Vitamin Shoppe's IPO Highlights a Retail Sector With Spunk

Vitamin Shoppe's recent IPO is exciting investors. The North Bergen, N.J.-based company, with just more than 400 stores, saw its stock open at $19.50 per share on Wednesday, 15 percent higher than the initial offering of $17 a pop.

In a retail world that seems to concentrate on luxury versus necessity shopping or the next batch of store closings coming down the pipe, this news is refreshing. The fact is, new IPO aside, vitamin-fueled retailing is a well-performing area of retail that is overlooked.

For its part, Vitamin Shoppe posted strong quarterly results in August, its last filing period. Stores open at least a year posted a 4.3 percent increase -- a strong number in this retail environment -- and the company's net income came in at $4.2 million, more than double the same year-ago period. Store growth is on tap too, with 30 to 35 new units planned a year, on top of the 300 it opened since 2003, according to its annual report.

Vitamin Shoppe is not alone in its success. General Nutrition Centers, which is known as the largest specialty vitamin seller with 5,300 U.S. locations, is also performing well in the recession. GNC's second-quarter net income rose 5.6 percent, hitting $18 million during its second quarter, with sales rising slightly as well.

Then there are the large drug store chains, major purveyors of vitamin products and some of the best performers in the retail industry. The two leading chains, CVS and Walgreens, both sell hundreds of different vitamins, and though both outfits obviously sell other items in the front ends of their stores, they consistently outperform much of the rest of the retail industry.

One of the obvious reasons for the success of vitamins is the aging baby boomer population, which is increasingly more health conscious. But a recent Newsweek article makes the interesting assertion that the recession might be fueling a recent interest in vitamins. As more Americans lose health benefits and need to cut costs, more might turn to vitamins to combat potential ailments.

So as with the proliferation of drug stores over the last few years, look for players like Vitamin Shoppe to rapidly expand as well.

Store image by Flickr page user inju.