Vitamin Shoppe, Inc. (NYSE: VSI), an omni-channel, specialty retailer of nutritional products, today announced preliminary results for the three months ended September 29, 2018. Total net sales in the third quarter were $276.6 million compared to $282.4 million in the same period of the prior year.

Reported earnings per share (EPS) from continuing operations in third quarter 2018 was $0.08, compared to a loss per share from continuing operations of $3.60 in the same period of the prior year. Results in third quarter 2018 include $0.6 million pre-tax expenses associated with management realignment and the closure of the New Jersey distribution center and a $1.3 million Federal income tax benefit. Third quarter 2017 results included goodwill and trade name impairment charges totaling $105.7 million pre-tax, and $2.3 million of pre-tax expenses related to the closure of the New Jerseydistribution center. Excluding these special items, EPS from continuing operations was $0.04 in third quarter 2018 flat with third quarter 2017. (Refer to Table 4 at the end of this press release for a reconciliation.)

Commenting on the quarter's results, Sharon Leite, CEO stated, "The team is making progress against the priorities outlined earlier this year. Sales and margins are improving and the organization is steadfast in our ability to improve these metrics further. Progress has also been made with our vendors, which has allowed us to test new categories as well as bring new and exclusive products to market."

"I am delighted to be a part of The Vitamin Shoppe organization. We will be taking transformative, strategic actions to expeditiously turn around the company and position us to drive sustainable growth. The team has made progress as evidenced by our achievements to date, however there is still much more work to do" concluded Ms. Leite.

Third Quarter 2018 Results

Total sales of $276.6 million in the quarter were 2.0% lower than the same period of the prior year. Total comparable sales were down 1.9% in the quarter. As the Company continues to advance its omni-channel initiative, digital comparable net sales, which includes vs.com and Auto Delivery, increased 22.1% in the quarter. The Company opened one store in the quarter and closed three.

Cost of goods sold, which includes product, distribution and store occupancy costs, were $189.9 million, 3.0% lower than the same period of the prior year. Third quarter 2017 included a $2.0 millioncharge associated with closing the New Jersey distribution center.

Gross profit of $86.7 million was flat with the $86.6 million reported in third quarter 2017. Reported gross profit as a percentage of net sales was 31.3% in third quarter 2018, compared to 30.7% in the same period of 2017. Excluding the special items mentioned above, gross profit was $88.6 million in third quarter 2017 and the adjusted gross profit as a percentage of sales was 31.4%. The third quarter 2018 year-over-year decrease was primarily due to deleverage in supply chain and occupancy partially offset by improvements in margin from more favorable pricing and promotions and lower costs through vendor partnerships. (Refer to Table 4 at the end of this press release for a reconciliation.)

Selling, general and administrative expenses (SG&A), including operating payroll and related benefits and advertising expense, was $82.7 million for the quarter ended September 29, 2018, compared with $84.4 million for the quarter ended September 30, 2017. SG&A as a percent of revenue was 29.9% in third quarter 2018 flat with third quarter 2017. On an adjusted basis, SG&A as a percentage of sales was 29.7% compared to 29.8% in third quarter 2017.

Operating income in third quarter 2018 of $3.2 million compared to operating loss of $103.8 million in the same period of the prior year. Third quarters 2018 and 2017 included goodwill, trade name and store impairment charges of $0.7 million and $106.0 million, respectively. Adjusted for the items noted in Table 4 for both third quarters 2018 and 2017, adjusted operating income was $3.9 million in third quarter 2018 compared with an adjusted operating income of $4.2 million in third quarter 2017. The adjusted operating margin was 1.4% in third quarter 2018 compared with 1.5% in the same period of the prior year. (Refer to Table 4 at the end of this press release for a reconciliation.)

Reported net loss was $1.7 million for third quarter 2018 compared to net loss of $86.2 million in the same period of the prior year. Net income from continuing operations was $1.9 million compared to a net loss from continuing operations of $83.4 million in third quarter 2017.

Reported loss per share was $0.07 in third quarter 2018, compared to a loss per share of $3.72 in third quarter 2017. Earnings per share from continuing operations were $0.08 in third quarter 2018 compared to a loss per share from continuing operations of $3.60 in third quarter 2017. Earnings per share from continuing operations on an adjusted basis (for the items described in Table 4) in third quarter 2018 were $0.04 flat with third quarter 2017.

Balance Sheet and Cash Flow

Cash and equivalents at September 29, 2018 were $1.8 million. At quarter end, the Company had a convertible notes liability with a total face value of $68.4 million and nothing borrowed on its revolving line of credit.

Capital expenditures were $9.0 million in the quarter with funds primarily expended on IT and other digital investments.

2018 Outlook

The Company is providing guidance around the key levers that drive the business. Specifically:

• Full year comparable sales of negative low to mid-single digits.
• Reported full year gross margin rate of 31.0% to 31.5%. This includes charges associated with assortment optimization and North Bergen closure this year. Excluding those charges, full year gross margin rate of 31.5% - 32.0%. The Company expects improved product margins offset by higher delivery costs and fixed cost deleverage. (See GAAP reconciliation in Table 5.)
• Reported full year SG&A expense of $344 million to $349 million including charges shown in Table 4. Excluding those charges, SG&A expenses between $340 million and $345 million. (See GAAP reconciliation in Table 5.)
• Combined Federal, State and Local tax rate of 28%. This excludes discrete items estimated at $0.5 million to $1 million.
• Full year capital expenditures of approximately $30 million, and includes the opening of two new stores.

About the Vitamin Shoppe, Inc. (NYSE:VSI) Vitamin Shoppe is an omni-channel, specialty retailer of nutritional products based in Secaucus, New Jersey. In its stores and on its website, the Company carries a comprehensive retail assortment including: vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and beauty aids. In addition to offering products from approximately 700 national brands, the Vitamin Shoppe also carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt®, ProBioCare®, and Next Step® brands. The Vitamin Shoppe conducts business through more than 775 company-operated retail stores under The Vitamin Shoppe and Super Supplements retail banners, and through its website, www.vitaminshoppe.com. Follow the Vitamin Shoppe on Facebook at http://www.facebook.com/THEVITAMINSHOPPE and on Twitter at http://twitter.com/VitaminShoppe.