Vitamin Shoppe Soars on Strong Fourth-Quarter Earnings

Vitamin Shoppe (VSI), the American nutrition retailer, has just released its fourth-quarter report to finish off fiscal 2013. The results have caused Vitamin Shoppe's shares to spike higher in the trading day and investors are hoping the rally can be sustained. Let's take a thorough look at the results from Vitamin Shoppe and determine if we should buy into this rally right now or if we should wait for a better entry point.

Source: Vitamin Shoppe's Instagram

The quarterly results
Vitamin Shoppe released its fourth-quarter report before the market opened on Feb. 25 and it met and exceeded analyst expectations. Here's a breakdown of the report and a year-over-year comparison: 

Vitamin Shoppe's earnings per share increased 15.6% and revenue increased 17.2%, driven by a 4.6% rise in same-store sales. This is the 33rd consecutive quarter which has seen positive same-store sales, a very impressive streak that shows the strength of the brand and the nutrition industry as a whole. E-commerce has continued to be a bright spot for Vitamin Shoppe, with total sales from the operation rising 25.5%; with the inclusion of e-commerce, the company's same-store sales increased 6.2%. In addition, 19 new stores and a distribution center were opened during the quarter, bringing the company's products to more markets that demand them. These were strong results and Vitamin Shoppe went on to point toward another year of growth...

Source:Vitamin Shoppe

The year ahead
In the report, Vitamin Shoppe also affirmed the guidance it previously provided for fiscal 2014. It expects to see comparable-store sales growth in the low-to-mid-single digits and the opening of about 60 new stores. The company did not give a specific earnings or revenue forecast as it does not provide such information, but analysts currently expect earnings per share of about $2.53 on revenue of $1.2 billion. Overall, it was a great quarter for Vitamin Shoppe and the company's shares have reacted by rising over 6% in the day's trading. I believe the rally can be sustained and the stock will slowly rise back toward its 52-week high, which it sits over 30% below today.

The new top dog in the industry?
Vitamin Shoppe's bullish report came just a few short weeks after GNC (GNC), its largest competitor, reported a horrible quarter. GNC released its report on Feb. 13 and it contained the following financial statistics:

GNC's report showed earnings per share increasing 6.4% and revenue rising 8.6%, which missed expectations by large margins. The company noted challenges in the retail environment as the reason for the misses; to make things worse, these challenges have carried over into the first two months of fiscal 2014, which has caused GNC to lower its full-year outlook. All of this caused GNC's shares to tumble nearly 15% on the day of the release and the share price has yet to fully recover. After the strong results from Vitamin Shoppe, it appears GNC's struggles were not caused by an industrywide slowdown. For this reason, I believe Vitamin Shoppe is the stock to own in this industry and investors should steer clear of GNC. If GNC can turn things around in its next quarterly report, then we can reconsider, but it needs to be left in the penalty box for now.

The Foolish bottom line
Vitamin Shoppe has just reported a strong quarter as it overcame the cold weather and extreme conditions that hundreds of its stores faced in the Northeast. The results have sent Vitamin Shoppe's shares more than 6% higher and its outlook on 2014 could help sustain the rally for the remainder of the year. I believe Vitamin Shoppe has become the new top stock in the nutrition retail industry and its stock will slowly rise back toward its previous high of $64.93, which represents immense upside from today's price. Investors looking for exposure to this industry should look to pick up positions immediately and hold onto them for the long-term.