Gulp: NBTY posts sales drop, plunge in net income

NBTY President and CEO Steve Cahillane.

They might wish they’d sold Vitamin World a little sooner.

Just one week after announcing it was selling its retail business to a subsidiary of New York City investment group Centre Lane Partners, Ronkonkoma-based dietary supplement manufacturer NBTY Inc. on Wednesday reported an 89.4 percent reduction in net income for the quarter ended Dec. 31, the first quarter of the company’s 2016 fiscal year.

NBTY, launched in 1971 as Nature’s Bounty Inc., claimed net income of $3.8 million for the quarter, down nearly 90 percent from the $35.91 million the company reported in its prior fiscal first quarter.

Net sales also fell in the quarter, down to $801.99 million, a 2.8 percent drop from the $825.77 million reported in 1Q FY2015.

Net sales from the global Vitamin World segment were among the hardest hit, down 8.1 percent year-over-year to $49.55 million in 1Q Fiscal 2016.

Among other income-eating culprits, the health-products distributor – whose brands include Nature’s Bounty, Ester-C, Balance Bar and, until the roughly $25 million sale to Centre Lane Partners closes later this month, Bohemia-based Vitamin World – blamed the sharp decline on a weakening U.S. dollar against foreign currencies.

The company also cited November’s devastating terrorist attack in Paris and the ensuing security lockdown in Belgium, which conspired to close several European retail outlets that carry NBTY products.

Asset disposal and restructuring charges associated with the Vitamin World sale also contributed to the bottom-line decline, the company said.

In a conference call with investors Wednesday, NBTY President and CEO Steve Cahillane said the company was displeased – though not entirely surprised – by its first-quarter performance.

“Our goal is to grow year over year, and undoubtedly, we are not satisfied with a performance that does not achieve that goal,” Cahillane said. “But as we signaled last quarter, this performance was broadly in line with our strategy.”

That strategy revolves primarily around the Vitamin World sale, which is valued at $25 million but involves many short-term expenses for NBTY, including some relatively steep charges.

Among the costs NBTY didn’t have at the end of its Fiscal 2015 first quarter – costs that dramatically skewed the company’s 1Q Fiscal 2016 numbers – were nearly $5.5 million in “facility restricting charges” and over $11.6 million related to the “impairment of Vitamin World assets,” according to the company’s SEC filings.

Cahillane also referenced several “one-time events” weakening his company’s European markets, including an unusually warm winter leading to extensive flooding in Northern England. Like the Nov. 13 terrorist attacks that killed 130 people in the French capital and its Saint-Denis suburb, the odd European winter “negatively influenced consumer shopping patterns,” Cahillane said.

“We continue to feel the negative effect of the weakening dollar on our international business,” he added.

But the most dramatic hits to the company’s bottom line were related to the Vitamin World sale. Cahillane stressed that those expenses were anticipated, however, and said his company remains “very pleased” with the Centre Lane Partners deal.

“We strongly believe it’s the right decision for the future success of Vitamin World as a retail business,” he said, adding the sale would allow NBTY to “exit the private-label business and invest in our core brands.”

It will also energize NBTY’s “laser-focus” on e-commerce, added the CEO, who referenced “relentless focus on a long-term vision” that incudes “building our branded businesses and strengthening our overall portfolio.”