NBTY's sales dip no reflection of company health

Despite New York-based supplement maker NBTY announcing lower sales
for two of its brands, namely Puritan's Pride and Vitamin World,
for the two-month period ending 31 May 2004, analysts refuse to see
the results as anything more than a slight blip, writes Philippa

Sales from Puritan's Pride direct response and e-commerce operations decreased by 12 percent to $38 million from $43 million for the comparable two-month period a year ago. Vitamin World retail sales decreased by one percent compared to 2003.

"We are disappointed by the decline in sales results in two of our operations and expect this slowdown to continue at least through the end of June,"​ said Scott Rudolph, chairman and CEO of NBTY​. "While this slowdown in sales will effect our overall results for the fiscal third quarter of 2004, we remain optimistic for the long-term."

Notwithstanding this announcement rating agencies remained upbeat about the firm.

"This is not a serious announcement,"​ said Martin Kountitz, S&P credit analyst. "It represents a shift in sales to mass market customers and this is a feature of the vitamin industry as a whole."

He did not believe these losses would have a significant impact on the third quarter results.

"I believe sales will continue to increase, especially in the wholesale sector,"​ added Kountitz. "The vitamin and supplement sector as a whole has a good demographic."

Meanwhile, Moody's has rated NBTY's new $224.4 million senior secured term loan C at Ba2 and affirmed the company's other ratings, with the overall outlook for the firm remaining stable.

Moody's explained that the Ba2 rating for the senior secured loan reflects the debt-financed acquisition of Rexall Sundown last summer plus several other smaller, more recent acquisitions that have resulted in a modest increase in leverage and deterioration in margins coupled with the strong likelihood that the company will continue to make additional acquisitions.

However, Margery Fischbein, senior credit officer at Moody's confirmed to NutraIngredientsUSA.com​ that although the outlook for the company is stable and Rexall has been "very successfully intergrated"​, "the ratings could be lowered if the operating performance deteriorates."

NBTY markets approximately 1500 products under several brands, including Nature's Bounty, Vitamin World and Holland and Barrett and has performed strongly in past months. In January the company reported record first quarter profits with the recently acquired Rexall helping to double the sales growth achieved in other units. Last year NBTY became the first vitamin supplement business to transfer from the Nasdaq to New York Stock Exchange

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