I'm as sick as the stocks I trash in this weekly column.

It's no big deal. I'm just going through a modest cold that happens to be hogtied to a nasty sore throat. It's not contagious -- at least not on your end of this article.

I'm doing my part to get healthy, and it started this morning with an acai berry smoothie loaded with antioxidants and a vitamin boost. Maybe I should heed my mother's advice and hit the vitamin bottle before I get sick next time.

Back to business: I do slam a company here every week, but I don't even begin to rip into a stock unless I have three companies that I think would be superior replacements. And the physical checkup was intentional, since it fits right into the stock I'm bashing.

Who gets tossed out this week? Come on down, Vitacost.com (Nasdaq: VITC).

Vitamin F
When Vitacost went public seven months ago, I had my doubts about an online retailer in the cutthroat vitamin game. But there were three things that drew me to embrace Vitacost as a debutante.

  • The e-tailer was growing quickly, with sales up 36% through the first six months of 2009.
  • Vitacost was quite profitable -- and growing.
  • Despite my fears of competitive pricing, roughly a third of its sales came from its proprietary Nutraceutical Sciences Institute (NSI) products, so it had an exclusive hook into the masses.

Well, let's jump all the way to this week's financial update.

It all started out as an acceptable logistical slip. There was a manufacturing issue at the plant, forcing $1 million to $1.2 million in back orders from being recognized in the first quarter to the current quarter. Earnings would also take a hit in the first quarter.

That's cool. It's all a zero-sum game in the end, right?

Nope. The company is also talking down its guidance for all of 2010. It now sees $235 million to $245 million in net revenue, $10 million below its original outlook. Whoa! Where did that come from?

Vitacost is talking down its earnings outlook, too, in part because of a product-mix shift away from the high-margin proprietary products that intrigued me in the first place. Vitacost is now expecting to earn between $0.40 and $0.50 a share this year.

That's less than the charge-adjusted $0.52 a share it rang up a year ago. Vitacost was trading above its $12 IPO before the grim report. It's a cardinal rule for IPOs to perform well during their first few quarters as public companies. Financial hiccups early on can scare away investors who start to believe that going public was just an exit strategy on the company's behalf.

Vitacost seemed to be doing just fine, but this week's bombshell changes the thesis. The e-tailer is going to win back Wall Street's faith, and that's the kind of stuff that you can't get in a bottle.

Good news
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's go over the three fill-ins.

  • Drugstore.com (Nasdaq: DRCM): It may seem like heresy to replace a profitable online pill pusher with a pioneer that won't turn an annual profit until this year, but there's more to Drugstore.com than meets the bottom line. For starters, the company has generated free cash flow for a couple of years now. It's growing nicely. Net sales from repeat customers made up 74% during last year's fourth quarter, so there's a respectable degree of shopper loyalty. It has also made recent e-commerce acquisitions in skin care and eye care that will help diversify and expand its reach. If investors are looking for a more niche-specific play, PetMed Express (Nasdaq: PETS) has thrived in mailing out pet treatments. It has topped Wall Street's profit estimates in 11 of the past 12 quarters.
  • Nepstar (NYSE: NPD): Stateside drugstores don't pack a whole lot of sizzle, even though Rite Aid (NYSE: RAD) shares have popped sevenfold since bottoming out 13 months ago. Let's head out to China, where Nepstar runs a popular 2,500-unit drugstore chain. Comps rose by a sharp 10.5% in its latest quarter, and the stock has a juicy 3.8% dividend yield. China takes its remedies seriously. Remember when Baidu (Nasdaq: BIDU) agreed to boot unlicensed medical advertisers from its site in late 2008? It probably didn't seem like too big an industry, until China's leading search engine revealed that it would take a 10% to 15% top-line hit.
  • OpenTable (Nasdaq: OPEN): Online restaurant reservations have little in common with Web-based vitamin shops, but it's here as an example of a 2009 IPO that did come through for its investors. Shares of OpenTable hit a new all-time high today, and rightfully so. It has blown past Wall Street estimates in each of its first three quarters as a public company.

Sorry, Vitacost, but there's nothing wrong with a second, third, and fourth opinion.