NBTY's Puritan's Pride mail order and e-commerce business fared well despite recent consumer anxiety about the mail, CFO Harvey Kamil told analysts during a fiscal year-end conference call Nov. 7.

"Most of our consumers - since this is a recurring business - they recognize the catalog and they know who Puritan's Pride is. We don't do any blind mailings with no address....We've always stated who we are and it's just basic catalogs," Kamil said.

Although the firm's direct response business saw a $3.1 mil. dip in September sales from the prior-year period, Kamil maintained the decline was due to backlogged sales and shipments.

"Backlog ran around $4 mil.," he said, noting October sales spiked 38% from last year. "We're pretty well back on track, but for November, we still have a backlog," he said.

For the fourth quarter ended Sept. 30, NBTY's direct response sector saw sales decrease 7% to $44 mil., while revenues for the 2001 fiscal year dropped 5.7% to $172 mil.

Despite the downturn, Kamil said the company remains "the leader in nutritional supplement direct response/ e-commerce sales," having fully integrated the NatureSmart mail order operation into its business. NBTY acquired NatureSmart from Whole Foods Market in May (¹ Also see "NBTY" - Pink Sheet, 14 May, 2001., In Brief).

Other segments of the vertically integrated supplement marketer also experienced limited repercussions from the Sept. 11 attacks.

Revenues for the firm's wholesale and Holland & Barrett divisions increased sizably in October, posting gains of 66% and 36%, respectively. Although Vitamin World sales fell 6.5% for the month, Kamil attributed the loss to an aggressive promotional campaign last October.

Overall, NBTY reported sales trailed down in the first few weeks following Sept. 11, but rebounded in October, rising 32% over the year-ago month.

UK-based Holland & Barrett revenue jumped 13% to $64 mil. in the fourth quarter and reached $263 mil. for the year, up 5.7%.

Vitamin World garnered $46 mil. in sales for the quarter, a 13% rise from the year-ago period. Year-end revenues were up 17.4% to $175 mil.

The retail chain still has not achieved profitability, and NBTY expects it will not break even for another three years. Due to the industry-wide downturn, the firm said it would scale back new store openings to 20 for 2002, compared to the 344 Vitamin World outlets opened in the past three years.

NBTY's Nature's Bounty wholesale operation generated the most pronounced growth, largely due to recent acquisitions. The division "continues to gain market share and has become the preferred supplier to the mass market," CEO Scott Rudolph reported.

"Most of the competition that we have in the market [is] extremely weak right now," he noted, citing Leiner Health Products, which has announced a financial restructuring plan in preparation for a Chapter 11 bankruptcy filing in early 2002 (see ² Also see "Leiner Chapter 11 Plan To Include New Capital, Credit, Debt Restructuring" - Pink Sheet, 12 November, 2001.).

For the fiscal year, wholesale revenues grew 40% to $197 mil., while sales for the quarter skyrocketed 74% to $57 mil. NBTY attributed over half of the sales gains to the NatureSmart and Global Health Sciences acquisitions last May.

GHS was purchased after the contract manufacturer lost its primary customer, Herbalife International, whose business accounted for roughly half of GHS sales (³ Also see "NBTY Global Health Sciences $40 Mil. Acquisition Approval Pending" - Pink Sheet, 30 April, 2001., p. 13). NBTY reported that integration of GHS is taking longer than anticipated, but estimated operating losses would decrease significantly in the next three to six months.

NBTY had "some Herbalife business for the quarter" and is seeking to "build a relationship [with Herbalife] closer than it is now," Rudolph added.

Overall, the firm generated net sales of $211 mil. for the fourth quarter, up 19% over last year, while year-end sales totaled $807 mil., a 12% increase. Without the NatureSmart and GHS sales, NBTY would have posted a 9% gain.

Net income for the quarter slid 23% to $10 mil., primarily due to the integration of GHS and NatureSmart. For the year, NBTY amassed earnings of $42 mil., down 19% from 2000.

NBTY Direct Response Business Unaffected By Mail Concerns

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