FitLife Brands stumbles with distribution switch; iSatori merger not seen as panacea

By Hank Schultz contact

- Last updated on GMT

Related tags: Income, Revenue, Gnc

FitLife Brands stumbles with distribution switch; iSatori merger not seen as panacea
Earlier this year dietary supplement manufacturer FitLife Brands hitched its wagon more firmly to the GNC star. As that leviathan has stumbled in recent months, FitLife has faltered, too, and an upcoming merger with sports nutrition brand iSatori has not been viewed by stock traders as a panacea.

In March, FitLife, which sells supplements under several brand names including NDS Nutrition Products, MPD and SirenLabs and the newly introduced Metis Nutrition brand, announced a captive distribution agreement with GNC in which it migrated completely over to GNC’s centralized distribution platform for fulfillment to the GNC franchise network. FitLife, which is based in Omaha, NE, took this step even though it mean slightly lower unit prices, said chief financial officer Mike Abrams, because it meant more consistent demand for less work.

“We saw a solid increase in volumes related to strong sell through and increased penetration into domestic and international franchisees,” ​Abrams said in March.

The company recorded second quarter 2015 revenue of $5.0 million compared to $6.0 million during the same period in 2014. Revenue for the first six months of 2015 was $8.9 million, as compared to $12.3 million for the first six months of last year. Abrams said the flat-to-declining revenue was to be expected given the radical change in distribution methodology, and upcoming quarters are likely to show similar difficult comparisons to previous quarters until the distribution revamp has been reflected in results for a full year.  

More worrying, though, were the changes in net income, something that was supposed to improve with the captive GNC distribution scheme. In the second quarter of 2015 it came at $243,537, or $0.03 per diluted share, versus $725,215, or $0.08 per diluted share, for the same quarter last year. Net income for the first six months of the year was $201,274, or $0.02 per diluted share, compared to $1,618,561, or $0.19 per diluted share, for the six months ended June 30, 2014.

Merger news fails to excite

Abrams also touted in FitLife’s recent earnings release the previously announced merger with Denver, CO-based sports nutrition and healthy lifestyles brand iSatori. ISatori makes a variety of pre workout and other sports supplements. The company reported steep losses in its most recent quarter, which it attributes to an unexpected decline in demand for its weight loss products. 

In its second quarter 2015 earnings release, iSatori reported revenues of $2.5 million compared to revenues of $2.9 million for the same period a year previously, or a 14.7% decline. The company also reported a loss of $522,712 for the quarter as opposed to net income of $336,099 in the same quarter a year previously.  The good news, CEO Stephen Adelé said, is that sales of the company’s sports nutrition offerings have been increasing rapidly, though not enough to offset decline of the weight loss offerings. 

“Gross margins are lower than we wished, our management team has taken significant action to help restore our gross margins over the next two quarters, back to levels that are more acceptable for operating profitably again. In the first six months of 2015, we made solid progress in several areas of our business operations to regain profitability,”​ he said.

Stock traders have been unimpressed with the news of the merger. The price of FitLife shares have steadily declined from a 52-week high of $2.90 late last year to about $1.71 today.

Online event

NutraIngredients-USA will host two online events on sports nutrition, one on trends in science and the other focusing on market trends, in late September and early October respectively.  Registration details will be available soon on the NutraIngredients-USA registration page​.

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