- Vitamin World, a retailer of vitamins and health supplements, is preparing to file for Chapter 11 bankruptcy protection as it looks to shed some leases on its 345 stores, according to a Reuters report. The retailer’s private equity owner, Center Lane Partners, did not immediately reply to requests for comment from Retail Dive.
- CEO Michael Madden told Reuters in a statement that the retailer, by filing, is looking to exit expensive leases signed by the company’s previous owners. Unnamed sources told Reuters that the bankruptcy filing could come as soon as this month.
- Madden told Reuters in a statement, "This action will empower us to move forward as a stronger organization that can and will continue to service our millions of loyal customers with premium offerings via retail and online channels."
Founded in 1977, Vitamin World previously operated under the umbrella NBTY Inc, a vitamin and supplement maker, until last year when it was sold to private equity firm Centre Lane Partners and became a stand-alone retail business. That transaction was worth $25 million, according to Reuters.
Costly leases and overextended store footprints, combined with a sales slump, have created a crisis for numerous retailers this year. Mall-based niche retailers like Payless, rue 21, Gymboree, True Religion, Papaya Clothing and Perfumania have all used the Chapter 11 process to shrink their store footprint and rid themselves of unprofitable stores and leases.
Madden took his landlords to task publicly. "While a handful of landlords cooperated, the vast majority have not," he told Reuters in a statement, referring to his company’s efforts to review and rationalize its real estate portfolio. "At this time we have no other option than to restructure the company’s real estate portfolio by filing for Chapter 11 protection."
Should Vitamin World indeed file and then emerge from bankruptcy smaller and nimbler, it will still face a tough environment for selling health supplements. Late last year, rival GNC briefly shuttered all its stores in an ambitious rebranding that came after a new CEO, upon reviewing the retailer he’d taken over, found "a badly broken business model in need of change." (The arrival of GNC’s current CEO, Robert Moran, followed the abrupt resignation of previous CEO Michael Archbold last summer.)
Supplements in general are under scrutiny from public health officials and state attorneys general. Faced with mounting concerns over the effectiveness of its signature dietary supplements — which culminated in a damning New York State attorney general’s office probe — Archbold had shifted GNC’s emphasis to its vitamin business.
But his efforts were undermined by cuts to the company’s marketing budget, and in late April, GNC announced plans to sell and refranchise 84 of its stores to franchisee Sun Holdings for $17 million. At the time, GNC said it was looking to sell a total of 200 company-owned stores this year and another 1,000 in total over the next several years.