Schiff Nutrition has maintained its strong growth using a five-pronged strategy, president and CEO Tarang Amin told investors during a conference call on first quarter earnings on Tuesday.
The strategy has yielded exceptional results. Schiff reported net sales of $85.1 million, compared to $58.2 million for the same period in fiscal 2012 and gross profit margin was 47.1% for the fiscal 2013 first quarter. That is even after figuring in a $1.6 million charge to absorb inventory from Schiff’s recent acquisition of Airborne.
“Our first strategy is building premium brands,” Amin said. “We have leading brands in conditions that matter to consumers. MegaRed is the #1 omega-3 SKU in heart health. Move Free is a leading brand in joint care. Airborne is a leading brand in immune support, and Digestive Advantage is a leading brand in probiotics.”
Schiff supports this performance with a strong commitment to advertising, which amounted to 22% of net sales in the quarter. “With our brands and given our targets, TV is a very effective medium. But we have diversified our marketing to include print and online as well,” he said.
Innovation drives growth
“Our second strategy is leading innovation. As I've said before, the best way I know to build premium brands is to lead innovation,” Amin said. Among the innovations he mentioned were Move Free Ultra, a joint care product, MegaRed Extra Strength and Digestive Advantage Gummis, which feature the BC30 probiotic technology that Schiff purchased from Ganeden in 2011.
The third strategy, Amin said, is to expand Schiff’s channel and geographic footprint. To that end, he mentioned positive developments in Sam’s Club, Costco and Target stores, all of which have stocked additional Schiff SKUs or have accepted them in test mode.
Schiff has also made progress in its direct-to-consumer online business, Amin said.
The fourth strategy is to pursue acquisitions, to build on the success Schiff has had with its acquisition of Airborne in March which launched Schiff into the immune health category.
The fifth strategy Amin outlined is to improve Schiff’s operations. Improvements in sourcing and distribution have trimmed enough waste out of the system that Schiff can shortly relinquish 20 percent of the space it has been leasing for its facility in Salt Lake City.
Growth expected to accelerate
Schiff expects its strategic plan will continue to yield stellar results. Joseph Baty, Schiff’s CFO, said that in light of the company’s robust first quarter, Schiff was revising its earnings guidance upwards.
“As compared to prior guidance, we now forecast overall net sales growth between 43% and 46% for fiscal 2013 as compared to fiscal 2012. The change is due to our expecting greater branded sales growth. Gross profit percentage is expected to be in the range of 49% to 51% for fiscal 2013,” he said.