Vitamin Shoppe looks to China as US retail sales falter
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.
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