Price Target Raised On Vitamin Shoppe After Meeting With CFO

JP Morgan has published a research report on the Vitamin Shoppe VSI after meeting with the company COO and CFO Mike Archbold in New York City. In the report, JP Morgan writes "While management didn't comment directly on sales trends, we obtained the sense that business remains firm – recall YTD average comp of 7.3%. Four points: First, favorable industry trends have continued as new customers are being added and former Food, Drug & Mass customers are shifting to vitamin/natural retailers (FDM lost 490 bps of share over the past 9 years). Second, we expect the influx of new/immature stores into the comp base to add roughly 150-200 basis points to the comp in 2010 (and more so in 2011 as VSI accelerates sq. ft. expansion). Third, as a reminder, the 3Q comp was driven by a combination of traffic and ticket (helped by mix/growth in higher-priced sports nutrition and supplement categories). During our meeting, management alluded to (a) the continuation of solid trends within its Healthy Rewards program (87% of sales) and (b) ongoing strength in higher-priced sports nutrition and supplement categories, which leads us to believe that last quarter's trends have likely continued into 4Q. Fourth, all pools of stores continue to comp positive with the oldest pools growing in the low-single digits. In sum, despite a more challenging comparison this quarter (260 bps tougher sequentially, 120 bps tougher on 2-year stack), we feel confident in our new 5.5% estimate." JP Morgan maintains its Overweight rating and has raised the price target from $31 to $35. The Vitamin Shoppe, Inc. closed yesterday at $30.03.