Vitamin Shoppe Industries, Inc. - Company Profile, Information, Business Description, History, Background Information on Vitamin Shoppe Industries, Inc.

4700 Westside Avenue
North Bergen, New Jersey 07047

Company Perspectives:

Since 1977, The Vitamin Shoppe has grown into one of America's leading discount retailers of quality vitamins and nutritional supplements. What began as a single store in New York City has evolved into over 160 stores in 18 states with new grand openings planned every month during 2003. And the addition of our popular monthly catalog plus comprehensive website and online learning center allows The Vitamin Shoppe to reach thousands of visitors daily who are interested in the best products for their healthy lifestyle.

History of Vitamin Shoppe Industries, Inc.

Vitamin Shoppe Industries, Inc. operates a chain of more than 160 stores that sell vitamins, nutritional supplements, herbal products, and related goods. The company also offers its wares through a monthly direct-mail catalog and via the Internet. Vitamin Shoppe stores, which are located in nearly 20 states and the District of Columbia, offer discount prices on more than 8,000 items from over 350 brand names, including the company's own private label, with a wider selection available through mail order. The stores also feature informational computer kiosks and a free lending library of books on vitamins and alternative medicines. In 2002 Vitamin Shoppe Industries was acquired by an equity capital unit of Bear Stearns Cos.

1970s Beginnings

The Vitamin Shoppe was founded in 1977 by Jeffrey Horowitz (then going by the name of Howard) as a retail shop on the corner of 57th Street and Lexington Avenue in Manhattan. The initial outlet's success led Horowitz to open several other locations in New York City, and in 1981 he began publishing a monthly catalog from which consumers could purchase vitamins by mail. By 1987 the chain had grown to nine New York locations, and over the next several years reached 15 stores in the area. Looking for new places to expand, Horowitz subsequently opened stores on Long Island and in Westchester County, New York, and then in Connecticut and New Jersey, where the company established its headquarters in the town of North Bergen.

Much of The Vitamin Shoppe's success was due to Horowitz's strategy of discounting prices by 20 percent or more on each item. The company had also developed its own line of private label goods, which were more profitable because they were not advertised. In addition to vitamins, the firm had by now added herbal products and nutritional bodybuilding supplements, which accounted for up to a quarter of sales. More than 400 different brand names were offered, with as many as 17,000 different products available through the mail. To help customers decide what to buy, the company's stores featured a free lending library of books on vitamins and other health topics. The Vitamin Shoppe also distributed 12 million copies of its direct mail catalog each year, and mail orders accounted for as much as a third of the company's estimated $65 million in annual revenues for 1997. By this time, the chain had grown to 18 stores.

Seeking to increase the rate of expansion, in 1997 Horowitz sought outside financing and sold 70 percent of the company to investment firms J.P. Morgan Partners and FdG Associates. With the new backing, the pace of store openings was ramped up, bringing the firm to a total of 39 locations in 1998.

In April of that year the company launched a Web site from which consumers could order vitamins and supplements by mail. To promote it, The Vitamin Shoppe purchased all of the online advertising space on Time, Inc. New Media's "Ask Dr. Weil" Web site for a year. The cost of blanketing the site, which featured the advice of Dr. Andrew Weil, a well-known alternative medicine exponent, was reportedly more than a million dollars. Viewers of the Dr. Weil "Vitamin Adviser" feature who got a personalized vitamin regime prepared for them would see an on-screen button that linked them directly to Similar sponsorship deals were later cut with other Web sites. For 1998, The Vitamin Shoppe's annual sales leapt to $132 million.

1999 Spin Off

In the summer of 1999, as the Vitamin Shoppe chain neared a total of 60 stores, the company decided to spin off its operation as a separate entity. Former Hearst Corporation HomeArts Network founder Kathryn Creech was named the unit's president and CEO, and in October an initial public offering (IPO) was made on the NASDAQ exchange. Some 4.5 million shares were sold at $11 each, which brought the new company nearly $50 million in funding to advertise the Web site and make improvements to it. More than 80 percent of the shares were held by its parent company, which was officially known as Vitamin Shoppe Industries, Inc., or VSI. In December a second Web site called was also launched which offered information about vitamins and nutritional supplements. Its content was largely licensed from the firm Healthnotes Online.

During the fall and into early 2000, spent heavily on Internet advertising as it sought to bring in new customers. In January CEO Creech departed, leaving Horowitz in charge. Though he had predicted profitability for its first full year as a public company,'s revenues lagged far behind expenditures, and by December 2000 it had incurred net losses of $61.3 million. With its stock now selling for less than fifty cents and close to delisting by the NASDAQ, VSI offered to buy back the outstanding shares for $1 each to reacquire the unit. Earlier, attempts had been made to sell the company alone or in combination with VSI, but there had been no serious offers. While the buy-back was being completed the Web unit's offices were moved from New York City to VSI headquarters in New Jersey, and its staff was cut by more than half, to 37.

In June of 2001 VSI named former Barnes & Noble retail division president Thomas Tolworthy to the posts of president and chief operating officer, with Horowitz retaining the jobs of CEO and chairman. In August the company opened its 95th and 96th stores near Atlanta, Georgia, reflecting its strategy of locating outlets in densely populated areas which had above-average income and education levels. The company was now firmly entrenched on the East Coast of the United States, where it had stores in eleven states plus the District of Columbia. The chain's reach extended all the way south to Florida, where 13 stores had been opened over the previous year. VSI's skills in site selection were exceptional, with no store having ever been closed. One key indicator the firm looked at when adding new locations was the high level of catalog sales found in a particular area. The large number of retirees in Florida, for example, generated significant mail order business, and the new stores that were opened there did well.


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