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Sales & Earnings In Brief

This article was originally published in The Tan Sheet

Executive Summary

Costs eat into NBTY income: Despite a 21.9 percent increase in net sales to $651.7 million in the April-June period, NBTY reports flat net income due to higher costs and expenses. Net income in the firm's fiscal 2009 third quarter was $45.9 million, compared to $45.5 in the year-ago period, NBTY said July 27. The supplement manufacturer and retailer experienced a significantly higher cost of sales - up 36.9 percent to $359.2 million - and a $10.1 million charge for discontinued information technology projects "determined to be ineffective and uneconomical" and $4 million in legal expenses from the antitrust case associated with NBTY's purchase of U.K. retailer Julian Graves. However, advertising, promotion and catalog costs fell 34 percent to $23.6 million. CEO Scott Rudolph said in a same-day earnings call that he expects the private-label share of NBTY's sales to increase. "Because private-label sales traditionally have lower gross profits, our overall gross profit margin should decrease," he said. President and Chief Financial Officer Harvey Kamil said the gross margins and increased productivity in the third quarter appear to be sustainable and are more indicative of the Ronkonkoma, N.Y.-based firm's future performance than the first half of fiscal 2009, when net income growth suffered. High material costs hurt NBTY's bottom line in previous quarters, though Rudolph said the volatility in material pricing is beginning to stabilize (1"The Tan Sheet" April 27, 2009). The Julian Graves acquisition has been provisionally approved, but the execs said that following the U.K. Competition Commission's final decision - expected by Sept. 3 - it could take up to nine months to integrate the chain (2"The Tan Sheet" July 27, 2009, In Brief)
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