If you mention the topic of health supplements and stocks, the first thing that comes to mind is likely the recent melodrama that is the fight for control of Herbalife (NYSE: HLF). And while the internecine machinations over that supplement seller should, I think, be avoided by traders, there’s another supplement company quietly increasing revenue and profits that traders should embraced—and that company is Vitamin Shoppe (NYSE: VSI).
Now, in the interest of full disclosure, I am an avid customer of this supplement retailer. In fact, I spend way more money there than I’d care to admit, and that’s because I am one of the millions of Americans addicted to health and fitness. I’m also one of those aging baby boomers who want to continue looking as young as I did in my 20s. Hey, I still get asked frequently for my I.D. while buying adult beverages at stores and restaurants, and I attribute that in part to the battery of anti-aging supplements I get from the Vitamin Shoppe.
The store carries just about everything one needs to keep the body and mind sharp, including vitamins, protein powders, performance supplements, diet and weight loss products, natural hair and skin care products, and even natural pet care products.
The company offers a wide variety of supplement brands, including its own store-branded supplements which tend to be very attractively priced. Vitamin Shoppe also offers customers one of the best rewards plans of any retailer I know of, which gives plenty of incentive to spend at the store, and then to keep spending on the store.
Yes, I’m a loyal Vitamin Shoppe customer, but I’m not alone.
The company obviously is doing something right with more than just this writer, as it has posted double-digit percentage sales growth every quarter since it went public in October 2009.
Tomorrow morning, (Tuesday, Feb. 26), we will find out how Vitamin Shoppe performed in the fourth quarter, as the company is scheduled to report results before the opening bell. The expectation is for a 5% increase in EPS over the same quarter last year to 40 cents. The top line estimate is for a 4% sales increase to $223.88 million.
In a recent article in Investor’s Business Daily, Piper Jaffray analyst Sean Naughton explained that there was an extra week in Vitamin Shoppe’s Q4, 2011 results, so if you exclude that extra week, Vitamin Shoppe’s fourth-quarter sales will be up 11% to 12%. “Excluding the impact of the extra week in 2011, which accounted for 7 cents a share, fourth-quarter 2012 earnings should be up 30% vs. a year earlier,” Naughton said.
Other factors that could affect Vitamin Shoppe’s Q4 results are an alteration in its buy one, get one, or BOGO promotion, from last year. The company also had a significant number of stores negatively affected by Hurricane Sandy. Still, I am expecting a strong earnings beat by VSI, and that would give this stock a robust rise during the next several months.
I think VSI could climb a healthy 15% over the next two-to-three months, which would put the shares around $73.47 from the current price. Of course, if the earnings Tuesday morning disappoint, then we could see the stock fall sharply. That’s why any position entered into before the earnings should be accompanied by a tight, 8% stop-loss to protect your downside exposure.
At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.