Third Quarter 2017 Highlights:

• Total Comparable Sales Down 6.6%, down 5.8% excluding hurricane impact

• GAAP loss per share of $3.72, includes impairment charges of $106.0 million

• Launched Sales Driving and Customer Acquisition Initiatives
  • SPARK Auto Delivery – Over 200,000 Subscriptions in First Six Weeks
  • Improving Trends in New Customer Acquisition

Vitamin Shoppe, Inc. (NYSE: VSI), an omni-channel, specialty retailer and manufacturer of nutritional products, today announced preliminary results for the three months ended September 30, 2017. Total net sales in the third quarter were $288.2 million compared to $314.9 million in the same period of the prior year. Reported basic and fully diluted loss per share in third quarter 2017 was $3.72, compared to fully diluted earnings per share of $0.48 in third quarter 2016. Results in third quarter 2017 include the following pre-tax expenses; $105.7 million for intangible asset impairment charges and $3.9 millionassociated with the closure of the New Jersey distribution center and Nutri-Force turnaround, while third quarter 2016 results include approximately $1.4 million of costs related to strategic initiatives. Excluding these items in both periods, adjusted EPS loss for third quarter 2017 was $0.03 and adjusted EPS for third quarter 2016 was $0.50. (Refer to Table 4 at the end of this press release.) In addition, we estimate that the impact from hurricanes in 3Q17 was $0.05 per share.

Commenting on the quarter's results, Colin Watts, Chief Executive Officer of the Vitamin Shoppe stated, "The competitive environment remains elevated and challenging. While we are disappointed with overall third quarter financial results, we are seeing progress when compared with the second quarter. During the third quarter we accelerated the roll-out of several key initiatives focused on customer acquisition, price/value with our new "Shop with Confidence" program and customer retention and replenishment. We are encouraged with the improving trends in customer traffic, new customer acquisition and unit growth. Additionally, customer signups for our innovative SPARK Auto Delivery program are performing ahead of expectations."

Third Quarter 2017 Results

Total sales of $288.2 million in the quarter were 8.5% lower than the same period of the prior year. Total comparable sales were down 6.6% in the quarter, or 5.8% when excluding the impact from hurricanes. Retail comps declined 7.0%, while vitaminshoppe.com comparable sales were down 5.0%. The decrease in comparable sales was due to ongoing challenges with the sports nutrition division and comparing against a sales promotion that was not repeated this year. The Company opened three stores in the quarter. Manufacturing sales to the Vitamin Shoppe increased 43.1%, while third party sales decreased 58.2% from the same period of the prior year as the Company continues to streamline this business.

Cost of goods sold, which includes product, distribution, manufacturing and store occupancy costs, decreased $10.7 million, or 5.0%, to $202.1 million for the three months ended September 30, 2017, compared with $212.8 million for the three months ended September 24, 2016. During the quarter, the Company recorded $2.0 million in expenses related to the closure of the New Jersey distribution center.

Gross profit of $86.1 million was 15.7% lower than $102.1 million in third quarter 2016. Reported gross profit as a percentage of net sales was 29.9% in third quarter 2017, compared to 32.4% in the same period of 2016. Excluding the inventory charge mentioned above, gross profit was $88.0 million in the quarter and the adjusted gross profit as a percentage of sales was 30.5%. The third quarter 2017 year over year decrease was primarily due to deleverage in occupancy and supply chain from lower sales as well as additional investments in pricing and promotions. This was partially offset by improvements in margin from favorable category and private brands mix shifts, lower costs through new vendor partnerships and improvements from Nutri-Force.

Reported selling, general and administrative expenses (SG&A), including operating payroll and related benefits and advertising expense, was $88.5 million for the quarter ended September 30, 2017, compared with $81.7 million for the quarter ended September 24, 2016. SG&A in third quarter 2017 included $2.1 million in turnaround expenses for Nutri-Force and costs associated with closing the New Jersey distribution center. SG&A in third quarter 2016 included $1.4 million related to strategic initiatives. Excluding these items for both periods, SG&A as a percent of revenue was 30.0% in third quarter 2017 and 25.5% in third quarter 2016. This deleveraging is mainly driven by a combination of store payroll, advertising, other store operating costs and increases in corporate costs. (For further information on adjustments see Table 4 at the end of this release.)

During the third quarter the decline in the Company's market capitalization triggered the need for further interim impairment testing. Based on this analysis, a non-cash impairment charge to write down the value of goodwill for the retail reporting unit and tradename was recorded in the amount of $105.7 million.

The overall effective tax rate for the quarter was impacted by goodwill impairment not being deductible in determining taxable income for 2017.

Reported operating loss in third quarter 2017 of $108.3 million compared to operating income of $20.3 million in the same period of the prior year. Adjusted for the items noted in the preceding paragraphs, income from operations was $1.3 million in third quarter 2017 and $21.6 million in third quarter 2016. As a percentage of sales, and adjusted for the items noted above, operating income was 0.5% in third quarter 2017 and 6.9% in third quarter 2016. (See Table 4.)

Reported net loss was $86.2 million for third quarter 2017 compared to net income of $11.4 million in the same period of the prior year. Reported loss per share was $3.72 in third quarter 2017, compared to earnings per share of $0.48 in third quarter 2016. Earnings per share loss, on an adjusted basis (for the items described in Table 4), was $0.03 in third quarter 2017 compared to earnings per share of $0.50 for the third quarter 2016.

Balance Sheet and Cash Flow

Cash and equivalents at September 30, 2017 were $1.9 million. At quarter end, the Company had $12.0 million borrowed on its revolving line of credit and a convertible notes liability with a total face value of $143.8 million. Availability on the revolving line of credit as of September 30, 2017 was $75.2 millionwith the ability to increase by an additional $60 million at the Company's option.

Capital expenditures were $14.9 million in the quarter. Funds were primarily expended on the new distribution center, new and remodeled stores, supply chain, digital and other IT investments as well as additional office space to accommodate closing of the North Bergen facility.

2017 Outlook

Consistent with the guidance measures introduced last quarter, the Company is providing guidance around the key levers that drive the business. Specifically:

• The Company expects full year comparable sales decline rate of negative 7%, which includes the impact from hurricanes.

• Reported full year gross margin rate of 29.5% to 29.8%. This includes charges associated with the Nutri-Force restructuring and North Bergen closure this year. Excluding these charges, full year gross margins of 30.6% to 30.9% (Refer to Table 5 at the end of this press release.).

• Full year SG&A expense of $344 million to $346 million including charges associated with the Nutri-Force restructuring. Excluding these charges, full year SG&A expense of $337 million to $339 million (Refer to Table 5 at the end of this press release.).

• Full year capital expenditures of $50 million, including build out of distribution center in Arizona, IT investments, approximately 15 new stores, 10-15 brand defining store transformations and corporate office expansion in Secaucus to support closure of offices in North Bergen.

Non-GAAP Financial Measures
Adjusted information is non-GAAP financial information. These supplemental non-GAAP measures should not be considered superior to, or a substitute for, and should be considered in conjunction with the GAAP financial measures presented. The Company believes such non-GAAP financial information facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of, or are unrelated to the Company's and our business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. These adjustments are consistent with how management views our businesses. Management uses such non-GAAP financial information in making financial, operating and planning decisions and evaluating the Company's and each business segment's ongoing performance. A reconciliation of adjusted financial information to the most directly comparable financial measures calculated and presented in accordance with GAAP is shown in Tables 4 and 5.

About the Vitamin Shoppe, Inc. (NYSE:VSI) 

Vitamin Shoppe is an omni-channel, specialty retailer and contract manufacturer 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 900 national brands, the Vitamin Shoppe also carries products under The Vitamin Shoppe®, BodyTech®, True Athlete®, MyTrition®, plnt®, ProBioCare®, Next Step® and Betancourt Nutrition® 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.