Private brands deliver dose of hope for Vitamin Shoppe

Following disappointing second-quarter results, Vitamin Shoppe is ready to accelerate its efforts to change the trajectory of the business.

Sales and customer traffic worsened in the quarter, primarily driven by the sports category, which accounted for 70% of the comp decline. Nevertheless, the retailer is focused on launching new programs that CEO Colin Watts expects will address many of the challenges Vitamin Shoppe has been experiencing. According to Watts, the company is already seeing signs of progress in its Q3 numbers. “We are beginning to change the top-line momentum of the business, improve our customer acquisition rate and turn around our performance,” he said.

Vitamin Shoppe is also beginning to see higher growth and penetration of its private brands and improving margins for its VMS products in the brand defining stores. Penetration of private label brand rose 23.5% to 95 basis points in the quarter, bolstered by strength in the True Athlete and ProBioCare categories. The specialty retailer’s new product pipeline is also robust. The company has been working on several new SKUs and product line extensions that will be flowing into its system beginning this month.

The company has also brought in Bill Wafford as its new SVP of strategy and business development. Wafford was most recently at KPMG and has also held roles at Walgreens and Target. Business development is a major area of focus for Vitamin Shoppe as it positions itself to be relevant to consumers in a rapidly changing and increasingly crowded retail environment. “To that end,” added Watts, “we recently formed an exclusive brand incubation partnership with healthy natural solutions starting with their new line of supplements from Canada. HNS is the first company in our new platinum vendor program, but we expect to see several more in the coming year. You can expect to see partnerships, licenses and strategic integrations as a larger area of focus for us in the coming year.”

Looking ahead to the rest of this year, Watts is realistic. In the short term, some of the measures to improve the company’s top-line performance are expected to have a negative effect on margins. But they are necessary investments that, according to Watts, will win back customers and ensure future growth. In the long term, the company expects to see improvements in operating trends as it continues reducing the complexity of the business and transitioning more of its private brand production in-house. This restructuring should be substantially completed by the end of this year.

 

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