Vitamin Shoppe Inc (VSI) Falls…Is the New GNC Holdings Inc (GNC) Gold Card Program to Blame?

Page 1 of 2

GNC Holdings Inc(NYSE:GNC)Health supplement retailer Vitamin Shoppe Inc (NYSE:VSI) announced fourth quarter results recently. Revenue grew only 2% on a reported basis to $218 million, but the company was lapping a 14 week quarter in the prior year. Therefore, on a comparable basis, we think sales grew closer to 10% year-over-year, though the number was still slightly below expectations. Earnings, excluding certain items including the integration costs of Super Supplements and the impact of Sandy, were $0.40 per share, in line with consensus expectations and 29% higher than the same period a year ago.

Same-store sales growth was fairly solid, in our view, up 5.2% year-over-year in spite of a 1.6 percentage point drag from Hurricane Sandy. This lagged competitor GNC Holdings Inc (NYSE:GNC), which reported same-store sales growth of 7.1% during the fourth quarter. Many seem to think that GNC’s new Gold Card program that provides consumers with discounts every day is eating into Vitamin Shoppe Inc (NYSE:VSI)’s sales growth. To some extent, we agree. GNC Holdings Inc (NYSE:GNC) has proven to have a sticky customer base, and it has a larger network of supplement stores.

However, we at Valuentum think the real game changer for GNC Holdings Inc (NYSE:GNC) and Vitamin Shoppe is online competition. As regular supplement users become more educated on the supplements themselves, we believe they tend to search online for the lowest cost rather than looking for in-store convenience and expertise. Not surprisingly, Amazon.com, Inc. (NASDAQ:AMZN) has vendors selling supplements in its marketplace. Again, it’s no surprise that Amazon also has among the lowest prices. Upstart Bodybuilding.com, which has several millions of loyal fans, also provides strong competition in the space. The company has consistently low prices, and it rarely increases product prices out-of-step with market price inflation.

A price comparison on Optimum Nutrition’s Gold Standard Whey Protein reveals the following:

5 LB 100% Whey Protein from ON Price “List” Price Shipping? Total Cost
Bodybuidling.com $52.99 $     74.95 $   7.94 $    60.93
Amazon.com $52.99 $     82.45 $     - $    52.99
GNC.com $54.99 $     92.99 $   1.00 $    55.99
VitaminShoppe.com $52.99 $     99.49 $     - $    52.99

Source: Valuentum, company websites

To compete, GNC Holdings Inc (NYSE:GNC) and Vitamin Shoppe Inc (NYSE:VSI) will have to continue to charge lower prices to match those of Amazon. Although Bodybuilding.com is slightly costlier than competitors, buyers also get several free supplement samples and other free items when ordering (so the above may not be apples-to-apples in terms of complete value add). Bodybuilding.com also has about 300,000 more “likes” on Facebook Inc (NASDAQ:FB) , indicating its popularity with younger consumers that are highly likely to spend a significant amount of money on supplements now and in the future. Still, price transparency and Amazon’s presence will keep margins in check for the industry, in our view.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Least Expensive Cities in the World

Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!