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

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!