Vitamin Shoppe (VSI) Stock Tumbles, DoJ to Announce Actions Against Supplements

Vitamin Shoppe (VSI) stock is slumping in afternoon trading on Tuesday, ahead of an announcement in which the Department of Justice will declare actions related to dietary supplements.
By Rachel Graf ,

NEW YORK (TheStreet) -- Vitamin Shoppe (VSI) - Get Report stock is down by 6.48% to $27.73 on heavy volume in afternoon trading on Tuesday, amid reports that federal agencies will announce actions against dietary supplements later this afternoon. 

Based in Secaucus, NJ, Vitamin Shoppe is a multi-channel specialty retailer and contract manufacturer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products.

Federal agencies are expected to announce criminal and civil actions against dietary supplements' advertising and sales practices at a 3:30 p.m. ET press conference today.

No specific companies have been named in relation to the charges, but shares of dietary supplement makers GNC and Herbalife (HLF) are down as well this afternoon. 

The agencies involved in the investigation include the Department of Justice, Food and Drug Administration, Federal Trade Commission, Department of Defense, Anti-Doping Agency and U.S. Postal Inspection ServiceBloomberg reports. 

About 1.47 million shares of Vitamin Shoppe have been traded so far today, well above the company's average trading volume of roughly 394,144 shares. 

Separately, TheStreet Ratings team rates VITAMIN SHOPPE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate VITAMIN SHOPPE INC (VSI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 15.6% when compared to the same quarter one year prior, going from $12.20 million to $14.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VITAMIN SHOPPE INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VITAMIN SHOPPE INC reported lower earnings of $2.00 versus $2.18 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $2.00).
  • VSI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.44%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, VITAMIN SHOPPE INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: VSI

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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