Vitamin Shoppe, Inc (VSI)
Vitamin Shoppe (VSI)
When you think of Vitamin Shoppe stock, with a -83.8% YTD decline, it may stir up indigestion or excitement depending on what side of the trade you’re on. With 27.8% of the float short (8 short ratio), quite a few of these reverse-investors have been handsomely rewarded.
The 3-year stock performance reflects compounded losses:
Why has Vitamin Shoppe and General Nutrition Centers (GNC) suffered so much? Both companies are facing intense competition from other retailers and e-commerce sites. Perhaps most troublesome is that Amazon.com (AMZN) recently entered the nutritional supplements market with the launch of its ‘Amazon Elements’ line of vitamins.
Each earnings release during 2017 resulted in a multi-million share volume plunge shown on the chart below. The 52-week high is $26.25 with the low set last month at $2.95. Personally, I was watching but missed timing the bottom as a hammer-support candlestick posted and has remained intact since. Year-end tax selling and forward-looking pessimistic sales bias could keep the upside limited until proven otherwise.
I would not be surprised to see the stock drop further to $2 or even $1 with a overall market correction.
I analyzed the financials to determine if Vitamin Shoppe was an immediate bankruptcy risk, which sometimes clouds a stock with such dismal performance.
Price/Book, Price/Sales and Price/Cash Flow is .4, .1 and 1.5 compared to the industry average of 10.6, 2.8 and 8.9, which on the surface don’t appear to show signs of distress.
Debt to equity is .59 and up from .27 as of last year. Financial leverage is also increasing. However, Net Tangible Assets has increased $40m+ this year.
With all the turmoil, I still like VSI as a possible turnaround/survival story (not a buy recommendation). Non-cash flow negative adjustments to net income were ($84.6m) and ($159.4m) for the past 2 quarters. A possible window of opportunity to accumulate exists created by the write-downs taken to goodwill/intangibles. These events have skewed net income and price-to-earnings ratios and has also obscured the vision of investors who filter stocks using these critical performance metrics, leaving VSI off the radar.
I do question if the capital expenditures will result in respectable ROI, but have the sense VSI will be able to weather the competition over the next few quarters if they are able to execute operationally with financial discipline.
Corporate Governance is weaker than I feel comfortable with per the ISS Governance QualityScore as of December 1, 2017, which is 2. The pillar scores are Audit: 2; Board: 1; Shareholder Rights: 3; Compensation: 3.
With any equity, perform your due diligence before making an investment decision.
About Vitamin Shoppe:
Employees: nearly 4,000
Vitamin Shoppe operates as a multi-channel specialty retailer and contract manufacturer of nutritional products in the United States and internationally. It operates through three segments: Retail, Direct, and Manufacturing. The company provides custom manufacturing and private labeling services for VMS products, as well as develops and markets own branded products.
It offers vitamins, minerals, herbs, specialty supplements, sports nutrition, and other health and wellness products of approximately 900 brands. Owned brands include, but are not limited to Vitamin Shoppe, BodyTech, True Athlete, Mytrition, plnt, ProBioCare, Next Step, and Betancourt Nutrition; and national brands, including Optimum Nutrition, Cellucor, Garden of Life, Quest Nutrition, Solaray, Solgar, and Nature’s Way.
The company sells its products through Vitamin Shoppe and Super Supplements retail stores; and catalogs, as well as through its vitaminshoppe.com Website. As of December 31, 2016, it operated 775 company-operated retail stores; and 7 franchise stores in Panama, 5 franchise stores in Guatemala, 3 franchise stores in Costa Rica, and 2 franchise stores in Paraguay. Vitamin Shoppe, Inc. was founded in 1977 and is headquartered in Secaucus, New Jersey.
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