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Super Supplements acquisition makes cultural sense, says Vitamin Shoppe CEO

By Hank Schultz , 19-Dec-2012
Last updated on 19-Dec-2012 at 15:36 GMT

Vitamin Shoppe Inc. has acquired Seattle-based chain Super Supplements in a transaction that makes both strategic and cultural sense, says Vitamin Shoppe CEO Tony Truesdale.

“Not only is Supper Supplements is a  great strategic fit but perhaps even more important we are a good fit culturally,” Truesdale said in a call with analysts Tuesday.

“Their real estate strategy is similar with most stores in stand alone locations. Stores similar in size and have the look and feel of a Vitamin Shoppe store.

“We both share a commitment to our customers health and wellness needs.  And having knowledgeable team members is the core of what we both excel at,” he said.

Dominant player in Pacific Northwest

The transaction, which the company says it expects to close by the end of the year, makes Vitamin Shoppe a dominant force in the Pacific Northwest.  Super Supplements has 31 stores in Washington, Oregon and Idaho;  Vitamin Shoppe currently has 17.  Truesdale said both brands would operate in the region for the foreseeable future.  Overall, Vitamin Shoppe has more than 500 stores in 42 states.

Vitamin Shoppe is paying about $50 million for Super Supplements . The transaction is structured as a purchase of Super Supplements' assets by a wholly-owned subsidiary of the Vitamin Shoppe, and is being funded by available cash.

Vitamin Shoppe expects Super Supplements to contribute about $75 million in revenue in 2013.  Integration of the two chains will cost about $7 million spread over 2013 and 2014 and Vitamin Shoppe expects that the acquisition will start to contribute earnings in 2104, according to CFO Brenda Galgano.

Similar demographics

The stores have similar customer demographics, though Truesdale said there are subtle differences;  Vitamin Shoppe has greater penetration in sports nutrition while Super Supplement stores are stronger in beauty and health and wellness.

Speaking earlier this year at the 32nd annual Piper Jaffray consumer conference in New York City, Truesdale said Vitamin Shoppe customers are typically divided into “three core segments.”

First, the “vitamin, mineral supplement health and wellness-focused user, slightly older, more likely to be female”, he said.

Second, the sports nutrition customer, who “tends to be young and male”.

And third, men interested in physical fitness and health and wellness that span the above two categories

True Athlete private label exceeds expectations

One of Vitamin Shoppe’s recent significant wins has been the launch of its private label True Athlete NSF certified for Sport sports nutrition range that has significantly exceeded expectations.

The range, which is targeted at everyone from elite athletes to fitness enthusiasts “with a passion for natural products”, will be followed by other new concepts, Truesdale said at the conference.

“We’re on a journey of evolving corporate brands at Vitamin Shoppe. It takes a long time to do what we did with True Athlete. It’s a unique formulation that you can’t buy anywhere else. We’re not duplicating a third party.”

“Its success has been beyond our expectations, it has been very very enthusiastically received, so we are working on a couple of other concepts as well.”

In early November, Vitamin Shoppe recorded fiscal third quarter 2012 nets sales growth of 14.4% and operating income growth of of 40.5%.  It was the 28th consecutive quarter of sales growth, according to the company. During the period, the company reported fully diluted earnings per share (EPS) of $0.54; up from $0.40 in fiscal third quarter 2011. For the nine-month period, fully diluted EPS was $1.71, up from $1.20 in the comparable period of the prior year.

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