Vitamin Shoppe jumps, Addus falls in debut

NEW YORK (Reuters) - Vitamin Shoppe Inc (VSI.N) shares rose in their debut after the health supplement retailer's IPO priced above expectations, a performance likely to ease the way for other retailer IPOs.

Vitamin Shoppe's IPO was the first by a U.S. retailer since 2007.

Its shares were up 7.1 percent at $18.22 in afternoon trading on the New York Stock Exchange, after rising as much as 19 percent shortly after the opening bell.

Separately, Addus HomeCare Corp (ADUS.O), an Illinois-based provider of home health care, also had its market debut on Wednesday, but with markedly different results.

Its shares were down 9 percent, trading at $9.10 on Nasdaq. The shares priced below expectations in the IPO, although Addus HomeCare increased the size of the offering to 5.4 million shares from the 5 million originally planned.

Vitamin Shoppe's strong pricing and first day rise will likely whet investor appetite for IPOs from other retailers, despite the sector's struggles during the economic crisis, according to an analyst.

"This definitely bodes well because you have a successful IPO in a sector that has not been active in a long time," said Bill Buhr, an IPO strategist with Morningstar IPO Service.

But Buhr warned against reading too much into any company's first day performance. Vitamin Shoppe's on-line rival Vitacost.com Inc (VITC.O), edged up 0.42 percent in its debut last month, but is now 12.5 percent below its IPO price.

While Vitamin Shoppe is on track to get the best first-day performance of the last eight U.S.-listed IPOs, its rise is below the historical average of about 11 percent.

Two retailers are expected to go public in the next few weeks: discount chain Dollar General Corp, a 8,577-store chain backed by private equity firm Kohlberg Kravis Roberts & Co KKR.UL and youth clothing chain rue21 Inc, which operates 500 stores in the United States.

Vitamin Shoppe, a North Bergen, New Jersey-based operator of 434 health supplement stores in the United States, became the first brick-and-mortar retailer to go public since the October 2007 IPO by beauty products chain Ulta Salon Cosmetics & Fragrance Inc (ULTA.O).

In its prospectus, Vitamin Shoppe estimated it could eventually have 900 stores in the United States, which one retail analyst said was ambitious but feasible.

"The commercial real estate market is not in good shape, so it's not a bad time to be expanding, but they are entering an intensively competitive area," said Craig Johnson, president of Customer Growth Partners, a retail consulting firm.

Still, Johnson praised the chain for its sales growth during the recession. Vitamin Shoppe's same-store sales rose 4.7 percent for the six months of 2009, according to its prospectus.

Vitamin Shoppe's overall sales rose at an annual clip of 11.3 percent between 2005 and 2008, when they reached $601.5 million. During that time, it opened 171 new stores, according to its prospectus. The company has been profitable since 2006.

Vitamin Shoppe sold 9.1 million shares for $17 in its IPO, more than the expected range of $14 to $16. The chain will net proceeds of $121 million from the IPO that it will use for the redemption of preferred shares and paying down some debt.

The Vitamin Shoppe IPO is being managed by JP Morgan, Bank of America Merrill Lynch and Barclays Capital. The underwriters will have the option of buying another 1.4 million shares from Vitamin Shoppe's selling shareholders.

Addus HomeCare's clients include federal, state and local government agencies, commercial insurers and private individuals, according to its prospectus.

In the first half of 2009, Addus HomeCare had sales of $126.8 million, up 14 percent over the same period in 2008, with net income of $12 million.

The Addus HomeCare IPO is being managed by Robert W. Baird & Co and Oppenheimer & Co, which have the option to purchase an additional 810,000 shares.

(Reporting by Phil Wahba; editing by Dave Zimmerman and Andre Grenon)