NBTY Q1: Strong brand performance offsets contract manufacturing exit

By Stephen Daniells contact

- Last updated on GMT

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Supplement giant NBTY has reported strong sales for many of its flagship brands it its Q1 earnings, and its CEO has dismissed media reports that it will sell its Holland & Barrett retail group.

NBTY is a leading manufacturer of dietary supplements in the US which it sells under the Pure Protein, Nature’s Bounty, Solgar brands and others. It also operates dietary supplement retail locations under Holland & Barrett International, which has significant operations in Europe and is the largest vitamin retailer in the UK. The company also has a significant direct to consumer business under the Puritan Pride name.

The company recently announced the sale of its Vitamin World retail group​, and last year announced it was exiting the contract manufacturing category because it was no longer strategic​.

Brands

As reported last year by NutraIngredients-USA​, top of the company’s list of five key strategies for 2016 is the brands and these performed well during the first quarter. Speaking with investors during their first quarter webcast, Steve Callihane, CEO of NBTY, said that Nature’s Bounty grew more than 14% in the US in Q1. “This is faster than the category and almost three times faster than their primary competitor as measured by AC Nielsen,”​ he said.

The company’s Hair, Skin & Nails brand also reported impressive growth of over 32% in the first quarter, linked to the advertising campaign run by the company. The company is hoping for similar success for its Osteo Bi-Flex brand as a new ad campaign was launched in January for the leading joint health brand.

The sports and active nutrition category also had successes, said Callihane, with the Pure Protein brand growing by more than 11% in Q1, led by Pure Protein Bars, which were up 18%.

Hair Skin and Nails NBTY
Image: NBTY

“Solgar continues to perform exceptionally well with 20% growth for Q1 and achieved its 21st​ consecutive quarter of growth,” ​he said. These increases were led by Solgar #7 Joint Support product and the Full Spectrum Curcumin product, he added. “Expect upcoming product innovation to drive growth in the second half of the year,”​ said Callihane.

But the overall net sales for the consumer goods group decreased by 4.5% to give net sales of $472.4 million, said Dipak Golechha, NBTY’s CFO, and this was linked to exiting contract manufacturing and de-emphasizing private label manufacturing.

Consolidated EBITDA for the company was $120.7 million, added Golechha, with a 15% EBITDA margin but a 13% decrease since last year.

Holland & Barrett

Holland & Barrett International has been a source of continued growth for NBTY and the first quarter was no different with its 27th​ consecutive quarter of same stores sales growth and increased market share. Net sales increased by 2.3% to $218.5 million, and 24 new stores (including franchises) opened while seven closed giving a net increase of 17 stores.

The retailer had to deal with “unexpected headwinds”, said Callihane, as the European retail sector faced several one-time events like the Paris terrorist attacks, unseasonably warm weather, and floods in Northern England.

Callihane also dismissed media reports in British newspaper The Telegraph​ last month​, which claimed that Holland & Barrett was “gearing up for a £1bn sale this year”.

We have no plans to divest any of our businesses,” ​he told analysts. “Holland & Barrett is a core brand for us.”

New initiatives

The company also reported costs associated with its soon-to-be-launched Designed to Value​ initiative, which is a shopper-preferred assortment strategy with the most popular products and sizes based on consumer insights, explained Callihane.

“Overall, there continues to be an outstanding business marketplace and we are well-positioned to deliver a solid year,”​ he said.

Related topics: Suppliers

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