exclusive products to market."
"I am delighted to be a part of The Vitamin Shoppe organization. We will be taking transformative, strategic actions to expeditiously turn around the company and position us to drive sustainable growth. The team has made progress as evidenced by our achievements to date, however there is still much more work to do" concluded Ms. Leite.
Third Quarter 2018 Results
Total sales of $276.6 million in the quarter were 2.0% lower than the same period of the prior year. Total comparable sales were down 1.9% in the quarter. As the Company continues to advance its omni-channel initiative, digital comparable net sales, which includes vs.com and Auto Delivery, increased 22.1% in the quarter. The Company opened one store in the quarter and closed three.
Cost of goods sold, which includes product, distribution and store occupancy costs, were $189.9 million, 3.0% lower than the same period of the prior year. Third quarter 2017 included a $2.0 million charge associated with closing the New Jersey distribution center.
Gross profit of $86.7 million was flat with the $86.6 million reported in third quarter 2017. Reported gross profit as a percentage of net sales was 31.3% in third quarter 2018, compared to 30.7% in the same period of 2017. Excluding the special items mentioned above, gross profit was $88.6 million in third quarter 2017 and the adjusted gross profit as a percentage of sales was 31.4%. The third quarter 2018 year-over-year decrease was primarily due to deleverage in supply chain and occupancy partially offset by improvements in margin from more favorable pricing and promotions and lower costs through vendor partnerships. (Refer to Table 4 at the end of this press release for a reconciliation.)
Selling, general and administrative expenses (SG&A), including operating payroll and related benefits and advertising expense, was $82.7 million for the quarter ended September 29, 2018, compared with $84.4 million for the quarter ended September 30, 2017. SG&A as a percent of revenue was 29.9% in third quarter 2018 flat with third quarter 2017. On an adjusted basis, SG&A as a percentage of sales was 29.7% compared to 29.8% in third quarter 2017.
Operating income in third quarter 2018 of $3.2 million compared to operating loss of $103.8 million in the same period of the prior year. Third quarters 2018 and 2017 included goodwill, trade name and store impairment charges of $0.7 million and $106.0 million, respectively. Adjusted for the items noted in Table 4 for both third quarters 2018 and 2017, adjusted operating income was $3.9 million in third quarter 2018 compared with an adjusted operating income of $4.2 million in third quarter 2017. The adjusted operating margin was 1.4% in third quarter 2018 compared with 1.5% in the same period of the prior year. (Refer to Table 4 at the end of this press release for a reconciliation.)
Reported net loss was $1.7 million for third quarter 2018 compared to net loss of $86.2 million in the same period of the prior year. Net income from continuing operations was $1.9 million compared to a net loss from continuing operations of $83.4 million in third quarter 2017.
Reported loss per share was $0.07 in third quarter 2018, compared to a loss per share of $3.72 in third quarter 2017. Earnings per share from continuing operations were $0.08 in third quarter 2018 compared to a loss per share from continuing operations of $3.60 in third quarter 2017. Earnings per share from continuing operations on an adjusted basis (for the items described in Table 4) in third quarter 2018 were $0.04 flat with third quarter 2017.
Balance Sheet and Cash Flow
Cash and equivalents at September 29, 2018 were $1.8 million. At quarter end, the Company had a convertible notes liability with a total face value of $68.4 million and nothing borrowed on its revolving line of credit.
Capital expenditures were $9.0 million in the quarter with funds primarily expended on IT and other digital investments.
2018 Outlook
The Company is providing guidance around the key levers that drive the business. Specifically:
- Full year comparable sales of negative low to mid-single digits.
- Reported full year gross margin rate of 31.0% to 31.5%. This includes charges associated with assortment optimization and North Bergen closure this year. Excluding those charges, full year gross margin rate of 31.5% - 32.0%. The Company expects improved product margins offset by higher delivery costs and fixed cost deleverage. (See GAAP reconciliation in Table 5.)
- Reported full year SG&A expense of $344 million to $349 million including charges shown in Table 4. Excluding those charges, SG&A expenses between $340 million and $345 million. (See GAAP reconciliation in Table 5.)
- Combined Federal, State and Local tax rate of 28%. This excludes discrete items estimated at $0.5 million to $1 million.
- Full year capital expenditures of approximately $30 million, and includes the opening of two 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 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 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 and 5.
Webcast
Management will host a conference call to discuss the third quarter 2018 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 telephonic replay will be available beginning at 11:30 a.m. ET on November 7, 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 2549154. The telephonic replay will be available until 11:59 p.m. ET on November 14, 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 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 700 national brands, the Vitamin Shoppe also carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt®, ProBioCare®, and Next Step® 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, compliance with regulations, certifications and best practices with respect to the development, manufacture, sale 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, regulatory 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 |
Nine Months Ended |
|||||||
September 29, |
September 30, |
September 29, |
September 30, |
|||||
2018 |
2017 |
2018 |
2017 |
|||||
Net sales |
$ 276,636 |
$ 282,407 |
$ 865,703 |
$ 884,599 |
||||
Cost of goods sold |
189,945 |
195,789 |
591,665 |
601,678 |
||||
Gross profit |
86,691 |
86,618 |
274,038 |
282,921 |
||||
Selling, general and administrative expenses |
82,747 |
84,423 |
260,263 |
246,168 |
||||
Goodwill, tradename and store fixed-assets impairment charges |
718 |
106,000 |
1,551 |
274,090 |
||||
Income (loss) from operations |
3,226 |
(103,805) |
12,224 |
(237,337) |
||||
Gain on extinguishment of debt |
- |
- |
16,229 |
- |
||||
Interest expense, net |
1,289 |
2,426 |
5,429 |
7,212 |
||||
Income (loss) before provision (benefit) for income taxes |
1,937 |
(106,231) |
23,024 |
(244,549) |
||||
Provision (benefit) for income taxes |
57 |
(22,867) |
6,204 |
(24,664) |
||||
Net income (loss) from continuing operations |
1,880 |
(83,364) |
16,820 |
(219,885) |
||||
Net loss from discontinued operations, net of tax |
(3,626) |
(2,786) |
(15,245) |
(14,688) |
||||
Net income (loss) |
$ (1,746) |
$ (86,150) |
$ 1,575 |
$ (234,573) |
||||
Weighted average common shares outstanding |
||||||||
Basic |
23,545,842 |
23,152,645 |
23,477,982 |
23,070,781 |
||||
Diluted |
23,545,842 |
23,152,645 |
23,743,856 |
23,070,781 |
||||
Net income (loss) from continuing operations per common share |
||||||||
Basic |
$ 0.08 |
$ (3.60) |
$ 0.72 |
$ (9.53) |
||||
Diluted |
$ 0.08 |
$ (3.60) |
$ 0.71 |
$ (9.53) |
||||
Net loss from discontinued operations per common share |
||||||||
Basic |
$ (0.15) |
$ (0.12) |
$ (0.65) |
$ (0.64) |
||||
Diluted |
$ (0.15) |
$ (0.12) |
$ (0.64) |
$ (0.64) |
||||
Net income (loss) per common share |
||||||||
Basic |
$ (0.07) |
$ (3.72) |
$ 0.07 |
$ (10.17) |
||||
Diluted |
$ (0.07) |
$ (3.72) |
$ 0.07 |
$ (10.17) |
||||
TABLE 2 |
||||||||
VITAMIN SHOPPE, INC. AND SUBSIDIARY |
||||||||
Key Performance Indicators and Store Info |
||||||||
($ in thousands) |
||||||||
(Unaudited) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 29, |
September 30, |
September 29, |
September 30, |
|||||
2018 |
2017 |
2018 |
2017 |
|||||
Decrease in total comparable net sales |
(1.9)% |
(6.6)% |
(2.2)% |
(7.1)% |
||||
Decrease in comparable store net sales |
(4.7)% |
(7.0)% |
(5.5)% |
(6.8)% |
||||
Increase (Decrease) in digital comparable net sales |
22.1 % |
(2.7)% |
26.2 % |
(9.3)% |
||||
Gross profit from continuing operations as a percent of net sales |
31.3 % |
30.7 % |
31.7 % |
32.0 % |
||||
Income (Loss) from continuing operations as a percent of net sales |
1.2 % |
(36.8)% |
1.4 % |
(26.8)% |
||||
Capital Expenditures |
$ 8,950 |
$ 14,936 |
$ 24,655 |
$ 43,314 |
||||
Depreciation and Amortization |
$ 10,504 |
$ 7,709 |
$ 32,002 |
$ 23,548 |
||||
Store Data: |
||||||||
Stores open at beginning of period |
782 |
783 |
785 |
775 |
||||
Stores opened |
1 |
3 |
2 |
12 |
||||
Stores closed |
(3) |
(2) |
(7) |
(3) |
||||
Stores open at end of period |
780 |
784 |
780 |
784 |
||||
Total retail square footage at end of period (in thousands) |
2,718 |
2,733 |
2,718 |
2,733 |
||||
TABLE 3 |
|||
VITAMIN SHOPPE, INC. AND SUBSIDIARY |
|||
CONSOLIDATED BALANCE SHEETS |
|||
(In thousands, except share and per share data) |
|||
(Unaudited) |
|||
September 29, |
December 30, |
||
2018 |
2017 |
||
ASSETS |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 1,792 |
$ 1,947 |
|
Inventories |
188,400 |
218,087 |
|
Prepaid expenses and other current assets |
40,756 |
39,473 |
|
Current assets held for sale |
- |
22,625 |
|
Total current assets |
230,948 |
282,132 |
|
Property and equipment, net of accumulated depreciation and amortization of $310,789 and $334,082 in |
130,907 |
141,520 |
|
Other intangibles, net |
11,051 |
11,040 |
|
Deferred taxes |
22,800 |
37,278 |
|
Other long-term assets |
2,516 |
2,572 |
|
Noncurrent assets held for sale |
- |
16,891 |
|
Total assets |
$ 398,222 |
$ 491,433 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current liabilities: |
|||
Revolving credit facility |
$ - |
$ 12,000 |
|
Accounts payable |
43,989 |
46,921 |
|
Accrued expenses and other current liabilities |
59,411 |
62,645 |
|
Current liabilities held for sale |
- |
5,337 |
|
Total current liabilities |
103,400 |
126,903 |
|
Convertible notes, net |
62,228 |
126,415 |
|
Deferred rent |
38,411 |
40,832 |
|
Other long-term liabilities |
1,458 |
1,916 |
|
Commitments and contingencies |
|||
Stockholders' equity: |
|||
Preferred stock, $0.01 par value; 250,000,000 shares authorized and no shares issued |
|||
and outstanding at September 29, 2018 and December 30, 2017 |
- |
- |
|
Common stock, $0.01 par value; 400,000,000 shares authorized, 24,248,598 shares issued and |
|||
23,991,881 shares outstanding at September 29, 2018, and 24,220,509 shares issued and 24,021,948 |
|||
shares outstanding at December 30, 2017 |
242 |
242 |
|
Additional paid-in capital |
84,881 |
88,823 |
|
Treasury stock, at cost; 256,717 shares at September 29, 2018 and 198,561 shares at December 30, 2017 |
(7,285) |
(7,010) |
|
Retained earnings |
114,887 |
113,312 |
|
Total stockholders' equity |
192,725 |
195,367 |
|
Total liabilities and stockholders' equity |
$ 398,222 |
$ 491,433 |
|
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 |
|||||||
Continuing Operations |
Profit |
SG&A |
Charges |
Income (Loss) |
Income (Loss) |
EPS |
|||||
Three months ended September 29, 2018: |
|||||||||||
As Reported |
$ 86.7 |
$ 82.7 |
$ 0.7 |
$ 3.2 |
$ 1.9 |
$ 0.08 |
|||||
Tax Reform (1) |
- |
- |
- |
- |
(1.3) |
(0.06) |
|||||
Management realignment charges (2) |
- |
(0.4) |
- |
0.4 |
0.3 |
0.01 |
|||||
Closing of distribution center (3) |
- |
(0.2) |
- |
0.2 |
0.2 |
0.01 |
|||||
As Adjusted |
$ 86.7 |
$ 82.1 |
$ 0.7 |
$ 3.9 |
$ 1.0 |
$ 0.04 |
|||||
Three months ended September 30, 2017: |
|||||||||||
As Reported |
$ 86.6 |
$ 84.4 |
$ 106.0 |
$ (103.8) |
$ (83.4) |
$ (3.60) |
|||||
Goodwill impairment (4) |
- |
- |
(46.3) |
46.3 |
46.3 |
2.00 |
|||||
Tradename impairment (5) |
- |
- |
(59.4) |
59.4 |
36.6 |
1.58 |
|||||
Closing of distribution center (3) |
2.0 |
(0.3) |
- |
2.3 |
1.4 |
0.06 |
|||||
As Adjusted |
$ 88.6 |
$ 84.2 |
$ 0.3 |
$ 4.2 |
$ 0.9 |
$ 0.04 |
|||||
Nine months ended September 29, 2018: |
|||||||||||
As Reported |
$ 274.0 |
$ 260.3 |
$ 1.6 |
$ 12.2 |
$ 16.8 |
$ 0.71 |
|||||
Gain on extinguishment of debt (6) |
- |
- |
- |
- |
(11.7) |
(0.49) |
|||||
Tax Reform (1) |
- |
- |
- |
- |
(1.3) |
(0.06) |
|||||
Inventory charge (7) |
3.6 |
- |
- |
3.6 |
2.6 |
0.11 |
|||||
Closing of distribution center (3) |
1.8 |
(1.1) |
- |
2.9 |
2.1 |
0.09 |
|||||
Management realignment charges (2) |
- |
(2.2) |
- |
2.2 |
1.6 |
0.07 |
|||||
Shareholder settlement (8) |
- |
(0.7) |
- |
0.7 |
0.5 |
0.02 |
|||||
As Adjusted |
$ 279.4 |
$ 256.2 |
$ 1.6 |
$ 21.7 |
$ 10.6 |
$ 0.45 |
|||||
Nine months ended September 30, 2017: |
|||||||||||
As Reported |
$ 282.9 |
$ 246.2 |
$ 274.1 |
$ (237.3) |
$ (219.9) |
$ (9.53) |
|||||
Goodwill impairment (4) |
- |
- |
(210.6) |
210.6 |
197.6 |
8.57 |
|||||
Tradename impairment (5) |
- |
- |
(59.4) |
59.4 |
36.6 |
1.59 |
|||||
Store impairment charges (9) |
- |
- |
(3.8) |
3.8 |
2.3 |
0.10 |
|||||
Closing of distribution center (3) |
2.0 |
(0.3) |
- |
2.3 |
1.4 |
0.06 |
|||||
As Adjusted |
$ 284.9 |
$ 245.9 |
$ 0.3 |
$ 38.7 |
$ 18.0 |
$ 0.78 |
|||||
(1) Represents the tax benefit associated with tax accounting method changes and their effect on the revalued deferred tax assets and liabilities under the Tax Cut |
|||||||||||
(2) Costs related to management turnover, including severance charges, recruitment costs and related professional fees. |
|||||||||||
(3) Costs related to the closing of the North Bergen, New Jersey distribution center. |
|||||||||||
(4) Impairment charges on the goodwill of the retail segment. |
|||||||||||
(5) Impairment charge on the Vitamin Shoppe tradename. |
|||||||||||
(6) Gain recognized on the repurchases of a portion of Convertible Notes, net of tax. |
|||||||||||
(7) Inventory charge resulting from an evaluation to optimize the Company's product assortment. |
|||||||||||
(8) Professional fees incurred related to shareholder settlement. |
|||||||||||
(9) Impairment charges on the fixed assets of retail locations still in use in the Company's operations. |
|||||||||||
TABLE 5 |
|
VITAMIN SHOPPE, INC. AND SUBSIDIARY |
|
ADJUSTED 2018 GUIDANCE |
|
(Unaudited) |
|
Dollars in millions |
|
Figures may not sum due to rounding |
|
Fiscal Year |
|
Gross Margin Rate - GAAP basis |
31.0% to 31.5% |
Inventory charge |
0.3% |
Closing of distribution center |
0.2% |
Gross Margin Rate - Adjusted basis |
31.5% to 32.0% |
SG&A - GAAP basis |
$344 to $349 |
Management realignment charges |
(2) |
Shareholder settlement |
(1) |
Closing of distribution center |
(1) |
SG&A - Adjusted basis |
$340 to $345 |
SOURCE Vitamin Shoppe, Inc.
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