Will Weak Comps Weigh on Vitamin Shoppe's (VSI) Q3 Earnings?

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Vitamin Shoppe, IncVSI is scheduled to release third-quarter 2018 results on Nov 7, before market opens. This renowned specialty retailer of nutritional products has a mixed record of bottom-line surprises in the trailing four quarters. Further, sales surpassed estimates in the trailing three quarters. Let's see how things are shaping up prior to the upcoming quarterly announcement.

Lower Comps Pose a Worry

Vitamin Shoppe has been reporting dismal comparable sales (comps) for a while. In fact, net comps slipped 1.1% and 3.6% during the second and first quarters of 2018, respectively. This was largely due to dismal store performances. Also, during the first quarter, adverse weather conditions negatively impacted comps. We note that lower comps led to a 1.1% and a 3.2% decline in total sales over the trailing two quarters, respectively.

Sadly, management expects comps to decline in low- to mid-single digits in 2018. This mars expectations regarding the upcoming quarterly performance. Incidentally, the Zacks Consensus Estimate for sales for the to-be-reported quarter is currently pegged at $279 million, reflecting a decline of almost 3.2% from the prior-year quarter's tally.

Vitamin Shoppe, Inc Price, Consensus and EPS Surprise

Vitamin Shoppe, Inc Price, Consensus and EPS Surprise | Vitamin Shoppe, Inc Quote

Dismal Gross Profit Trend & Escalating Costs

The company's gross profits declined 3.2% and 5.9% during the second and first quarters of 2018, respectively. Deleverage in supply chain due to channel shifts and lower sales have been depressing the company's gross profit performance. Additionally, rising promotional and shipping costs have been deterrent for this metric. To top this, the company has also been witnessing escalating SG&A expenses, mainly stemming from deleverage in store payroll, elevated store operating expenses and higher healthcare costs.

Persistence of such costs will likely impede the company's bottom-line performance in the upcoming quarterly release. Incidentally, the consensus mark for earnings for the third quarter is currently pegged at loss of 4 cents compared to a loss of 3 cents delivered in the year-ago quarter.

Will Efforts Aid?

We note that Vitamin Shoppe is on track with augmenting its digital capabilities, which has been performing well, lately. In fact, digital comps improved 36.9% and 20.7% in the preceding two quarters, respectively. To continue this momentum, the company has been investing in making improvements to its website, along with enhancing Buy Online Pickup In-Store facilities. Additionally, the company has been gaining from customer acquisitions. It has also been focusing on improving product assortments through innovation.

That said, it is to be seen if such efforts can aid the company's performance in the upcoming earnings announcement, and provide cushion to the aforementioned headwinds.

What does the Zacks Model Predict?

Our proven model doesn't show that Vitamin Shoppe can beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

Although Vitamin Shoppe currently carries a Zacks Rank #3, its Earnings ESP of 0.00% reduces chances of an earnings beat.  You can see the complete list of today's Zacks #1 Rank stocks here .

Stocks Poised to Beat Earnings Estimates

Here are a few companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat:

Kohl's Corporation KSS has an Earnings ESP of +0.35% and a Zacks Rank #2.

L Brands, Inc. LB has an Earnings ESP of +10.00% and a Zacks Rank #2.

Zumiez Inc. ZUMZ has an Earnings ESP of +0.41% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: VSI , ZUMZ , LB , KSS

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