VSI
#Morning, <UNK>.
I don't think it going to be a meaningful addition that's going to offset.
I do think we are assuming on our private brand area overall that we have already amped up that team.
We have some plans to add some additional critical positions.
Some of this really is ---+ we've been able to grow our pipeline of new product development quite markedly on a year-to-date basis.
And really what we are focusing our time and effort on is the balance between internal resources and in some cases external resources to help us get the product development done so that then we can run those products through Nutri-Force and in some cases through some external, third party manufacturers.
We are very, very pleased by the ramp-up we're seeing on the new product development on that front.
But a lot of that really had been balancing out the resources that were down in Miami Lakes at the Nutri-Force facility with some of the resources that we actually had in product development up here in New Jersey.
And we think we are getting very close to getting the right mix
By today you mean in the third quarter, <UNK>.
It's a little hard to tell because really a lot of the promotional activity happens in bursts by key players.
It's hard to say whether it's really ramped down or ramped up.
I would say it's a mix.
I haven't seen quite as aggressive BOGO activity that we had seen in second quarter.
Obviously, in July there were some big online activity that we all know about.
But I would say in balance.
It's fair to moderate.
Let's put it that way.
Yes, it is difficult to get an exact number but, based on the different metrics, we believe that the benefit to comp was a little over 1.5%.
Let me correct the fact.
I didn't mean to imply that the redemptions all came at the end of the quarter.
I meant to imply that we were actually finding, given that we are now going to a quarterly redemption cycle, new ways of improving frequency in our stores.
We actually saw the bulk of the redemption happen in the month that the certificates were delivered, which is very much in line with what we've seen on our annual certificates historically.
So when we deliver these certificates to the market they are the equivalent cash in the hands of our customers.
And we see them often either jump online or come into stores in order to make sure they take advantage of redemption.
In terms of cadence of the overall comps for the quarter was variable.
It is hard to talk one way or another on it.
It bounced around a little bit in terms of how the quarter went.
Sure.
Hello, <UNK>.
I guess what I would start to say is, what we are forecasting for the balance of this year was in line with the way that we saw the business performing prior to the amp up in promotional activity that we did in second quarter.
So I think what we are doing is, we're looking at the underlying trend.
We're basically separating out what we felt was the incremental pop that we saw from the promotions that we did and we are assuming a return to that level.
In terms of competitive situation, I'm not sure I would characterize, <UNK>, the way you would characterize it.
I think we are seeing the overall market realizing that there had been a level of promotional activity that might have been excessive.
And I think everyone is currently looking at it, obviously everybody is going to fight for a share of the customer's wallet, and we don't expect that will necessarily decrease markedly.
But I think right now we hope that it will be a more normalized approach for us.
Certainly, we are going to be disciplined in the way that we are going about doing promotions and pricing ourselves.
Sure.
Actually we just got back from our annual product education conference and during that conference we bring together almost a thousand of our field teams, all of our store managers and up in the field as well as most of our major vendors come together.
So both Jason and I got a chance to meet with a lot of the senior vendors that were on the ground there.
I was actually really pleased, back to your point about exclusives, we are starting to negotiate some exclusive line extensions with key competitors.
I think when we look at the innovation that we see in front of us, we really want ---+ we have had the historical reputation and we want to continue to own the reputation of being the retailer of choice to really launch new innovation this category.
We think that's where specialty retailers particularly shine and we know our health enthusiasts really enjoy and do a great job of taking new innovation, getting it into the hands of customers, getting them excited and really converting.
So we are going to look for ways to be able to maximize that point of difference as we move forward and we are working closely with our vendor partners to make sure that we can get our fair share, if not better, our fair share of the pie of the new innovation as it comes forward.
<UNK>, first of all those categories have been an area over the last couple of years where there has been a bit more activity than in the straight-up whey protein area.
And so I think what we are seeing now is that there is a lot of both current incumbents that are recognizing that a way to diversify their overall line is to focus a little less on the straight up sports protein and start to think about the full system of pre and post.
It's a natural opportunity for the customers who, obviously many of them are on a regimen where they use protein, and then they are looking for things to help their workout on the pre- and post-basis.
We are also doing ---+ I would point particularly to our Betancourt business, which is one that we acquired when we acquired Nutri-Force.
That is a very strong player in that area but we are also, as we have gone through trade shows, we've seen in the last several months that there is a lot of activity in that particular area.
So we're very pleased by that and, as I mentioned, we're planning on putting a lot of focus on that in our stores as we move forward.
Yes, great question.
So first of all, I don't think we have seen emerge some type of breakthrough ingredient that hasn't been in the market before.
On the other hand, I will say that there is a lot of R&D work that is going on in general in the sports nutrition category.
And we are seeing more creative formulations, some new flavoring, some new overall systems are coming forward that are pretty exciting and we think will please the customer as they hit the market.
In terms of separating the wheat from the chaff if you will, around what was promotional versus what was innovation driven or tying back to our reinvention activities, we went into the quarter, and we will be going into every quarter, with very clear success metrics for our new initiatives.
And we track those, not just in an overall comp level, but we track them very specifically in terms of uptake in the database.
In some cases where it's appropriate, we're looking at incrementality in terms of first use versus repeat.
And what we are seeing is that we are ---+ I wouldn't necessarily say it's about attracting new customers but I feel very confident that several of our new initiatives are clearly doing a better job of winning share of wallet.
I want to remind us that the whole point of this reinvention was really a balancing act.
It wasn't just, let's try to bring in a whole bunch of new customers into the category.
Part of it was, how do we win more than our fair share for the current customers that shop at the Vitamin Shoppe.
And we think we are doing both.
<UNK>, I will comment on what is going on with the initiative and expand on my comment a little bit on what we are expecting out of it.
But I would start with the cadence on BOPIS was, we turned it on for the first time in February, we started with a limited number of SKUs that was available, and in order to make sure the customer experience was positive, make sure that our systems can handle it.
We then steadily ramped up the number of SKUs that were available so that it's now our complete set of retail SKUs that are available to buy on and pick up in store.
And that is across our entire fleet because, as you know, we are 100% Company-owned so we really don't care whatever store you go into.
We are perfectly happy if you go into any of our stores in order to get the benefit.
In terms of lift, I would say we have been happy and very surprised by the number of people who have taken advantage of the BOPIS capability.
I think largely our qualitative research would suggest that the reason for that is our customer, our target customer, is used to BOPIS in other retailers.
And in some ways we are a little late to the party in terms of BOPIS capabilities, but it is something unique in this particular category.
And I think for some of our products, whether it's a refrigerated product or whether it's a product where a customer wants to get quick pick up, the convenience of BOPIS and the chance to interact with our health enthusiast when they come into the store, is a pretty positive overall experience.
So for a customer it is a win-win as they go forward.
In terms of comp expectations, it's a little tough to judge.
I will offer to <UNK>.
I will give my thoughts and <UNK> might jump on them but we ---+ right now it is achieving our expectations.
We are in the process of teasing out exactly what it's contributing in terms of incremental comp lift.
Right now what we do know is, we know that the orders that are coming through BOPIS are bigger than the typical order that we get in the retail.
We also know that largely the people that are taking advantage of BOPIS are our current customer base.
It's not necessarily bringing in new customers.
It's a higher degree of convenience and really that is what it is designed to do.
We are testing some promotional approaches to BOPIS to see if there's ways for us to be able to further leverage it.
We think it's a opportunity for us.
It's another area or lever, if you will, around driving more omnichannel relationships with Vitamin Shoppe.
That kind of relationship, we know if we drive that, we ultimately will win in terms of the business build.
Anything you would add, <UNK>.
Yes, I'm good with everything you say.
And I would just say, in terms of the math, if you were to assume that all of BOPIS is incremental, that would suggest another less than 50 basis points of comp.
Probably close to that, but not quite 50 basis points.
But again, that is not all incremental.
We do not have a mobile app.
So BOPIS is available right now solely through our website.
We have talked about the fact that our intention is to move towards a mobile app later on this year or early 2017.
Yes.
We should be in that positive territory, as I said in our prepared remarks, we are expecting to spend approximately $10 million in reinvention costs and as we look at that, we believe that approximately $6 million of that is ongoing.
As we look at the cost savings that we've identified to date, it exceeds that.
So we believe that next year it will be a net contributor.
I think it's a combination.
Yes, we announced as part of our reinvention that we announced first quarter that we were going to be doing a more aggressive category management approach.
In some cases that is a SKU rationalization and in some cases that is taking our best brands and giving them a bigger presence within our stores.
We are also introducing, both digitally as well as in our stores, several new marketing capabilities.
And so really the discussion that we had with the market, with our vendors as recently as a couple weeks ago was, we want to be a retailer where they can invest more in.
And we think that we are giving them more opportunity to build their business with us.
It's great to have Jason on board because this has really been Jason's bread and butter career-wise, both at Dollar Tree as well as prior at Walmart.
And so Jason is going to be starting to take up the baton of really driving a lot of that initiative in the coming weeks and months.
Really, there is a lot of work that we are doing around store performance and some of that, quite frankly, is not just about cost reduction.
It includes taking a hard look at things like incentives, which we plan to modify as we continue to work through our reinvention initiatives.
It also does include looking at things like labor scheduling and the like, so there are some savings embedded within the stores and there's some savings as well as in incorporate.
<UNK>, let's just clarify, when we talked about that 50/50 split, you are talking about the incremental $10 million that we are talking on this call.
That's not the characteristic of the total $22.5 million cumulative.
But it is fair to say that, and not surprisingly frankly, as we have done work, particularly with AlixPartners, to take a look quantitatively at areas of efficiency, both at headquarters, but in particular in the store area.
We've been able to identify some ways that we can go about servicing our stores and setting our stores up to service our customers in a more efficient way without taking away from the critically important job that the health enthusiasts have of a building a relationship with our customers.
You are welcome.
We would expect ---+ we would continue to expect a benefit from loyalty.
Probably not to the same degree as in the second quarter but we had talked previously about that 1% lift.
I would expect that we would see at least that in the third and fourth quarter.
As we look at comps for Q3 versus Q4, I would expect that it's likely we would get a little bit more of a lift in Q4.
Especially, as we look at this on a two-year staff-basis, we're cycling a little bit easier comps in the fourth quarter.
So we are baking some of that into our forecast.
<UNK>, we also as we been having the conversation with our vendors, we have engaged them on improved promotional cadence for their business and I think we are counting on the fact that fourth quarter is going to be a strong quarter from that side as well with them.
Yes, sorry, go ahead.
Good question.
So we ---+ it's a quarterly approach so it's the first month of each quarter, so it's April, it's July, it will be in October.
And each ---+ and these certificates have a expiration that is a three-month expiration on them.
So they get used up in the quarter as well.
There's some bleed over but not very much.
So you will see three hits basically this year in the calendar year.
As <UNK> pointed out, it is still very, very strong.
We are not as aggressively promoting it in the third and fourth quarter as we did when we launched it in second quarter.
That was by design because basically the key to this is to get customers into the habit of shifting from an annual expectation to more of a quarterly expectation.
So the idea in second quarter was, get as many folks as possible to get a chance to enjoy a quarterly certificate so that then when we deliver in July as well as in October, we don't have to promote it as aggressively.
We continue to see strong redemptions on the certificates.
Yes.
So, yes, we do expect that the return will be higher.
As we look at the margins, we expect that it will be pretty neutral for the most part.
We did note that in the second quarter, some of the year-over-year decline did relate to loyalty.
And that was mainly because we aggressively promoted, and in some cases, we increased the value with some of our customers.
And as we evaluate each of these different initiatives, we are going to not repeat some of them.
So as we look at this over the long-term, it definitely has a return.
It had a return in the second quarter, just a little bit of a hit the margin.
But if I look at gross margin dollar benefit, in the second quarter it was definitely accretive.
Great question, <UNK>.
So Jason has only been on board three weeks but our goal when we were out recruiting for this position was to find somebody who had strong history of working for top retailers and, frankly, a strong background in transformational management of retail experience.
Jason brings with him, whether it was at Sam's, at Walmart or at Family Dollar or Dollar Tree, a track record of really delivering on the businesses he has had responsibility for.
He is going to have our merchandising business, our store operations business as well as our supply chain and IT all reporting up through him.
I think it's very early innings for Jason but in some ways it couldn't be a better time to bring somebody with his kind of background.
We'd mentioned the fact that we are in the midst of a very, very aggressive category management and vendor renegotiation.
I know that Jason has run that play book several times in his career and I think he's coming in feeling really good about the direction that we're going in that front.
He's already been out to several stores, put in several days' worth of time working the stores with the folks in the field.
Spent a week down at our product education conference with a thousand of our employees.
And I think he fits in great.
I didn't mention, but we did mention in the press release, Jason is a pharmacist by training, comes from a family of pharmacists.
This guy is a guy who really understands wellness and understand the wellness customer.
So for the direction also that we're going, both culturally as well as where we are going overall with our mission statement and the direction of the business, I think he is going to be a great leader for the business moving forward.
But, just to be very clear, what we were really looking for at the top of the house to work with me, with <UNK>, is somebody who brings a very strong operational background and a background delivering results.
And I think Jason is coming into the organization with that on his shoulders and he is planning on delivering in spades.
Yes, great.
We continue to do local market activation activities in second quarter.
We provided a new training manual to all of our stores.
We have also been doing local marketing through various different trade shows, sampling programs.
And being more aggressive with our sign up for our loyalty programs, which is a big area of focus for us is when we do local market activation, getting more people to join our loyalty program because we know that properly converts and then allows us to start to campaign those customers from a marketing standpoint moving forward.
What we've seen, and in fact anecdotally, last week when we were meeting together as a team this has been a really great shot in the arm for our health enthusiasts at a store level.
We are planning on continuing to drive local market activation, although what we are trying to do now is take our best practices from the first half of the year and make sure we really focus our dollars and our energy to doing those things that we know will best impacted business.
I expect this (technical difficulty) local market activation on an ongoing basis as a Company because we think that's really important to get our health enthusiasts out there in the market and we show well when we do this kind of work.
And we're getting a lot of (technical difficulty) other local market vendors, other companies that we can work with to successfully drive it.
So all good.
I just want to thank everyone again the joining us this morning and we will look forward to talking to you in the next quarter.
