NBTY grapples with tricky US retail

Related tags Vitamin world Nutrition

NBTY is feeling the chill of an adverse specialty retail climate in
the US, as the $11 million devaluing of its Vitamin World chain
casts a long shadow over the manufacturer's 3Q operating income.

While overall sales increased 9.7 percent on last year's quarter to $439 million, operating income fell from $41.1 to $29.5 million.

Despite the write-off however, the company​ does not consider Vitamin World a lost cause, having upped its advertising spend by $15 million in 2Q in order to "build brand awareness and to retain market share in a difficult environment."

It has achieved some pay off from throwing money at the problem, with a 10 percent increase in sales in the three months ended June, despite the closure of 11 unprofitable stores. Six new store locations opened during the quarter.

The vitamin manufacturer's European retail arm continues to be the leading division, however, achieving 17 percent sales growth to $143.2 million - and 19 percent in the first nine months of the fiscal year.

The Wholesale/US Nutrition also improved on its 2Q fortunes, with a 10 percent increase in sales despite $11 million in product returns, attributed largely to the decline in low carb bar sales.

The firm is in the throes of setting up a new business unit called Independent Health Food Stores, under which fall the Solgar and SISU supplements brands, both acquired during the quarter for $115 and $5.7 million respectively. Existing NBTY brands American Health and Good & Natural are also being transferred to the new unit.

While SISU was purchased with cash, the Solgar acquisition was funded by a five-year loan.

Chairman and CEO Scott Rudolph said these strategic acquisitions were made possible by the company's "strong financial and industry position."

New-Jersey based Solgar generated around $105 million in 2004, and NBTY intends to give its stagnant turnover a boost with the introduction of new products.

"We remain committed to increasing market share and enhancing our position in this highly competitive market place,"​ added Rudolph.

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