Vitamin Shoppe back in the black in Q2, backed by nearly 40% increase in e-commerce sales

10-Aug-2018 - Last updated on 21-Aug-2019 at 09:07 GMT

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Improvements in financial performance is a sign that its “strategy is directionally correct,” said Vitamin Shoppe president and interim-CEO Alexander Smith during the company’s Q2 earnings call this week.

The company posted a decrease of 1.1% in comparable sales and an increase of 36.9% for digital commerce sales.

It also posted a net income of $7 million, compared to a loss of $156 million in Q2 last year.

“To be clear, a better quarter and improving trends does not mean we are satisfied or believe that we have things fixed,” Smith said, according to a transcript of the earnings call on Seeking Alpha.

“I do believe, however, that it indicates that our strategy is directionally correct. Our focus is on upgrading talents, processes, products, and how we engage with our customers,” he added.

What were some of the effective changes?

According to Dave Mock, the retailer’s newly hired chief merchandizing and marketing officer, positive contributions to The Vitamin Shoppe’s growth this quarter were in the protein and weight management categories.

“Weight management turned positive in June,” he said, and “while protein trends are encouraging, the category is not where we believe it can be.”

Digital sales gave a big boost in revenue as well, as the retailer’s online operations saw nearly 40% more in sales driven by the SPARK Auto Delivery service, which it launched a year ago. The average units or products per subscriber is close to three products, he explained.

Mock also attributed positive growth to tighter control over promotion, a better cost structure based on work with vendors, and product mix shifts.

“Let me provide you a few examples. In the sports category we launched new brands in our sports supplement and protein powder categories,” he said. This included a nationwide distribution deal with Redcon1, a line of military-themed sports supplements, making it the largest sports nutrition launch for the retailer to date.

Coming up next: More plant-based, more private label

Next steps to continue its growth trajectory, Mock said, include launching line extensions with established brands in the on-the-go category as well as enter new categories, such as hemp, a category in which the retailer will be entering shortly.

“We are excited about this launch as it takes us into a new category and we will be supporting it with a full marketing campaign across social media, emails, in-store display and prominently featured on our website,” Mock said of the coming hemp products.

“Growing our private brand business and increasing the pace of new product introductions in private brand is also a key priority for us,” he added. “During the quarter, we saw improving trends and better margins which were driven by the launch of new products, better pricing, marketing support and an improved cost structure.”

Reported fully diluted earnings per share (EPS) were $0.30 in second quarter 2018, compared to a loss per share of $6.73 in second quarter 2017. Reported EPS from continuing operations in second quarter 2018 was $0.22, compared to a loss per share from continuing operations of $6.30 in the same period of the prior year.