An aging population and a greater focus on health have driven rising demand for supplements and vitamins. Vitamin Shoppe has been a beneficiary of both trends, and its shares could reward investors nicely in coming years.
The second-largest U.S. retailer of nutritional products behind GNC Holdings (ticker: GNC), Vitamin Shoppe (VSI) has increased same-store sales for the past 35 quarters. Yet, the North Bergen, N.J.–based company hit some speed bumps in the past year, as investments in growth hurt gross profit margins and retarded earnings momentum.
Since reaching a high of $65 in February 2013, Vitamin Shoppe’s shares have fallen about 30%, to a recent $45.85. As investment costs recede in the next year, gross margins could improve, and earnings growth could resume. Analysts see earnings jumping 19% in 2015, to $2.69 a share, on a 12% rise in revenue.
The shares currently trade for 17 times 2015 estimates. They could rally 20% or more in the next 12 months.
Since coming public in 2009, Vitamin Shoppe has increased its store count by 50%, to 678 stores. The retailer operates under the Vitamin Shoppe, Super Supplements, and Vitapath names, and has stores in 44 states, Puerto Rico, and Canada. It also sells online.
Vitamin Shoppe’s diverse product line includes vitamins, minerals, herbs, and sports-nutrition products. The retailer sells 900 brands, with its proprietary product line contributing about 20% of sales. In-house brands have higher profit margins, and help to differentiate the company from online vendors.