Vitamin Shoppe’s strong showing obscured in bankruptcy news

The Vitamin Shoppe’s parent company has filed for bankruptcy protection in a surprise move that appears to be unrelated to the performance of the retailer of nutritional supplements.

The parent company, known as Franchise Group (FRG) filed for Chapter 11 bankruptcy in a Delaware court, and the filing features a restructuring agreement with the holders of 80% of the company’s debt. In addition to The Vitamin Shoppe, the company also owns Pet Supplies Plus and Buddy's Home Furnishings.

According to court documents, the company listed almost $2 billion of debt.

The first lien holders have agreed to convert the full value of their notes into equity. They have also committed, subject to court approval, to plow an additional $250 million into the company to maintain liquidity for the restructured company’s brands.

The “announcement to de-lever our balance sheet is a pivotal step forward in enabling our market-leading businesses Pet Supplies Plus, The Vitamin Shoppe and Buddy's Home Furnishings to realize their full potential," FRG President and CEO Andrew Laurence said. "Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process. Strengthening FRG's balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories."

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One of the company’s brands will not survive: American Freight, which is a furniture and appliance retailer.

Strong category performance

As late as July 2024, The Vitamin Shoppe announced a partnership with longtime direct-to-consumer sales platform iHerb, in which The Vitamin Shoppe’s products would be featured on the iHerb platform.

Part of that announcement centered on The Vitamin Shoppe’s dominant position within the sports nutrition category, which is one of the strongest growth areas of the dietary supplement industry. According to Nutrition Business Journal’s 2024 Sports Nutrition and Weight Management Report, in the domestic market alone, sports nutrition supplements sales are estimated to reach $9 billion on 11.6% growth. 

At the time of the announcement of the deal, Muriel Gonzalez, The Vitamin Shoppe’s president, said, “Our collection of exclusive brands and products are consistently top sellers across our U.S. business, due to their trusted quality, innovation and value.”

Turmoil at parent company

The seeds of FRG’s problems were planted when the company became a private entity. The Franchise Group was taken private in a $2.6 billion management takeover led by then-CEO Brian Kahn. The deal closed in August 2023 and included financing provided by B. Riley Financial Inc, an investment bank. 

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However, Kahn stepped down as CEO in January amid a Securites and Exchange Commission investigation of B. Riley Financial over the collapse of a hedge fund known as Prophecy Asset Management. Kahn was replaced by Laurence as FRG CEO. 

According to some of the final financial statements filed before the company went private, in December 2022, Franchise Group reported having about 8,500 full-time employees and more than 5,000 part-time workers. The company had reported more than $1 billion in quarterly revenue in early 2023 but also revealed it was carrying more than $1.4 billion in debt. 

The Vitamin Shoppe did not respond to a request for comment in time for publication.