Supplement manufacturer NBTY increased its inventory by $35m in the first quarter of 2005 in a bid to prevent supply issues impacting sales over the next six months.
In Q1, ending 31 December 2004, the company reported a net sales increase of 9 percent to $420.27 million, compared to $385.05 million for the same period last year. Income from operations rose 18 percent, from $41.66 million to $49.13 million, in spite of the inventory layout.
Harvey Kamil, president and chief financial officer of NBTY, told NutraIngredients-USA.com that the company's inventory turnover has remained constant and the current inventory will be used over the next two quarters.
Supply availability is not constant, however, especially for joint care products. Kamil said that this is a relatively new problem for the company: "We have had issues in the past but the company is bigger now, so our demand on our suppliers is greater."
Overall, NBYT chairman and CEO Scott Rudolf called the results "satisfactory" but the marketplace "difficult and highly competitive".
"We remain confident in the long-term outlook for the company and anticipated continued growth in revenue and market share," he said.
It certainly seems to be reaping rewards from aggressive marketing by the company's direct response/Puritan's Pride division, where sales increased 28 percent to $45 million from $35 million in the same quarter in 2003, including a 39 percent increase in on-line sales.
The European retail division also showed healthy growth of 21 percent to almost $142 million in sales from Holland and Barrett and GNC stores in the UK - but this success was not mirrored by the US, where net sales for both the retail and wholesale divisions remained relatively unchanged at around $179 million and $53 million respectively.
Vitamin World reported a pre-tax loss of loss of more than $3 million for Q1 2005, during which seven new stores were opened but four unprofitable stores closed their doors. Of the 560 outlets trading as at 31 December, the company plans to close 12 by the end of the current fiscal.
Net sales for Vitamin World decreased by 1 percent to $53 million in Q4 2004 , during which eight new stores opened and three closed.
Despite the difficulties and the need for heavy discounting to maintain market share, Kamil denied that the company was likely to pull out of retail operations in the US altogether. "It is an integral part of our business," he said.
In August 2004 NBTY was named by Fortune Magazine as one of the 100 fastest growing companies in the United States. But this recognition did not cause the company to lose sight of retail difficulties: "As we introduce more new products directly to the mass market, the specialty retail market's ability to capitalize on trends and new products is restricted," it stated.