Vi­ta­min Shoppe looks to China as US re­tail sales fal­ter

China Daily (Canada) - - FRONT PAGE -

The Vi­ta­min Shoppe has been on some­thing of a roller­coaster ride lately. The news for the nu­tri­tional-sup­ple­ments re­tailer in­cludes a re­cent foray into China and a vote of con­fi­dence by a North Carolina hedge fund.

But the com­pany also is clos­ing a dis­tri­bu­tion cen­ter and faces a class-ac­tion law­suit over state­ments about the busi­ness’ per­for­mance.

Shares perked up ear­lier this month when The Vi­ta­min Shoppe, based in Se­cau­cus, New Jersey, an­nounced it would sell its prod­ucts on Alibaba Group Hold­ings Ltd’s Tmall Global web­site.

On Oct 2, the shares, which trade un­der the sym­bol VSI on the New York Stock Ex­change, spiked 12 per­cent to $5.75 on that news, but have since re­treated.

It was a brief respite for a stock that had lost more than 50 per­cent over the past three months and 75 per­cent year to date. The stock’s 52-week range is $4.95-$28.33.

Ri­val GNC Hold­ings Inc shares also have tailed off and are down 20 per­cent this year.

The Vi­ta­min Shoppe, ubiq­ui­tous across the US with its fa­mil­iar blue sig­nage, has part­nered with Macy’s China Lim­ited to bring its prod­ucts to the Chi­nese mar­ket. The goods are shipped to con­sumers in China from the Wil­liam Hen­nelly com­pany’s new dis­tri­bu­tion cen­ter in Ari­zona.

“The Asian vi­ta­min, min­eral and sup­ple­ment mar­ket is an at­trac­tive mar­ket for us, ex­hibit­ing a growth rate of 6 per­cent per year and is pro­jected to reach $20 bil­lion in the next five years, ac­cord­ing to Nutri­tion Busi­ness Jour­nal, and we are pleased that we are able to se­cure ease of en­try into China,”Vi­ta­min Shoppe’s Di­rec­tor of In­ter­na­tional De­vel­op­ment David Denker said in an Oct 2 re­lease.

But Vi­ta­min Shoppe faces sev­eral class-ac­tion law­suits re­gard­ing its state­ments about the com­pany’s per­for­mance.

The law firm Glancy Pron­gay & Mur­ray LLP of Los An­ge­les claims that: “On May 10, 2017, Vi­ta­min Shoppe re­leased poor first-quar­ter 2017 fi­nan­cial re­sults and slashed its fis­cal 2017 guid­ance by 45 per­cent. How­ever, the com­pany still claimed that its ‘rein­ven­tion plan’ was suc­ceed­ing. On this news, Vi­ta­min Shoppe shares lost ap­prox­i­mately one-third of their value, clos­ing at $12.70 per share.

“Then, on Aug 9, 2017, Vi­ta­min Shoppe an­nounced that it was tak­ing a $168.1 mil­lion im­pair­ment charge (write­off ) re­lat­ing to the com­pany’s re­tail seg­ment, and that, as a re­sult, Vi­ta­min Shoppe would re­port a loss per share of $6.73.

“In ad­di­tion, the com­pany dropped its fis­cal 2017 earn­ings per share guid­ance al­to­gether. On this news, Vi­ta­min Shoppe’s com­mon stock plunged again, fall­ing $3.50 per share to close at $6.10 per share.”

Vi­ta­min Shoppe hasn’t yet re­sponded to a re­quest for com­ment.

Per­haps in­dica­tive of the tough re­tail mar­ket, the com­pany an­nounced on Oct 6 that it would close its dis­tri­bu­tion cen­ter in North Ber­gen, New Jersey, with the po­ten­tial loss of 139 jobs, ac­cord­ing to real es­tate web­site ROI-NJ.com. The ware­house clo­sure could come by Dec 1.

The com­pany said op­er­a­tions will be moved to other dis­tri­bu­tion cen­ters in Ari­zona and Vir­ginia. A spokesper­son said em­ploy­ees af­fected will have the op­tion of re­lo­cat­ing, the web­site re­ported.

The com­pany said its lease at the site ex­pires Aug 31, 2018.

“In ad­di­tion to the lease ex­pi­ra­tion, we did not feel that there was a need for an­other (dis­tri­bu­tion cen­ter) on the East Coast,” the spokesper­son said.

Shah Cap­i­tal, a Raleigh, North Carolina-based hedge fund, whose hold­ings in 12 stocks to­tal close to $200 mil­lion,on Sept 30 took a 1.3 mil­lion-share stake in Vi­ta­min Shoppe while un­load­ing its 1.1 mil­lion-share po­si­tion in com­peti­tor GNC, ac­cord­ing to its 13F fil­ing with the Se­cu­ri­ties and Ex­change Com­mis­sion.

The pur­chase prices were be­tween $5 and $11.90 a share, with an es­ti­mated av­er­age price of $7.83.

Maybe China’s mas­sive mar­ket will even­tu­ally boost the stock, which closed un­changed at $5.25 on Wed­nes­day.

Con­tact the writer at williamhen­nelly@chi­nadai­lyusa.com

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