Vitamin Shoppe to Be 1st Retail IPO Since 2007

Consumers are frugal and unemployment is high. It may not seem like the best time for Vitamin Shoppe, a brick-and-mortar seller of supplements like fish oil and vitamins, to go public.

But VS Holdings Inc., Vitamin Shoppe's parent, has been holding off for more than two years. Many companies that planned initial public offerings in 2007, pulled back as financial markets soured. Now that the stock market and economy appear to be recovering, VS Holdings and other companies are jumping back in. It's the first IPO of a traditional retailer since the December 2007 offering of Titan Machinery Inc., a seller of agricultural and construction equipment.

North Bergen, N.J. Vitamin Shoppe is offering 9.1 million shares, hoping to fetch between $14 and $16 apiece to raise as much as $145.5 million in its IPO expected on Wednesday. Underwriters are being offered nearly 1.4 million shares for overallotments, which could boost total proceeds to $167.4 million.

Vitamin Shoppe's sales are concentrated in specialty supplements such as fish oil, Vitamin D and digestion-enhancing probiotics and sports nutrition products. Retailers' sales tumbled as the economy struggled, but Vitamin Shoppe has "managed to weather the recession pretty well," said Nick Einhorn of Renaissance Capital. The company has steadily opened new stores, and sales at existing locations, a crucial retail metric, have grown than 4 percent every year since 2006.

In the year that ended December 27, 2008, the company booked net income of $8.2 million, up 21 percent, from $6.8 million a year earlier. Sales rose to $601.5 million from $537.9 million.

Still, some investors may cast a wary eye. The bulk of the IPO's proceeds will go to the company's backers, primarily Irving Place Capital Management, previously known as Bear Stearns Merchant Banking, and to pay down debt. Irving Place took Vitamin Shoppe private in 2002. It will retain a 54.5 percent stake after the offering. The company doesn't plan to pay dividends for the forseeable future.