Bangalore, July 27 - Nutritional supplements maker NBTY Inc posted quarterly results handily beating Wall Street estimates, aided by better gross margins and lower promotion costs, sending its shares up 14 percent.
Gross margins improved sequentially helped by implementation of higher prices and on lower raw material costs, CJS Securities analyst Lawrence Solow told Reuters by phone.
The analyst said the company also benefitted as it got rid of several expenses related to its acquisition of Leiner Health Products, which it bought in July 2008, and on lower advertising and corporate overhead costs.
Advertising expense fell 34 percent to $23.6 million in the quarter, "reflecting falling ad rates as well as management's deliberate discontinuation of certain unproductive television ad campaigns," Wedbush analyst Rommel Dionisio said in a note to clients.
The company's gross margin of 45 percent in the third quarter rose 260 basis points, compared sequentially with the previous quarter, Dionisio said.
The company's finance chief said he expects advertising expenses to come down further in the future.
"A lot of the sales that we now have are private label sales... which does not need advertising," Chief Finance Officer Harvey Kamil said on the conference call.
The company also forecast a capital expenditure of $50 million to $65 million in fiscal 2010, and said it expects to add a lot of stores in Europe next year.
The management plans to take advantage of competitor dislocation as well as cheaper real estate and build costs to expand its retail infrastructure in Europe, given the recent acceleration in same-store sales trends there, Dionisio said.
WHOLESALE SALES SURGE
For the third quarter ended June 30, NBTY -- whose brands include Ester-C, Nature's Bounty, Solgar and Sundown -- earned $45.9 million, or 73 cents a share, compared with $45.5 million, or 72 cents a share, a year ago.
Revenue surged 22 percent to $651.7 million, as sales at the company's wholesale division rose 40 percent to $396 million in the quarter.
Excluding items, the company earned 90 cents a share while analysts on average had expected it to earn 51 cents a share on revenue of $638.8 million, according to Reuters Estimates.
The company also said the acquisition of UK-based food and confectionary chain Julian Graves by its subsidiary NBTY Europe in September 2008, has been provisionally approved by the UK Competition Commission and a final decision is expected in September.
Shares of the Ronkonkoma, New York-based company were up 14 percent at $36.30 Monday afternoon on the New York Stock Exchange, making it one of the top percentage gainers on the exchange.