Vitamin Shoppe, Inc. (Form: 10-K, Received: 02/27/2018 16:39:35)

/s/ Timothy J. Theriault

February 27, 2018

Timothy J. Theriault

February 27, 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from to .

Commission file number: 001-34507

VITAMIN SHOPPE, INC.

(Exact name of registrant as specified in its charter)



Delaware		11-3664322
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

300 Harmon Meadow Blvd.

Secaucus, New Jersey 07094

(Addresses of Principal Executive Offices, including Zip Code)

(201) 868-5959

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Class		Name of the exchange on which registered
Common Stock, $0.01 par value per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant was approximately $274,373,029 as of July 1, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price of the common stock on the New York Stock Exchange.

As of January 27, 2018 , Vitamin Shoppe, Inc. had 24,203,144 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed for the 2018 Annual Meeting of the Stockholders.

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TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	4
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 9A.	Controls and Procedures	45
Item 9B.	Other Information	46

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accounting Fees and Services	47

PART IV

Item 15.	Exhibits, Financial Statement Schedules	47

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Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, those that contain words such as “outlook”, “believes”, “expects”, “potential”, “continues”, “may”, “will”, “should”, “seeks”, “predicts”, “intends”, “plans”, “estimates”, “anticipates”, “target”, “could” or the negative version of these words or other comparable words.

These statements are subject to various risks and uncertainties, many of which are outside our control, including, among others, strength of the economy, changes in the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, implementation of our strategy, trade restrictions, availability of suitable store locations at appropriate terms, the availability of raw materials, compliance with regulations, certifications and best practices with respect to the development, manufacture, sales and marketing of the Company's products, management changes, maintaining appropriate levels of inventory, changes in tax policy, ecommerce relationships, disruptions of manufacturing, warehouse or distribution facilities or information systems, political environment and other specific factors discussed herein and in other Securities and Exchange Commission (the "SEC") filings by us (including our reports on Forms 10-K and 10-Q filed with the SEC).

We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes with certainty and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

Electronic Access to Company Reports

Our investor website can be accessed at www.vitaminshoppe.com under “Investor Relations”. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our investor website under the caption “SEC Filings” promptly after we electronically file those materials with, or furnish those materials to, the SEC. No information contained on any of our websites is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Information relating to corporate governance at our Company, including our Corporate Governance Guidelines, our Standards of Business Conduct for all directors, officers, and employees, and information concerning our directors, Committees of the Board, including Committee charters, and transactions in Company securities by directors and executive officers, is available at our investor website under the captions “Corporate Governance” and “SEC Filings”. Paper copies of these filings and corporate governance documents are available to stockholders free of charge by written request to Investor Relations, Vitamin Shoppe, Inc., 300 Harmon Meadow Blvd., Secaucus, New Jersey 07094. Documents filed with the SEC are also available on the SEC’s website at www.sec.gov .

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PART I

Unless the context requires otherwise, references in this Annual Report on Form 10-K to “VSI”, the “Company”, “we”, “us” and “our” collectively refer to Vitamin Shoppe, Inc., its wholly owned subsidiary, Vitamin Shoppe Industries Inc. (“VS Industries”) and the wholly owned subsidiaries of VS Industries. References to “Fiscal” or “Fiscal Year” mean the fifty-two weeks ended December 30, 2017, the fifty-three weeks ended December 31, 2016 and the fifty-two weeks ended December 26, 2015 for Fiscal Year 2017, Fiscal Year 2016 and Fiscal Year 2015, respectively, and references to “Fiscal” and “Fiscal Year” for other years are similarly based on a fifty-two week or fifty-three week fiscal year, as applicable.

Item 1. Business

Overview of our Company

We are an omni-channel specialty retailer and contract manufacturer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products. We market approximately 900 nationally recognized brands as well as our own brands, which include The Vitamin Shoppe®, BodyTech®, True Athlete®, Mytrition®, plnt®, ProBioCare®, Next Step® and Betancourt Nutrition®. We believe we offer one of the largest varieties of products among vitamin, mineral and supplement (“VMS”) retailers and continue to refine our assortment with approximately 7,000 stock keeping units (“SKUs”) offered in our typical store and approximately 10,000 additional SKUs available through e-commerce. Our broad product offering enables us to provide our customers with a depth of selection of products that may not be readily available at other specialty retailers or mass merchants, such as discount stores, supermarkets, drug stores and wholesale clubs. We believe our product offering and emphasis on product knowledge and customer service helps us meet the needs of our target customer and serves as a foundation for enhancing strong customer loyalty.

We continue to focus on our strategy to improve the customer experience through the roll-out of initiatives including increasing customer engagement and personalization, redesigning the omni-channel experience (including in stores as well as through the internet and mobile devices), growing our private brands and improving the effectiveness of pricing and promotions. As part of this strategy, we have developed several initiatives, including a new remodeled store format that is being piloted in 20 stores as of December 30, 2017, which includes a new layout, revised product assortment and other instore experiences (hereafter referred to as "transformations"). In addition, we remain committed to innovation at the store level and we have been rolling out two key elements of new category innovation with our new Kombucha bar on tap and Fit Freezer / Cooler section to over 80 stores in Fiscal 2017.

In 2017, competitive trends have intensified, such as broader channel availability of supplement products, more aggressive competitor pricing and promotional strategies, and significantly increased expenditures in marketing by our competitors. Our operations have been negatively impacted, resulting in lower customer traffic and a reduction in net sales during Fiscal 2017. During Fiscal 2017 we have tested and launched several initiatives including new pricing and promotional strategies and a customer auto-delivery subscription program. We also increased our marketing expense beginning in the third quarter of Fiscal 2017. We anticipate these initiatives will mitigate some of the negative performance we have experienced in areas such as customer traffic.

We continue to identify and implement opportunities to improve efficiencies and reduce costs in key areas including sourcing of inventory and cost savings opportunities related to selling, general and administrative expenses. For Fiscal 2017, the Company realized incremental year over year cost of goods sold savings of approximately $15.0 million and selling, general and administrative expenses savings of approximately $4.0 million, for a total savings of $19.0 million. During Fiscal 2017, the Company renegotiated rent expenses with a number of landlords resulting in lower occupancy costs of $9.5 million over the remaining lease periods, or approximately $0.9 million on average per year through 2027.

Impairment of long-lived assets :

In Fiscal 2017, the Company recorded impairment charges on the goodwill of its retail segment of 210.6 million, of which $177.2 million was not deductible for income tax purposes. The Company also recorded an impairment charge on the Vitamin Shoppe tradename of $59.4 million during Fiscal 2017. In addition, the Company recognized store impairment charges of $4.8 million during Fiscal 2017 on fixed assets related to 34 of its underperforming retail locations still in use.

Manufacturing turnaround:

In the fourth quarter of Fiscal 2016 the Company recorded impairment charges of $32.6 million on goodwill and $6.6 million on the customer relationships intangible asset of FDC Vitamins, LLC d/b/a Nutri-Force Nutrition (“Nutri-Force”), a subsidiary of VS Industries, as our manufacturing operations continued to perform below expectations. During the first quarter of Fiscal 2017, the Company engaged outside consultants to perform an assessment of the operations of Nutri-Force and to

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assist in the development of initiatives required to turnaround this business unit. These initiatives were focused on improving the efficiency of manufacturing processes, eliminating unprofitable SKUs, reducing third-party customers, and reducing costs. The implementation of this plan began during the second quarter of Fiscal 2017 and has been substantially completed in Fiscal 2017. As a result, the Company incurred costs of approximately $12.3 million during Fiscal 2017 related to the turnaround of Nutri-Force including inventory charges, consulting expenses and other related charges.

The Company is currently exploring strategic alternatives related to Nutri-Force, including the potential sale of this subsidiary. Refer to Long-Lived Assets section of our Critical Accounting Policies included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K for additional information.

Closing of distribution center:

In August 2017, the Company announced its intention to close the North Bergen, New Jersey distribution center prior to or by the August 31, 2018 lease expiration. Distribution operations have been transitioned to the Company's other distribution centers. Costs related to this closure, such as severance, inventory related costs and other charges, were $3.1 million in Fiscal 2017. As a result of this closure, the Company anticipates annualized savings between $4.0 million to $5.0 million upon lease expiration.

Segment Information

We have increased our focus on customer centric initiatives and being an omni-channel retailer. As initiatives, including "buy online and pickup in store" and subscription sales, continue to develop, the interrelationship among the ways customers can purchase products from the Company results in sales that are generated and fulfilled across multiple channels. The Company has revised its internal management structure and reporting to align with our omni-channel strategy. We believe the historical structure of separate segments for retail stores and e-commerce is no longer representative of the way the business is managed. As a result, beginning in Fiscal 2017, the Company has updated its segment reporting to better align with its omni-channel strategy. These changes resulted in a single retail segment that includes fulfilled in store and direct to consumer sales channels. In addition, certain costs previously classified as corporate costs, such as retail and direct management costs, are allocated to the retail operating segment. Segment results related to prior periods have been restated to conform with this omni-channel structure.

Based upon the revised structure of the Company, we operate through two business segments: retail, which includes Vitamin Shoppe and Super Supplements retail store formats and our e-commerce formats, and manufacturing, which consists of the Nutri-Force manufacturing operations.

Retail. Through our retail store formats, we believe we differentiate ourselves in the VMS industry. What makes us unique is our broad selection of VMS products and our stores are staffed with trained and knowledgeable employees, who we refer to as Health Enthusiasts®, and who are able to inform our customers about product features and assist in product selection. We also sell our products directly to consumers through the internet, primarily at www.vitaminshoppe.com . Our e-commerce sites complement our in-store experience by extending our retail product offerings with approximately 10,000 additional SKUs that are not available in our stores and enable us to access customers outside our retail markets and those who prefer to shop online.

Manufacturing. Through Nutri-Force, we provide custom manufacturing and private labeling of VMS products and develop and market our own branded products for both the VSI product assortment and sales to third parties.

Industry

The VMS industry is large, estimated to be approximately $44 billion in 2017 according to the Nutrition Business Journal (“NBJ”). We believe the industry is fragmented, and continued growth is expected as health and wellness trends continue. According to the NBJ, the VMS industry is expected to register a CAGR of 6.2% from 2017 to 2021. Sports supplements and meal replacement categories are projected to post the highest CAGRs at 8.6% and 7.9%, respectively.

Increased focus on healthy diet and nutrition, along with growing fitness and wellness program participation, serves as a positive trend for the nutritional supplements industry. Retailers of VMS products primarily include specialty retailers and mass merchants, such as discount stores, supermarkets, drug stores and wholesale clubs. The specialty retailers typically cater to the more sophisticated VMS customer by focusing on selection and customer service, while the mass merchants generally offer a limited assortment comprised of more mainstream products with less customer service. NBJ anticipates that the specialty retail channel will grow at an average rate of 5.5% through 2021. Additionally, NBJ forecasts the internet channel to grow at an average rate of 12.0% from 2017 to 2021.

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Although long-term prospects noted above suggest continued growth, recent trends have created volatility in the near term and we expect continued volatility. Recent industry trends have been mixed, driven in part by the prospects of more federal and state involvement in the industry. A lack of clarity on regulation appears to be dissuading manufacturers from investing in and developing new ingredients/products. Additionally, negative publicity about the nutritional supplement industry has increased over the past few years and adds further uncertainty to the fundamental outlook. With product innovation remaining slower than in past years, and negative headlines/media at heightened levels, VMS industry headwinds appear poised to persist over the near term.

Over recent years, there has been a shift of market share from specialty retailers to other channels such as mass market retailers, supermarkets, club chains, drug store chains and e-commerce companies. In 2017, competitive trends have intensified, including more aggressive competitor pricing and promotional strategies and significantly increased expenditures in marketing by our competitors. These competitive trends represent a challenge for VSI to keep pace with industry growth rates.

Industry and market data contained or incorporated by reference in this Form 10-K were obtained through company research, surveys and studies conducted by third parties and industry and general publications or based on our experience in the industry. We have not independently verified market and industry data from third-party sources.

Competitive Strengths

We believe there is an opportunity to position the Vitamin Shoppe as a leading Health and Wellness authority capitalizing on the attractive VMS industry dynamics and the overall market for wellness. We believe the following competitive strengths form the foundation of our strategy:

Omni-Channel Retailer . We are an omni-channel retailer, distributing products in a variety of ways including our retail stores, our e-commerce sites and our mobile application. This business model affords us multiple touch points of interaction with our customers, which allows us to gather data and communicate with them in person, through our call center and via the internet. In 2017, we accelerated our omni-channel focus to take advantage of changes in the evolving customer decision journey in the wellness market.

Value-Added Customer Service . We believe we offer a high degree of customer service. We place a strong emphasis on employee training and customer service, and view our Health Enthusiasts as a source for health and wellness information while assisting our customers with their product selections. In addition, we have also launched new products and services, such as our SPARK Auto Delivery, that make it easier for our customers to maintain their VMS regimen.

Product Selection, Including a Strong Assortment of Private Brands . We believe we have a broad merchandise assortment and are consistently working to add new and exciting products. We are working closely with our vendor partners to introduce innovative and unique products to further differentiate us from the competition. We complement our assortment with our private brands merchandise which accounted for approximately 22% of our net sales (excluding Nutri-Force net sales) in Fiscal 2017.

Attractive Customer Base . We have a large base of customers who proactively manage their health and wellness through the use of vitamins and supplements. In Fiscal 2017, 88% of our net sales (excluding Nutri-Force net sales) were attributable to our Healthy Awards customers. Our no-fee Healthy Awards Program promotes brand loyalty among our customers and allows our customers to earn points redeemable for future purchases, approximately 62% of which were redeemed in Fiscal 2017. We also utilize our Healthy Awards Program database to track customer purchasing patterns across our retail business segment, analyze market and industry trends and create targeted merchandising and marketing strategies. Our loyalty program is a vehicle to enhance our customer relationships management approach via personalized emails, content and offers. Beginning in Fiscal 2016, the Company implemented enhancements to its loyalty program, including the issuance of credit certificates on a quarterly basis compared with the annual issuances under the previous program. Further enhancements are planned to be rolled out in Fiscal 2018.

Highly Refined Real Estate Locations. We locate our stores primarily in attractive stand-alone locations or endcap (corner) positions in retail centers. We believe that the location and visibility of our real estate is an important component of our customer acquisition strategies.

Experienced Management Team . We have assembled a management team across a broad range of disciplines with extensive experience in building leading national specialty retailers.

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Business Strategy

Our New Base Plan is based on the following principles:

1) Obsessive focus on our Customers’ needs by deeply understanding how they shop through a fresh view of the Wellness Customer Decision Journey;

2) Embracing the digital transformation that is sweeping through retail and society and realigning all our channels to take advantage of the changes; and

3) Focus on our retail fundamentals.

The Five Strategy Pillars of our Plan to return the Company to profitable growth are the following:

New Customer Acquisition. We will be implementing various new tools as well as increasing the use of other tools and programs that have proven successful to us in the past across both digital and in-store. With respect to digital we are targeting new customer acquisition through increased spending through paid search and paid social media outlets with relevant offers to attract new customers. Grass roots acquisition at the store level will focus on local events and outreach programs. Overall, we also plan to increase our total marketing spend.

Integrated Customer Experience . We are focused on improving our omni-channel customer experience. To do this we will be investing in technology both in store and also across our website and mobile app that will help keep our customers more engaged and make it even easier for them to find the personalized wellness solution that is right for their needs.

Relevant and Inspiring Assortment . We have undertaken a substantial upgrade to our assortment and will continue to make changes as we add products from faster growing categories. We are working with some of our top vendor partners to introduce several unique product lines or custom SKUs to increase the level of innovation and further differentiate our assortment. Our Private Brands portfolio will also play an important role in further differentiating our product assortment.

Customer Loyalty and Retention . A significant portion of visits to the Vitamin Shoppe are for replenishment. To make this shopping experience even easier for our customers we introduced Spark Auto Delivery in 2017 and in the coming year we plan to add enhancements to this program as well as introduce new products and services such as Easy Reorder. We have a large and loyal customer base with approximately 90% of our sales coming from our Healthy Awards members. We plan significant upgrades to our loyalty program over the coming years that will give our members greater benefits and offers and increase their annual purchase level with us.

Operational Excellence. This includes a relentless focus on driving efficiencies, controlling costs and increasing overall margins at the Vitamin Shoppe every year. This pillar is guided by a heightened focus on free cash flow and includes a significant reduction in our capital expenditures going forward.

Store Counts and Locations

We plan to open two new stores in Fiscal 2018. The following table shows the change in our network of stores for the Fiscal Years 2013 through 2017:



	Fiscal Year
	2017		2016		2015		2014		2013
Store Data:
Stores open at beginning of year	775		758		717		659		579
Stores opened	15		26		50		61		52
Stores acquired	—		—		—		—		31
Stores closed	(5	)	(9	)	(9	)	(3	)	(3	)
Stores open at end of year	785		775		758		717		659

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New stores have typically required approximately four to five years to mature, generating lower store level sales in the initial years than our mature stores. As a result, new stores generally have a negative impact on our overall operating margin. In addition, our new stores since the beginning of Fiscal 2013 are approximately 2,900 square feet compared to the average of our total store portfolio of approximately 3,500 square feet. As these stores mature, we expect them to contribute positively to our operating results. The following table reflects our store count by state, as well as the District of Columbia and Puerto Rico at December 30, 2017:



	Stores Open at December 30, 2017		Stores Open at December 30, 2017
Alabama	6	Nebraska	2
Arizona	12	Nevada	8
Arkansas	2	New Hampshire	6
California	91	New Jersey	34
Colorado	8	New Mexico	3
Connecticut	11	New York	72
Delaware	3	North Carolina	27
District of Columbia	2	Ohio	25
Florida	79	Oklahoma	3
Georgia	25	Oregon	9
Hawaii	7	Pennsylvania	31
Idaho	3	Rhode Island	2
Illinois	41	South Carolina	17
Indiana	13	South Dakota	1
Iowa	3	Tennessee	13
Kansas	3	Texas	55
Kentucky	5	Utah	3
Louisiana	8	Vermont	1
Maine	2	Virginia	25
Maryland	22	Washington	34
Massachusetts	21	Wisconsin	6
Michigan	19
Minnesota	10
Missouri	8
Mississippi	1	Puerto Rico	3
		Total	785

As of December 30, 2017, we leased the property for all of our 785 stores. Our typical lease terms are ten years, with one or two five-year renewal options. We do not believe that any individual store property is material to our financial condition or results of operations. Of the leases for our stores, 44 expire in Fiscal 2018, 103 expire in Fiscal 2019, 93 expire in Fiscal 2020, 90 expire in Fiscal 2021, 107 expire in Fiscal 2022 and the balance expire in Fiscal 2023 or thereafter. For the majority of our leases, renewal options remain available.

Products

We organize our products by category enabling comparisons between different brands within each product sub-category. In addition, our stores are staffed with experienced and knowledgeable Health Enthusiasts, many of whom are regular and informed VMS consumers. Our Health Enthusiasts are equipped with tablets to inform our customers about product features and assist our customers in product selection. To further inform our customers, our stores are equipped with Aisle 7 ® , an independent source of health and wellness information.

We offer a comprehensive selection of vitamins, minerals, herbs, homeopathic remedies, specialty supplements such as fish oil, probiotics, glucosamine and Co Q10, sports nutrition, weight management, aromatherapy, as well as natural bath and beauty products. Our offering includes approximately 17,000 SKUs from approximately 900 brands, including our own brands such as The Vitamin Shoppe ® , BodyTech ® , True Athlete ® , Mytrition ® , plnt ® , ProBioCare ® , Next Step ® and

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Betancourt Nutrition ® brands which include products such as Ultimate Man, Ultimate Woman, Ultimate 10 Probiotic, Whey Tech and Whey Tech Pro 24 Proteins. We also offer a comprehensive assortment from leading national brands such as Optimum Nutrition ® , Cellucor ® , Garden of Life ® , Quest Nutrition ® , Solaray ® , Solgar ®, Megafood ® and Nature’s Way ® . This extensive assortment is designed to provide our customers with a unique selection of available products to help them achieve their health and wellness goals. Sales of our branded products accounted for approximately 22% of our net sales (excluding Nutri-Force net sales) in Fiscal 2017.

Key Product Categories

Below is a comparison of our net merchandise sales by major product category and the respective percentage of our total net merchandise sales for the periods shown (dollars in thousands).



	Fiscal 2017				Fiscal 2016 (a)				Fiscal 2015
Product Category	Dollars		%		Dollars		%		Dollars		%
Vitamins, Minerals, Herbs and Homeopathy	$	328,986	28.0	%	$	339,597	26.4	%	$	320,872	25.4	%
Sports Nutrition	353,578		30.1	%	408,288		31.7	%	421,293		33.3	%
Specialty Supplements	294,546		25.0	%	308,945		24.0	%	289,938		22.9	%
Other	199,418		16.9	%	230,252		17.9	%	232,399		18.4	%
Total	1,176,528		100.0	%	1,287,082		100.0	%	1,264,502		100.0	%
Delivery Revenue	2,166				2,161				2,047
	$	1,178,694			$	1,289,243			$	1,266,549


(a)	Fiscal 2016 includes a 53rd week.

Vitamins, Minerals, Herbs and Homeopathy

Vitamins and minerals are recommended to maintain health, proactively to improve health and in support of specific health conditions. These products help prevent nutrient deficiencies that can occur when diet alone does not provide all the necessary vitamins and minerals our bodies need. The vitamin and mineral product category includes multi-vitamins, which many consider to be a foundation of a healthy regimen, lettered vitamins, such as Vitamins A, C, D, E, and B-complex, along with major and trace minerals such as calcium, magnesium, chromium and zinc.

Herbs offer a natural remedy to address specific conditions. Certain herbs help support specific body systems, including ginkgo to support brain function and milk thistle to help support liver function, as well as other less common herbs such as black cohosh for menopause support. Herbal products include whole herbs, standardized extracts, herb combination formulas and teas. Homeopathic remedies offer our customers the ability to address health concerns while providing the safety of having no known drug interactions or side effects.

With approximately 6,000 SKUs in this product category, a wide range of potency levels and multiple delivery systems, our customers have many choices to fit their individual needs.

Sports Nutrition

Our sports nutrition consumers are looking for products to help maintain or supplement a healthy lifestyle. These products are used in conjunction with cardiovascular conditioning, weight training and sports activities. Major categories in sports nutrition include protein and weight gain powders, meal replacements, weight management, and pre and post-workout supplements to either support energy production or enhance recovery after exercise. Our sports nutrition products are offered in many convenient forms, such as powders, tablets, capsules, soft gels and liquids. Our sports nutrition consumers include the sports enthusiast, weekend warrior, endurance athlete, marathoner, serious bodybuilder, as well as those seeking to maintain a healthy fitness level. We offer approximately 2,000 SKUs in sports nutrition.

Specialty Supplements

Specialty supplements help supply higher levels of nutrients than diet alone can provide, help individuals stay healthy, and support specific conditions and life stages such as childhood, pregnancy, menopause and aging. Categories of specialty supplements include omega fatty acids, probiotics and condition specific formulas. Certain specialty supplements, such as organic greens, psyllium fiber and soy proteins, provide added support during various life stages. Folic acid is specifically

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useful during pregnancy. Super antioxidants, such as coenzyme Q-10, grapeseed extract and pycnogenol, address specific conditions. High ORAC (oxygen radical absorptive capacity) fruit concentrates such as; gogi, mangosteen, pomegranate and blueberry help prevent oxygen radical damage. Other specialty supplement formulas are targeted to support specific organs, biosystems and body functions. We offer approximately 3,500 SKUs of specialty supplements.

Other

Our “Other” category represents all other product classifications we stock that are not included within the previously described categories. These products include items such as on the go bars, drinks and snacks, natural beauty and personal care. Our on the go bars, drinks and snacks offer our customers access to an offering of protein, low carb and natural bars, protein, energy and functional beverages and natural snacks. Natural beauty and personal care products offer an alternative to traditional products that often contain synthetic and/or other ingredients that our customers find objectionable. Our customers choose these products over more traditional products because they contain organic and natural ingredients, are free of pesticides or not tested on animals and/or are more closely aligned with the health and wellness goals of our customers. We offer approximately 5,500 SKUs for our Other category. In Fiscal 2017, Fiscal 2016 and Fiscal 2015, our Other product category includes net merchandise sales to third parties of Nutri-Force of $32.2 million, $50.0 million and $56.6 million, respectively.

Delivery Revenue

Delivery revenue represents amounts billed to customers for shipping fees.

Access to New Products

One of the many components of customer satisfaction is the introduction of new products. We identify customer and market trends by listening to our customers, Health Enthusiasts, vendors, contract manufacturers and market influencers. We maintain active partnerships with our vendors to stay on top of their product offerings and to bring new products to our customers quickly. In addition, we have a knowledgeable team in-house who focuses on bringing new Vitamin Shoppe branded products to our offering. Each year we launch many new products under our own brands, including the launch in Fiscal 2017 of approximately 80 new products. These include new product expansions into whey isolate proteins and Flash Point, our new high intensity pre-workout concentrate supplement under our BodyTech ® brand, aromatherapy essential oils and blends under our Vitamin Shoppe® brand, continued focus and product development of our plnt® brand line with raw and non-GMO whole food vitamins, unique herbal formulas and honey, and the launch of the Duocap™ technology in our ProBioCare® brand line which allows us to offer new probiotic based formulas that also support specific conditions such as mood, stress, urinary and prostate health.

Manufacturing

Through Nutri-Force, we provide private labeling of VMS products and custom manufacturing and develop and market our own branded products for both the VSI product assortment and for sales to third parties. Our manufacturing operations, which are located in Miami Lakes, Florida, produce tablets, capsules, soft-gels and powders. By operating our own manufacturing facilities, we believe we have the ability to better control the production and timing of new product introductions, and maintain high standards of product quality.

Suppliers and Inventory

The Company had two suppliers from whom we purchased at least 5% of our merchandise during Fiscal 2017, one supplier from whom we purchased at least 5% of our merchandise during Fiscal 2016 and two suppliers from whom we purchased at least 5% of our merchandise during Fiscal 2015. We purchased approximately 15% of our total merchandise from these suppliers during Fiscal 2017 and approximately 11% during Fiscal 2016 and 17% during Fiscal 2015.

We consider numerous factors in supplier selection, including, but not limited to, quality, price, credit terms, and product offerings. As is customary in our industry, we generally do not have long-term contracts with any supplier and most suppliers may discontinue selling to us at any time.

We strive to maintain sufficient inventory to enable us to provide a high level of service to our customers. Inventory, accounts receivable and accounts payable levels, payment terms and return policies are in accordance with standard business

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procedures. We maintain a distribution network which we use in conjunction with a just-in-time inventory ordering system that we use to replenish our stores based upon customer demand of a given product or products.

Warehouse and Distribution

We operate our supply chain primarily from two Company operated distribution center facilities. The Company operates distribution centers in Ashland, Virginia and Avondale, Arizona. By operating our own facilities we gain greater control over operations and costs. Our products manufactured by Nutri-Force are warehoused and distributed through its Miami Lakes, Florida facilities.

In the third quarter of 2017, the Company announced its intention to close the North Bergen, New Jersey distribution center prior to or by the August 31, 2018 lease expiration. Distribution operations have been transitioned to the Company's other distribution centers.

Regulatory and Quality Control

The Food and Drug Administration (“FDA”) is the regulatory authority charged with overseeing the products we offer and the Federal Trade Commission (“FTC”) regulates the advertising of those products.

Our Scientific and Regulatory Affairs (“S&RA”) and Legal departments review all aspects of our Company’s FDA and FTC regulatory processes, ensuring compliance with regulations. We have established processes to review the underlying safety and efficacy of our branded products, including The Vitamin Shoppe ® , BodyTech ® , True Athlete ® , Mytrition ® , plnt ® , ProBioCare ® , Next Step ® and Betancourt Nutrition ® . These processes include review of the ingredients’ safety information, product formulation, product form, product labeling, the efficacy and claim support for the product and any marketing materials. All consumer communications that deal with product and health issues must be approved by S&RA prior to being disseminated to the public.

We have standard procedures whereby all potential Vitamin Shoppe contract manufacturers are reviewed and approved before they can supply any of our branded products. In addition, all potential new products are evaluated and approved prior to being accepted into our branded product lines.

Our relationships with manufacturers require that all of our branded products not be adulterated or misbranded under any provisions of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the regulations promulgated thereunder. This includes, but is not limited to, compliance with applicable Current Good Manufacturing Practices (“cGMP”). This means that ingredients in our products must be tested for identity, purity, quality, strength, and composition before being incorporated into our branded products, and that our final branded products must again be tested for identity, purity, quality, strength, and composition prior to being released. All of these products require a certificate of analysis, which includes certification to 100% of label claim .

We have established a standard quality control operating procedure that calls for on-site audits of our contract manufacturers’ facilities and processes, and have established an internal team that will audit each of these facilities and work with our contract manufacturers to resolve any noncompliance with dietary supplement cGMP regulations. We require that our manufacturers have certificates of analysis (such as for microbial testing and label testing).

Third party vendors, are also subject to a standard review, must comply with our vendor purchase agreement, including guaranteeing that all third-party products are lawful and manufactured in compliance with applicable cGMPs, and are required to carry adequate insurance policies to satisfy our standards. Each new product proposed to be carried by us is reviewed by our S&RA department. They reject those products that they believe may present undue risk or be unsafe.

Healthy Awards Program

Our Healthy Awards Program encourages our customers to make repeat purchases and enables us to enhance customer loyalty. The program is free of charge to join, and members earn one point for every dollar they spend, and points are accumulated toward a credit certificate which can be applied to a future purchase. Beginning in Fiscal 2016, the Company implemented enhancements to the program, including the issuance of credit certificates on a quarterly basis compared with annual issuances under the previous program. We enrolled approximately 1.8 million new members in Fiscal 2017. The number of active members was approximately 6.3 million as of December 30, 2017 and as of December 31, 2016. An active member is a customer that has purchased an item within the last twelve months.

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We utilize our Healthy Awards Program database to track customer purchasing patterns across our retail business segment, analyze market and industry trends and create targeted merchandising and marketing strategies.

Marketing

We believe our high quality real estate is one of our primary marketing tools, as we locate our stores in high-visibility areas. We also conduct targeted marketing efforts by sending promotional offers to members of our Healthy Awards Program, and we continue to develop our digital marketing and social media strategies. We advertise in national magazines, and engage in local advertising via direct mail, radio and television for certain new stores.

We promote our own branded products, including The Vitamin Shoppe ® , BodyTech ® , True Athlete ® , Mytrition ® , plnt ® , ProBioCare ® , Next Step ® and Betancourt Nutrition ® through our retail channel by placing the products in strategic and highly visible locations in our stores.

Competition

The U.S. nutritional supplements retail industry is highly competitive and fragmented. Competition is based primarily on quality, product assortment, price, customer service, convenience, marketing support and availability of new products. We compete with publicly and privately owned companies with broad geographical market coverage and product categories. We compete with other specialty and mass market retailers, including GNC ® , Whole Foods ® , Natural Grocers ® , Sprouts Farmers Market ®, Vitamin World ®, Costco ® and other club chains, Wal-Mart ® , drug store chains including Rite-Aid ® , CVS ® and Walgreens ® , internet and mail order companies, including Amazon.com ® , Puritan’s Pride ® , Vitacost.com ® , Bodybuilding.com ® , Doctors Trust ® , Swanson ® and iHerb ® , in addition to a variety of independent health and vitamin stores and e-commerce outlets.

Insurance and Risk Management

We purchase insurance to partially offset standard risks in our industry, including policies to cover products liability, travel liability, auto liability and other casualty and property risks. We are self-insured and utilize high deductible programs for certain losses related to our employee medical benefits, workers’ compensation and general liability, although we maintain stop-loss coverage with third-party insurers to limit our liability exposure. Our insurance rates are based on our safety record, claims experience and trends in the insurance industry.

We face an inherent risk of exposure to product liability claims if, among other things, the use of our products results in injury. With respect to product liability coverage, we carry insurance coverage typical of our industry and product lines. Our coverage involves self-insured retentions with primary and excess liability coverage above the retention amount. We have the ability to refer certain claims to our contract manufacturers, third-party vendors and their respective insurers to pay the costs associated with any claims arising from those contract manufacturers’ or third-party vendors’ products. Our insurance covers claims that are not adequately covered by a contract manufacturer’s or third-party vendor’s insurance and provides for excess secondary coverage above the limits provided by our contract manufacturers or third-party vendors. We believe we have obtained a prudent amount of insurance for the insurable risks associated with our business. Our insurance costs have increased in the past, and may increase in the future.

Tradenames and Other Intellectual Property

We believe trademark protection is particularly important to the maintenance of the recognized proprietary brand names under which we market our products. We own trademarks or trade names that we use in conjunction with the sale of our products, including The Vitamin Shoppe ® , BodyTech ® , True Athlete ® , Mytrition ® , plnt ® , ProBioCare ® , Next Step ® and Betancourt Nutrition ® brand names. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We protect our intellectual property rights through a variety of methods including trademark and trade secret laws, as well as confidentiality agreements and proprietary information agreements with vendors, employees, consultants and others who have access to our proprietary information. Protection of our intellectual property often affords us the opportunity to enhance our position in the marketplace by precluding our competitors from using or otherwise exploiting our technology and brands. The carrying value of our trademarks and brands was $19.0 million at December 30, 2017 and $78.9 million at December 31, 2016.

Sales from International Sources

For each of the last three years, less than 1.0% of our sales have been derived from international sources.

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Employees

As of December 30, 2017, we had a total of 3,860 full-time and 1,713 part-time employees, of whom 4,377 were employed in our retail stores and 1,196 were employed in corporate, manufacturing, distribution and e-commerce support functions. None of our employees belong to a union or are a party to any collective bargaining or similar agreement except for certain employees at one of our Seattle based stores, who are members of the United Food & Commercial Workers Local No. 367. We consider our relationships with our employees to be good.

Environmental

We are subject to numerous federal, state, local and foreign laws and regulations governing our operations, including the handling, transportation and disposal of our products and our non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water and groundwater. Failure to comply with those laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. Changes in environmental laws or the interpretation thereof or the development of new facts could also cause us to incur additional capital and operational expenditures to maintain compliance with environmental laws and regulations. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties. The presence of contamination from those substances or wastes could also adversely affect our ability to utilize our leased properties. Compliance with environmental laws and regulations has not had a material effect upon our earnings or financial position; however, if we violate any environmental obligation, it could have a material adverse effect on our business or financial performance.

Government Regulation

The formulation, manufacturing, processing, labeling, packaging, advertising and distribution of our products are subject to regulation by various federal agencies, including the FDA, the FTC, the Consumer Product Safety Commission, the U.S. Department of Agriculture (“USDA”) and the Environmental Protection Agency (“EPA”). These activities are also regulated by various agencies of the states and localities in which our products are sold. The FDA, under the Federal Food, Drug, and Cosmetic Act (“FDCA”) regulates the processing, formulation, safety, manufacture, packaging, labeling and distribution of dietary supplements (including vitamins, minerals, and herbs) and cosmetics. The FTC regulates the advertising of these products.

The Dietary Supplement Health and Education Act of 1994 (“DSHEA”) amended the FDCA to establish a new framework governing the composition, safety, labeling and marketing of dietary supplements. “Dietary supplements” are defined as vitamins, minerals, herbs, other botanicals, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, constituents, extracts or combinations of such dietary ingredients. Generally, under DSHEA, dietary ingredients that were on the market prior to October 15, 1994 may be used in dietary supplements without notifying the FDA. New dietary ingredients (i.e., not marketed in the U.S. prior to October 15, 1994) must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been “present in the food supply as an article used for food” without being “chemically altered.” A new dietary ingredient notification must provide the FDA with evidence of a “history of use or other evidence of safety” establishing that use of the dietary ingredient “will reasonably be expected to be safe.” A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. There can be no assurance that the FDA will accept the evidence of safety for any new dietary ingredients that we may want to market, and the FDA’s refusal to accept such evidence could prevent the marketing of such dietary ingredients. In 2011, the FDA issued draft guidance regarding new dietary ingredient notifications, including the scope of the notification requirement and the content of such notifications, and in August 2016, the FDA issued revised draft guidance. While the revised draft guidance is not enforceable, it may be deemed to represent the FDA’s current point of view. Should the FDA enforce the draft guidance as currently written, it would have a negative effect on the innovation and continued marketing of dietary supplements. There is no certainty that the FDA will accept any particular evidence of safety for any new dietary ingredient. The FDA’s refusal to accept such evidence could prevent the marketing of those dietary ingredients.

DSHEA permits “statements of nutritional support” to be included in labeling for dietary supplements without premarket FDA approval. Such statements must be submitted to the FDA within 30 days of first use in marketing and must be accompanied by a label disclosure that “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” Such statements may describe how a particular dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being, but may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease. Any statement of nutritional support we make in labeling

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must possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA were to determine that a particular statement of nutritional support was an unacceptable drug claim or an unauthorized version of a health claim about disease risk reduction for a food product, or if the FDA were to determine that a particular claim was not adequately supported by existing scientific data or was false or misleading, we would be prevented from using that claim. In addition, the FDA deems internet materials as labeling; therefore, our internet materials must comply with FDA requirements and could be the subject of regulatory action by the FDA, or by the FTC if that agency, reviewing the materials as advertising, considers the materials false and misleading.

DSHEA provides that so-called “third-party literature,” such as a reprint of a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used “in connection with the sale of a dietary supplement to consumers” without the literature being subject to regulation as labeling. Such literature must not be false or misleading; the literature may not “promote” a particular manufacturer or brand of dietary supplement; and a balanced view of the available scientific information on the subject matter must be presented. If the literature fails to satisfy each of these requirements, we may be prevented from disseminating such literature with our products, and any dissemination could subject our product to regulatory action as an illegal drug.

In June 2007, the FDA published current Good Manufacturing Practice (“cGMP”) regulations that govern the manufacturing, packing and holding of dietary ingredients and dietary supplements. cGMP regulations require dietary supplements to be prepared, packaged and held in compliance with strict rules, and require quality control provisions similar to those in the cGMP regulations for drugs. The FDA could inspect one of our facilities or those of one of our contract manufacturers and determine that the facility was not in compliance with these regulations, and cause affected products made or held in the facility to be subject to FDA enforcement actions. We believe our manufacturing and distribution facilities and practices comply with these rules. In addition, as is common practice in the industry, we rely on our third-party contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory requirements and seek representations and warranties in our agreements with these contract manufacturers confirming such compliance.

The FDA has broad authority to enforce the provisions of the FDCA applicable to foods, dietary supplements, and cosmetics, including powers to issue a public warning letter to a company, to publicize information about illegal products, to request a recall of illegal products from the market, and to request the United States Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the U. S. courts.

The FTC exercises jurisdiction over the advertising of foods, dietary supplements and cosmetics. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. As a result of our efforts to comply with applicable statutes and regulations, we have from time to time reformulated, eliminated or relabeled certain of our products and revised certain provisions of our sales and marketing program. The FTC has broad authority to enforce its laws and regulations applicable to foods, dietary supplements and cosmetics, including the ability to institute enforcement actions which often result in consent decrees, injunctions, and the payment of civil penalties by the companies involved. Failure to comply with the FTC’s laws and regulations could impair our ability to market our products.

We are also subject to regulation under various state and local laws that include provisions governing, among other things, the registration, formulation, manufacturing, packaging, labeling, advertising and distribution of foods, dietary supplements and cosmetics. In addition, in the future, we may become subject to additional laws or regulations administered by the FDA or by other federal, state, local or foreign regulatory authorities, to the repeal of laws or regulations that we consider favorable, such as DSHEA, or to more stringent interpretations of current laws or regulations. In the future, we believe the dietary supplement industry will likely face increased scrutiny from federal and state regulatory authorities. It is difficult to predict the effect future laws, regulations, repeals or interpretations will have on our business. However, such changes in the regulatory landscape could require the reformulation of certain products, recalls or discontinuance of certain products, additional administrative requirements, revised or additional labeling, increased scientific substantiation or other new requirements. Any such changes could have a material adverse effect on our business or financial performance.

Corporate Information

We were incorporated in Delaware on September 27, 2002. Our principal executive offices are located at 300 Harmon Meadow Blvd., Secaucus, New Jersey 07094.

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Item 1A. Risk Factors

You should carefully consider the following factors, in addition to other information in this Annual Report on Form 10-K, in evaluating our Company and our business.

Risks Related to Our Business and Industry

We operate in a highly competitive industry and our failure to compete effectively could materially and adversely affect our sales and growth prospects.

The U.S. nutritional supplements retail industry is a large and highly fragmented industry. We compete primarily against other specialty retailers, supermarkets, drug stores, club chains, mass merchants, multi-level marketing organizations and e-commerce companies. This market is highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. As certain products become more mainstream, with broader distribution, we experience increased competition for those products. For example, as the trend in favor of low carb products developed, we experienced increased competition for our low carb products from supermarkets, drug stores, club chains, mass merchants and other food companies. Increased competition from companies that distribute through retail, e-commerce or wholesale channels could have a material adverse effect on our financial condition and results of operations. Certain of our competitors may have significantly greater financial, technical and marketing resources than we do. In addition, our competitors may be more effective and efficient in introducing new products. Furthermore, if we fail to increase the utilization of our supply chain network, fail to maximize the efficiency of our ship direct to customers strategies, or fail to provide our customers with an attractive omni-channel experience, our business and results of operations could be materially and adversely affected. We may not be able to compete effectively, and any of the factors listed above may cause price reductions, reduced margins and losses of our market share.

Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our reputation, which could result in decreased sales and significant fluctuations in our business, financial condition and results of operations.

We depend significantly on consumer perception regarding the safety and quality of our products, as well as similar products distributed by other companies. Consumer perception of products can be significantly influenced by adverse publicity in the form of published scientific research, national media attention or other publicity, whether or not accurate, that associates consumption of our products or any other similar products with illness or other adverse effects, or questions the benefits of our or similar products or that claims that any such products are ineffective. A new product may initially be received favorably, resulting in high sales of that product, but that sales level may not be sustainable as consumer preferences change. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and may not be consistent with earlier favorable research or publicity. Unfavorable research or publicity could have a material adverse effect on our ability to generate sales.

Our failure to appropriately and timely respond to changing consumer preferences and demand for new products and services could significantly harm our customer relationships and our business, financial condition and results of operations.

Our business is subject to changing consumer trends and preferences. Our failure to accurately predict or react to these trends could negatively impact consumer opinion of us as a source for the latest products, which in turn could harm our customer relationships and cause us to lose market share. The success of our product offerings depends upon a number of factors, including our ability to:


•	anticipate customer needs;


•	innovate and develop new products;


•	successfully introduce new products in a timely manner;


•	price our products competitively with retail and online competitors;


•	deliver our products in sufficient volumes and in a timely manner; and


•	differentiate our product offerings from those of our competitors.

If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could be rendered obsolete, which could have a material adverse effect on our sales and other operating results.

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We continue to explore new strategic initiatives, but we may not be able to successfully execute on, or realize the expected benefits from the implementation of our strategic initiatives, and our pursuit of new strategic initiatives may pose significant costs and risks.

Our strategic initiatives are focused on, among other things, new customer acquisition, improving the customer experience through the roll-out of initiatives including increasing customer engagement and personalization, improving the omni-channel experience (including in stores as well as through the internet and mobile devices), providing a relevant and inspiring product assortment and improving customer loyalty and retention. Our future operating results are dependent, in part, on our management’s success in implementing these and other strategic initiatives, and as a result could divert management’s attention from our existing business as management focuses on developing these initiatives and related operations. Also, our short-term operating results could be unfavorably impacted by the opportunity and financial costs associated with the implementation of our strategic plans and we might not realize the benefits from such strategies. In addition, we may not be successful in achieving the intended objectives of the strategic initiatives in a timely manner or at all.

We may experience product recalls, withdrawals or seizures, which could materially and adversely affect our business, financial condition and results of operations.

We may be subject to product recalls, withdrawals or seizures if any of the products we sell or the products that we manufacture for third parties is believed to cause injury or illness or if we are alleged to have violated governmental regulations in the manufacturing, labeling, promotion, sale or distribution of those products. A significant recall, withdrawal or seizure of any of the products we manufacture or sell may require significant management attention, would likely result in substantial and unexpected costs and may materially and adversely affect our business, financial condition or results of operations. Furthermore, a recall, withdrawal or seizure of any of our products may adversely affect consumer confidence in our brands and thus decrease consumer demand for our products. As is common in the VMS industry, except with respect to the products that we manufacture at our manufacturing facility, we rely on our contract manufacturers and suppliers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. In general, we seek representations and warranties, indemnification and/or insurance from our contract manufacturers and suppliers. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in our products. In addition, the failure of those products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from the market, which in certain cases could materially and adversely affect our business, financial condition and results of operations.

Disruptions at our or our contract manufacturers’ manufacturing facilities or loss of our or their manufacturing certifications could materially and adversely affect our business, financial condition, results of operations and customer relationships.

Our private brands merchandise accounted for approximately 22% of our net sales (excluding Nutri-Force net sales) in Fiscal 2017. Any significant disruption in a contract manufacturers’ manufacturing facilities for any reason, including regulatory requirements, an FDA determination that the facility is not in compliance with the cGMP regulations, the loss of certifications, power interruptions, destruction of or damage to facilities, terrorist attacks, civil unrest, war or the perceived threat thereof, fires, hurricanes and other natural disasters could disrupt our contract manufacturers’ ability to manufacture products for the Vitamin Shoppe assortment as well as disrupt our ability to manufacture products for our contract manufacturing customers and our own branded products. Any such disruption could have a material adverse effect on our business, financial condition and results of operations. While we do not believe it would be difficult to source our products from other contract manufacturers, a transition period would be required in order to source our own branded products from other contract manufacturers.

Nutri-Force has incurred operating losses, which are expected to continue in Fiscal 2018. We have implemented initiatives to turnaround the performance of Nutri-Force which may not be successful in achieving the expected improvements.

The improved performance of our manufacturing operation will depend in large part on our ability to realize the benefits from the series of initiatives which have been implemented to reduce complexity. These initiatives included reducing the manufacture of unprofitable product and focusing on core customers, improving efficiencies, establishing core processes and reducing costs and expenses. If the turnaround plan does not achieve its intended results, the anticipated improvements to our operating results may not be realized fully or at all, or may take longer to realize than expected. In addition, we are evaluating strategic alternatives for Nutri-Force, including a potential sale. If we were to sell Nutri-Force, we might have to seek new sources to provide contract manufacturing for some of our private label VMS products. It could take substantial time and resources to transfer production of VMS products to one or more contract manufacturers, which may result in supply chain inefficiencies and adversely affect our ability to satisfy consumer demand. In addition, we may not find new contract

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manufacturers that have sufficient capacity to satisfy our demands, or the ability to meet our quality standards; or, if we do, on terms that are favorable to us, which could have a material adverse effect on our business or financial performance.

Our customers for whom we contract manufacture may significantly influence our business, financial condition and results of operations.

Our contract manufacturing business is dependent on demand for the products we manufacture for our customers and we have no control or influence over the market demand for those products. Demand for our customers’ products can be adversely affected by, among other things, regulatory issues, the loss of patent or other intellectual property rights protection, the emergence of competing products, competition from other contract manufacturers, negative public or consumer perception of those products or our industry and changes in the marketing strategies for such products.

If production volumes of products that we manufacture for third parties and related revenues are not maintained, it may have a material adverse effect on our business, financial condition and results of operations. Additionally, any changes in product mix due to our customers’ products may adversely affect our results of operations.

Increases in the price or shortages of supply of key raw materials could materially and adversely affect our business, financial condition and results of operations.

Our products and the products we manufacture for third parties are composed of certain key raw materials. If the prices of these raw materials were to increase significantly, it could result in a significant increase to us in the prices charged to us for our own branded products and third-party products. Raw material prices may increase in the future and we may not be able to pass on those increases to customers who purchase our products. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on our business, financial condition and results of operations.

We are reliant upon the supply of raw materials that meet our specifications and the specifications of third parties for which we manufacture. If any raw material is adulterated and does not meet our specifications or third parties’ specifications, it could significantly impact our ability to manufacture products and could materially and adversely affect our business, financial condition and results of operations.

In addition, if we are no longer able to obtain products from one or more of our suppliers on terms reasonable to us or at all, our ability to perform under contracts with third parties for whom we manufacture products and our customer relationships could be materially and adversely affected. Events such as terrorist attacks, civil unrest or war, or the perceived threat thereof, may also have a significant adverse effect on raw material availability essential to the manufacturing of our products which could have a material adverse effect on our business, financial condition and results of operations.

The cost of construction materials we use to build and remodel our stores is also subject to significant price volatility based on market and economic conditions. Higher construction material prices would increase the capital expenditures needed to construct a new store or remodel an existing store and could increase the rent payable by the Company under its leases.

We currently rely primarily on two warehouse and distribution facilities to distribute most of the products we sell. Disruptions to these warehouse and distribution facilities could adversely affect our business.

Our primary warehouse and distribution operations are currently concentrated in two locations; in Ashland, Virginia and in Avondale, Arizona. Any significant disruption to our two primary distribution centers operations for any reason, such as a flood, fire or hurricane, could adversely affect our product distributions and sales until we are able to secure an alternative distribution method. Unexpected delays in deliveries or increases in transportation costs (including through increased fuel costs) could significantly decrease our sales and operating results. In addition, labor shortages in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could negatively affect our business.

Failure to increase the utilization of our supply chain network could have a material adverse effect on our business.

If we fail to increase the utilization of our supply chain network and expand functionality of our information technology systems, we could experience increased costs associated with diminished productivity and operating inefficiencies related to the flow of goods through our supply chain, which could have a material adverse effect on our financial results.

Our existing stores, or any stores we open in the future, may not achieve sales and operating levels consistent with current financial projections. In addition, our business could be materially and adversely affected if we are unable to successfully negotiate favorable lease terms.

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Since the beginning of Fiscal 2015, we have opened 91 stores, expanding our presence in our existing markets as well as entering new markets. Historically, our new stores have reached sales that are consistent with our mature stores over the course of approximately four to five years. As part of our strategy, we have reduced the number of planned new store openings in Fiscal 2018 as we focus on the transformation of existing stores. Our new stores opened since the beginning of Fiscal 2013 average approximately 2,900 square feet compared to the average of our total store portfolio of approximately 3,500 square feet. Existing stores, or any new stores we open in the future, may not achieve sales and operating levels consistent with our current financial projections. In addition, customer migration from retail stores to e-commerce may also reduce store potential. The failure of our existing stores and new stores to achieve sales and operating levels consistent with our current financial projections could have a material adverse effect on our financial condition and operating results. As of December 30, 2017, we leased 785 stores along with our corporate headquarters, additional office space and manufacturing and distribution facilities. The store leases are generally for a term of ten years and we have options to extend most leases for a minimum of five years. Our business, financial condition, and operating results could be materially and adversely affected if we are unable to continue to negotiate acceptable lease and renewal terms.

The loss of key management could negatively affect our business.

Our success largely depends on the efforts and abilities of our senior executive group and key personnel. The loss of the services of one or more of our key executives or personnel, or increased demands placed on our key executives and personnel could adversely affect our financial performance and our ability to execute our strategies. Our continued success also depends on our ability to attract and retain qualified team members. We may not be able to attract and retain necessary team members to operate our business.

Our inability to attract, train and retain highly qualified Health Enthusiasts could adversely impact our business, financial condition and results of operations.

Our success depends on the continued contributions of our Health Enthusiasts, and the loss of these contributions could have a material adverse effect on our business. We must attract, train and retain a large number of qualified Health Enthusiasts, while controlling related labor costs and maintaining our core values. Our ability to control labor and benefit costs is subject to numerous external factors, including regulatory changes, prevailing wage rates, and healthcare and other insurance costs. We compete with other retail and non-retail businesses for these Health Enthusiasts and invest significant resources in training and motivating them. We may not be able to attract or retain qualified Health Enthusiasts in the future, which could have a material adverse effect on our business, financial condition and results of operations.

If we fail to protect our brand names, competitors may adopt tradenames that dilute the value of our brand names.

We may be unable or unwilling to strictly enforce our tradenames in each jurisdiction in which we do business. In addition, because of the differences in foreign trademark laws concerning proprietary rights, our trademarks may not receive the same degree of protection in foreign countries as they do in the U.S. Also, we may not always be able to successfully enforce our trademarks against competitors or against challenges by others. Our failure to successfully protect our trademarks could diminish the value and efficacy of our past and future marketing efforts, and could cause customer confusion, which could, in turn, materially and adversely affect our sales and profitability.

Disruptions in our information systems could damage our reputation, be expensive to remedy and have a material adverse effect on our business and results of operations.

We rely extensively on information systems for point-of-sale processing in our stores, our e-commerce business, supply chain, manufacturing operations, financial reporting, human resources and various other processes and transactions. Our information systems, including those provided and maintained by third-party service providers, are subject to damage or interruption from power outages or other types of damage, including those due to computer and telecommunications failures, natural events including hurricanes, fires, floods, earthquakes, tornadoes, high winds and other severe weather, and from events caused by humans, including computer viruses, physical or electronic break-ins and acts of war or terrorism. Any of these events could cause system interruptions, delays and loss of critical data, and could prevent us from accepting and fulfilling customer orders, process and receive shipments of products, process financial and credit card transactions and providing services, which could make our product offerings less attractive and subject us to liability as well as result in lost customer confidence. Additionally, changes in technology could cause our information systems to become obsolete and it may be necessary to incur additional costs to upgrade such systems, and if our information systems prove inadequate to handle our growth, we could lose customers, which could have a material adverse effect on our business, financial condition and results of operations. Our systems are not fully redundant and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation, be expensive to remedy and have a material adverse effect on our business and results of operations.

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If we fail to protect the integrity and security of customer-related and other confidential information, we could be exposed to litigation, increased costs and reputational damage, and our business, results of operations and financial condition could be materially and adversely affected.

The use of individually identifiable data by us, our customers, our Health Enthusiasts and others is regulated at the state, federal and international levels. Privacy and information security laws and regulations change from time to time, and increasing costs of compliance with those laws and regulations and related technology investments could materially and adversely affect our business and results of operations. Additionally, the success of our e-commerce operations depends upon the secure transmission of confidential information over public networks, including the use of cashless payments, and we use computers in substantially all other aspects of our business operations, including for point-of-sale processing in our stores. Such uses give rise to cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. While we have taken significant steps to protect customers’ personal information, consumer preferences and credit card information, and other confidential information including our employees’ private information and financial and strategic data about the Company and our business partners, the intentional or negligent actions of Health Enthusiasts, our suppliers or others may undermine our security measures. As a result, unauthorized parties may obtain access to our data systems and misappropriate confidential data. Furthermore, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate these methods or implement preventative measures, and our incident response efforts may not be entirely effective. Any preventative measures we implement may have the potential to negatively affect our relations with our customers or decrease activity on our websites by making them less user-friendly. If our data security is compromised, it could have a material adverse effect on our reputation, results of operations and financial condition, materially increase the costs we incur to protect against those events in the future and subject us to additional legal risk and a competitive disadvantage. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop shopping at our stores or online. The loss of confidence from a data security breach involving Health Enthusiasts could hurt our, and their, reputations and as a result cause Health Enthusiast recruiting and retention challenges.

Natural disasters and unusually adverse weather conditions could cause permanent or temporary damage to our distribution centers or stores, impair our ability to purchase, receive or replenish inventory or cause customer traffic to decline, all of which could result in lost sales and otherwise materially and adversely affect our results of operations.

The occurrence of one or more natural disasters, such as hurricanes, fires, floods, earthquakes, tornadoes, high winds and other severe weather, could materially and adversely affect our operations and results of operations. To the extent these events result in the closure of our distribution centers, our corporate headquarters, or a significant number of our stores, or to the extent they adversely affect one or more of our key suppliers, our operations and results of operations could be materially and adversely affected through an inability to make deliveries to our stores and through lost sales. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, delays in opening new stores, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from suppliers, delay in the delivery of goods to our distribution centers or stores, the temporary reduction in the availability of products in our stores and disruption to our information systems, as noted above. These events also could have indirect consequences, such as increases in the cost of insurance, if they were to result in significant loss of property or other insurable damage.

Our e-commerce business is dependent on certain third parties. Changes in business practices or terms by such third parties could have a material adverse effect on our results of operations.

Our e-commerce business has several third-party relationships that contribute to our ability to generate revenue from a variety of online sources. These relationships may be dependent upon third-party tools, such as search engines, or established business terms negotiated by the Company, or utilization of third party marketplaces. If the economics of these relationships or the use of the third-party tools used to drive revenue change materially, this could affect our decision to maintain these relationships, and could result in lost sales and otherwise materially and adversely affect our financial performance.

If we do not successfully develop and maintain a relevant omni-channel experience for our customers, our business and results of operations could be materially and adversely affected.

Omni-channel retailing is rapidly evolving, and we must keep pace with changing customer expectations and new developments by our competitors. Our customers are increasingly using computers, tablets, mobile phones, and other devices to shop online. As part of our omni-channel strategy, we are making technology investments. If we are unable to make, improve, or develop relevant customer-facing technology in a timely manner, our ability to compete and our business and results of operations could be materially and adversely affected. In addition, if our e-commerce businesses or our other customer-facing technology systems do not function as designed, we may experience a loss of customer confidence, lost sales, or data security breaches, any of which could materially and adversely affect our business and results of operations.

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We have significant lease obligations, which may require us to continue paying rent for store locations that we no longer operate.

Our stores are leased. We are subject to risks associated with our current and future real estate leases. Our costs could increase because of changes in the real estate markets and supply or demand for real estate sites. We generally cannot cancel our leases, so if we decide to close or relocate a location, we may nonetheless be committed to perform our obligations under the applicable lease including paying the base rent for the remaining lease term. As each lease expires, we may fail to negotiate renewals, either on commercially acceptable terms or any terms at all and may not be able to find replacement locations that will provide for the same success as current store locations. Of the current leases for our stores, 44 expire in Fiscal 2018, 103 expire in Fiscal 2019, 93 expire in Fiscal 2020, 90 expire in Fiscal 2021, 107 expire in Fiscal 2022 and the balance expire in Fiscal 2023 or thereafter.

Our international operations may result in additional market risks, which may harm our business.

As of December 30, 2017, we had 8 international franchise stores in Panama, 5 in Guatemala, 3 in Paraguay and 2 in Costa Rica, and also sell and distribute products to other countries and manufacture products for third parties in other countries. If the opportunity arises, we may expand our operations into new and high-growth international markets. However, we are subject to risks associated with international operations, including but not limited to: (i) fluctuations in currency exchange rates; (ii) changes in international staffing and employment issues; (iii) tariff and other trade barriers; (iv) greater difficulty in using and enforcing our intellectual property rights; (v) failure to understand the local culture and market; (vi) inconsistent product regulation or sudden policy changes by foreign agencies or governments; (vii) compliance with U.S. laws applicable to international operations, including the Foreign Corrupt Practices Act and regulations promulgated by the Office of Foreign Asset Control; (viii) compliance with foreign laws, including tax laws and financial accounting standards; and (ix) political and economic instability and developments. Any of these risks could have a material adverse effect on our international operations and our growth strategy.

If we expand our operations into new international markets, we may enter into business combination transactions, make acquisitions or enter into strategic partnerships, joint ventures or alliances, any of which may be material. We may enter into these transactions to acquire other businesses or products to expand our products or take advantage of new developments and potential changes in the industry. Our lack of experience operating in new international markets and our lack of familiarity with local economic, political and regulatory systems could prevent us from achieving the results that we expect on our anticipated time frame or at all. If we are unsuccessful in expanding into new or high-growth international markets, it could adversely affect our operating results and financial condition.

Legal and Regulatory Risks

We may incur material product liability claims, which could increase our costs and adversely affect our reputation with our customers, which in turn could materially adversely affect our business, financial condition and results of operations.

As a retailer, direct marketer and manufacturer of products designed for human consumption, we are subject to product liability claims if the use of our products or the products that we manufacture for third parties is alleged to have resulted in injury or to include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. Most of our products and the products that we manufacture for third parties are vitamins, minerals, herbs and other ingredients that are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the U. S. Our products or the products that we manufacture for third parties could contain contaminated substances, and some of our products and the products that we manufacture for third parties contain ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. In addition, third-party manufacturers produce many of the products we sell. We rely on these manufacturers to ensure the integrity of their ingredients and formulations. As a distributor of products manufactured by third parties, we may also be liable for various product liability claims for products we do not manufacture. While we attempt to manage these risks by obtaining indemnification agreements from the manufacturers of products that we sell (other than our own branded products) and insurance, third parties may not satisfy their indemnification obligations to us and/or our insurance policies may not be sufficient or available. A product liability claim against us, whether with respect to products of a third party that we sell, our branded products or products that we manufacture for third parties, could result in increased costs and could adversely affect our reputation with our customers, which in turn could materially adversely affect our business, financial condition and results of operations.

We may not be able to obtain insurance coverage in the future at current rates, or we may experience unfavorable claims.

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While we believe we will be able to obtain liability insurance in the future, because of increased selectivity by insurance providers we may only be able to obtain such insurance at increased rates and/or with reduced coverage levels. Additionally, we may experience unfavorable claims. Changes in insurance rates, reduced coverage levels, or unfavorable claims could reduce our income from operations.

Compliance with governmental regulations could increase our costs significantly and adversely affect our operating income.

The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products and the products that we manufacture for third parties are subject to federal laws and regulation by one or more federal agencies, including the FDA, the FTC, the USDA and the EPA. These activities are also regulated by various state, local and international laws and agencies of the states and localities in which our products and the products that we manufacture for third parties are sold. Regulations may prevent or delay the introduction, or require the reformulation, of our products or the products that we manufacture for third parties, which could result in lost sales and increased costs to us. A regulatory agency may not accept the evidence of safety for any new ingredients that we may want to market, may determine that a particular ingredient is not a legal dietary ingredient under DSHEA, may determine that a particular product or product ingredient presents an unacceptable health risk, may determine that a particular statement of nutritional support on our products or that parties use on the products we manufacture for them, or that we want to use on our products or that third parties want to use on the products we manufacture for them, is an unacceptable drug claim or an unauthorized version of a food “health claim.” A regulatory agency may determine that particular claims are not adequately supported by available scientific evidence. Any such regulatory determination would prevent us or third parties, as applicable, from marketing particular products or using certain statements on those products, or force us to recall a particular product, which could adversely affect our sales of those products

We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our operations in the future.

Our operations are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, wastewater discharges, the handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. We are also subject to laws and regulations governing the handling and disposal of raw materials, non-compliant products and waste, the handling of regulated material that is included in our products or products that we manufacture for third parties and the disposal of products at the end of their useful life. These laws and regulations have increasingly become more stringent, and we may incur additional expenses to ensure compliance with existing or new requirements in the future. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations, including operations at our manufacturing facility. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements. In addition, compliance with environmental, health and safety requirements could restrict our ability to expand our facilities or require us to acquire costly pollution control equipment, incur other significant expenses or modify our manufacturing processes.

Our manufacturing facilities use, store and dispose of hazardous substances in connection with the manufacturing processes. It is possible that these facilities may expose us to environmental liabilities associated with historical site conditions that have not yet been discovered. Some environmental laws impose liability for contamination on current and former owners and operators of affected sites, regardless of fault. If remediation costs or potential claims for personal injury or property or natural resource damages resulting from contamination arise, they may be material and may not be recoverable under any contractual indemnity or otherwise from prior owners or operators or any insurance policy. Additionally, we may not be able to successfully enforce any such indemnity or insurance policy in the future. In the event that new or previously unknown contamination is discovered or new cleanup obligations are otherwise imposed at any of our currently or previously owned or operated facilities, we may be required to take additional, unplanned remedial measures and record charges for which no reserves have been recorded.

Congress and/or regulatory agencies may impose additional laws or regulations or change current laws or regulations, and state attorneys general may increase enforcement of existing or new laws, and compliance with new or changed governmental regulations, or any state attorney proceeding, could increase our costs significantly and materially and adversely affect our business, financial condition and results of operations.

From time to time, Congress, the FDA, the FTC, or other federal, state, local or foreign legislative and regulatory authorities may impose additional laws or regulations that apply to us, repeal laws or regulations that we consider favorable to us or impose more stringent interpretations of current laws or regulations. We are not able to predict the nature of such future laws, regulations, repeals or interpretations or to predict the effect that additional governmental regulation, when and if it

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occurs, would have on our business in the future. Those developments could require reformulation of certain products to meet new standards, recalls or discontinuance of certain products (including products that we sell and products that we manufacture for third parties) not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, adverse event reporting or other new requirements. Any developments of this nature could increase our costs significantly and could have a material adverse effect on our business, financial condition and results of operations.

In July 2011, the FDA issued draft guidance governing the notification of new dietary ingredients (“NDIs”) and in August 2016, the FDA issued revised draft guidance. We believe that the draft guidance, if implemented as proposed, would have a material impact on our operations. FDA enforcement of the NDI guidance as written could require us to incur additional expenses, which could be significant, and negatively affect our business in several ways, including, but not limited to, the detention and refusal of admission of imported products, the injunction of manufacturing of any dietary ingredients or dietary supplements until the FDA determines that those ingredients or products are in compliance, and the potential imposition of penalties for non-compliance.

Our failure to comply with FTC regulations could result in substantial monetary penalties and could adversely affect our operating results.

The FTC exercises jurisdiction over the advertising of dietary supplements and has instituted numerous enforcement actions against dietary supplement companies, including us, for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. Failure by us to comply with applicable regulations could result in substantial monetary penalties, which could have a material adverse effect on our financial condition or results of operations.

We may be subject to intellectual property litigation and infringement claims by others.

We may be subject to intellectual property litigation and infringement claims initiated by others, other competitors or entities may assert rights in, or ownership of, our trademarks and other intellectual property rights or in marks that are similar to ours, and we may not be able to successfully resolve these types of conflicts to our satisfaction. Claims and litigation of this nature could cause us to incur significant expenses or prevent us from manufacturing, selling or using some of our products or the products that we manufacture for third parties, which could, in turn, adversely affect our sales and profitability.

Changes in accounting standards and estimates could have a material adverse effect on our results of operations and financial position.

Generally accepted accounting principles and the related authoritative guidance for many aspects of our business, including revenue recognition, inventories, goodwill and intangible assets, leases, income taxes and stock-based compensation, are complex and involve subjective judgments. Changes in these rules or changes in the underlying estimates, assumptions or judgments by our management could have a material adverse effect on our results of operations. For example, recently issued authoritative guidance for lease accounting will result in a significant increase to long-term assets and liabilities given we have a significant number of leases.

The accounting method for our convertible debt securities that may be settled in cash could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board, which we refer to as FASB, issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, which we refer to as ASC 470-20.

Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (including our Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the Company’s economic interest cost. The effect of ASC 470-20 on the accounting for the Convertible Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Convertible Notes. As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Convertible Notes to their face amount over the term of the Convertible Notes. We report lower net income in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results and the trading price of our common stock.

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In addition, under certain circumstances, convertible debt instruments (including the Convertible Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Convertible Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Convertible Notes, then our diluted earnings per share would be adversely affected.

Risks Related to our Capital Structure

Our debt, and potential future additional indebtedness, could adversely affect our results of operations and financial condition and otherwise adversely impact our operating income and growth prospects.

As of December 30, 2017, our total consolidated indebtedness was $140.3 million, consisting of borrowings under our Convertible Senior Notes, our Revolving Credit Facility and our capital lease liabilities.

Our current and potential future debt financing could:


•	increase our vulnerability to general adverse economic, industry and competitive conditions;


•	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, new store growth and other capital expenditures, research and development efforts and other general corporate purposes;


•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;


•	place us at a competitive disadvantage compared to our competitors that have less debt; and


•	limit our ability to borrow additional funds.

Restrictions in the agreements governing our existing and future indebtedness may prevent us from taking actions that we believe would be in the best interest of our business.

The agreements governing our existing indebtedness contain, and the agreements governing our future indebtedness will likely contain, customary restrictions on us or our subsidiaries, including covenants that restrict us or our subsidiaries, as the case may be, from incurring additional indebtedness, granting liens on our assets, making investments, consolidating or merging with another business, selling or otherwise disposing of our assets, paying dividends and entering into transactions with our affiliates.

Our ability to comply with these covenants and other provisions of our Revolving Credit Facility may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events beyond our control. The breach of any of these covenants could result in a default under our debt, which could cause those and other obligations to become immediately due and payable. In addition, these restrictions may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.

Our ability to continue to access credit on the terms previously obtained for the funding of our operations and capital projects may be limited due to changes in credit markets.

In the past, the credit markets and the financial services industry have experienced disruption characterized by the bankruptcy, failure, collapse or sale of various financial institutions, increased volatility in securities prices, diminished liquidity and credit availability and intervention from the U.S. and other governments. Continued concerns about the systemic impact of potential long-term or widespread downturn, energy costs, geopolitical issues, the availability and cost of credit, the global commercial and residential real estate markets and related mortgage markets and reduced consumer confidence have contributed to increased market volatility. The cost and availability of credit has been and may continue to be adversely affected by these conditions. We cannot be certain that funding for our capital needs will be available from our existing financial institutions and the credit markets if needed, and if available, to the extent required and on acceptable terms. The Revolving Credit Facility matures in 2022, and the Convertible Notes mature in 2020. If we cannot renew or refinance this facility and our notes upon their maturities or, more generally, obtain funding when needed, in each case on acceptable terms, such conditions may have an adverse effect on our revenues and results of operations.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

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Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Despite our current debt levels, we may still incur substantially more debt or take other actions which would intensify the risks discussed above.

Despite our current consolidated debt levels, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our Revolving Credit Facility. We will not be restricted under the terms of the indenture governing the Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Convertible Notes. Our Revolving Credit Facility restricts our ability to incur additional indebtedness, including secured indebtedness, but if the facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness.

In December 2015, we issued $143.8 million of 2.25% Convertible Senior Notes due 2020, which could dilute our existing stockholders’ equity and lower our reported earnings per share.

We issued $143.8 million of indebtedness in December 2015 in the form of 2.25% Convertible Senior Notes due 2020. The issuance of the Convertible Notes substantially increased our principal payment obligations. The holders of the Convertible Notes are entitled to convert the Convertible Notes into shares of our common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.

In addition, in the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The convertible notes hedge and warrant transactions we entered into in connection with the issuance of the Convertible Notes may affect the value of the Convertible Notes and our common stock.

In connection with the pricing of the Convertible Notes, we entered into convertible note hedge transactions with the option counterparties. The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be. We also entered into warrant transactions with the option counterparties. However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants.

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of the Convertible Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes, which could affect the noteholders’ ability to convert the Convertible Notes and, to the extent the activity occurs during any observation period related to a conversion of the Convertible Notes, it could affect the number of shares and value of the consideration that the holders will receive upon conversion of the Convertible Notes.

In addition, if any such convertible note hedge and warrant transactions fail to become effective, the option counterparties may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock and the value of the Convertible Notes.

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Hedging instruments often involve counterparty risks.

We will be subject to risk with respect to our counterparties to the convertible notes hedge transactions. Counterparty risk is the risk that the other party in a derivative transaction will not fulfill its contractual obligation. Changes in the credit quality of our counterparties with respect to their derivative transactions may affect the value of those instruments. By entering into derivatives, we assume the risk that these counterparties could experience financial hardships that could call into question their continued ability to perform their obligations.

If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, it is likely to result in a default under such derivative contract, unless such default is cured. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits, leaving us with unsecured exposure and force us to cover our resale commitments, if any, at the then current market price. It may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. A liquid secondary market may not exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

Furthermore, upon the bankruptcy of a counterparty, we may experience significant delays in obtaining any recovery under the derivative contract in a dissolution, assignment for the benefit of creditors, liquidation, winding-up, bankruptcy, or other analogous proceeding. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative transaction and these claims are unsecured, we will be treated as general creditors of such counterparty, and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in such circumstances and the enforceability of agreements for hedging transactions may depend on compliance with applicable statutory and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.

Our failure to meet market expectations could adversely affect the market price and volatility of our stock.

We believe that the price of our stock generally reflects market expectations for our future operating results. Any failure to meet, or delay in meeting, these expectations, including our comparable store sales growth rates, gross margin, earnings and earnings per share could cause the market price of our stock to decline, as could changes in our stock repurchase policies.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 30, 2017, there were 785 Vitamin Shoppe and Super Supplements retail stores open in the United States and Puerto Rico. See “Item 1—Business—Store Counts and Locations” for additional information on our network of stores for Fiscal 2013 through 2017 and the location of our stores as of December 30, 2017. As of December 30, 2017, we leased the property for all of our stores. We do not believe that any individual store property is material to our financial condition or results of operation, however, more highly populated geographic areas may have a higher concentration of store locations. Of the leases for our stores as of December 30, 2017, 44 expire in Fiscal 2018, 103 expire in Fiscal 2019, 93 expire in Fiscal 2020, 90 expire in Fiscal 2021, 107 expire in 2022 and the balance expire in Fiscal 2023 or thereafter. We have options to extend most of these leases for a minimum of five years.

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Our leased properties also include the following:



Location	Description	Square Footage	Lease Termination Year	Renewal Options
North Bergen, New Jersey (1)	Warehouse, Distribution Center and Corporate Offices	230,000	2018	None
Ashland, Virginia	Warehousing and Distribution Center	312,000	2028	Three Five-Year Renewal Options
Avondale, Arizona	Warehousing and Distribution Center	187,000	2029	Three Five-Year Renewal Options
Secaucus, New Jersey	Corporate Headquarters and Corporate Offices	106,000	2029	Two Five-Year Renewal Options and One Five-Year Renewal Option
Miami Lakes, Florida	Manufacturing Facilities	212,000	2021	None


(1)	In 2017, the Company announced its intention to close the North Bergen, New Jersey distribution center prior to or by the August 31, 2018 lease expiration.

We believe that all of our current facilities are in good condition.

Item 3. Legal Proceedings

The Company is party to various lawsuits arising from time to time in the normal course of business, some of which are covered by insurance. Although the impact of the final resolution of these matters on the Company's financial condition, results of operations or cash flows is not known, management does not believe that the resolution of these lawsuits will have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

In addition, on or about August 22, 2017, a federal securities class action suit was filed in the United States District Court in the District of New Jersey against Vitamin Shoppe and certain officers and directors on behalf of purchasers of Vitamin Shoppe common stock between March 1, 2017 and August 6, 2017. The lawsuit seeks remedies under the Securities Exchange Act of 1934, including monetary damages, alleging that the defendants made false and misleading statements regarding the Company's reported goodwill, initiatives designed to improve the Company's financial performance, the Company’s profitability trends, and its financial results. We believe this lawsuit is without merit, and we are vigorously defending the lawsuit.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Market Information

Since October 28, 2009, our common stock has been traded on the New York Stock Exchange (“NYSE”) under the trading symbol “VSI”. At December 30, 2017, there were 24,021,948 common shares outstanding, and the closing sale price of our common stock was $4.40. Also as of that date, we had approximately 181 common shareholders of record. The table below sets forth the high and low sale prices of our common stock for the periods indicated:



Fiscal period	High		Low
2017 Quarter ended:
March	$	24.85	$	18.25
June	20.70		9.80
September	12.00		4.95
December	5.75		2.95
2016 Quarter ended:
March	$	33.67	$	26.02
June	31.66		27.13
September	32.31		26.23
December	28.41		21.90

Issuer Purchases of Equity Securities

The following table summarizes the Company’s purchases of shares of common stock during the quarter ended December 30, 2017 :



Period	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in thousands) (2)
October 1, 2017 through October 28, 2017	—	$	—	—	$	100,066
October 29, 2017 through November 25, 2017	3,347	$	4.40	—	$	100,066
November 26, 2017 through December 30, 2017	—	$	—	—	$	100,066
Totals	3,347			—


(1)	Shares withheld to cover required tax payments on behalf of employees as their restricted shares vest.

(2)

On August 5, 2014, May 6, 2015 and November 23, 2015, the Company’s board of directors approved share repurchase programs that enable the Company to purchase up to an aggregate of $300 million of its shares of common stock from time to time over three year periods ending on August 4, 2017, May 5, 2018 and November 22, 2018, respectively. On May 5, 2017, the Company's board of directors authorized the repurchase of up to an additional $70.0 million of equity and equity-linked securities. This repurchase authorization expires on November 22, 2018.

Stock Performance Graph

The line graph below compares the cumulative total stockholder return on the Company’s common stock with the Russell 2000 Index (RUT), S&P Retail Index (SPXRT) and the NYSE Composite Index (NYA) for the five year period from December 29, 2012 through December 30, 2017. The graph assumes an investment of $100 made at the closing of trading on

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December 28, 2012, in (i) the Company’s common stock, (ii) the stocks comprising the RUT, (iii) the stocks comprising the SPXRT and (iv) the stocks comprising the NYA. All values assume reinvestment of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends are paid on those securities during the applicable time period.



	12/29/2012	12/28/2013	12/27/2014	12/26/2015	12/31/2016	12/30/2017
Vitamin Shoppe, Inc.	100.00	91.89	84.26	59.86	42.43	7.86
Russell 2000 Index	100.00	139.54	146.04	138.78	163.10	184.53
S&P Retail Index	100.00	146.08	160.58	200.38	210.00	271.10
NYSE Composite Index	100.00	124.50	132.10	123.36	132.96	154.02

This graph and the accompanying table are not “soliciting material”, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference in any filing by us under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Share Repurchase Programs

Dividends

We have not paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.

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Item 6. Selected Financial Data

We have derived the selected financial data presented below from our consolidated financial statements for the Fiscal Years ended December 30, 2017, December 31, 2016, December 26, 2015, December 27, 2014, and December 28, 2013. Financial results for all fiscal years presented are based on a 52-week period, with the exception of financial results for the Fiscal Year ended December 31, 2016 which are based on a 53-week period, unless otherwise stated. The selected financial data for the Fiscal Years ended December 30, 2017, December 31, 2016, and December 26, 2015 presented below, should be read in conjunction with such consolidated financial statements and notes included herein and in conjunction with Item 7., “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ”.

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	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015			December 27, 2014			December 28, 2013
	(data presented in thousands, except for share, per share data, number of stores and average store square footage)
Statement of Operations Data:
Net sales	$	1,178,694		$	1,289,243		$	1,266,549		$	1,213,046		$	1,087,469
Cost of goods sold	821,137			862,887			847,634			808,787			709,823
Gross profit	357,557			426,356			418,915			404,259			377,646
Selling, general and administrative expenses	345,494			340,752			328,745			301,184			267,354
Goodwill, intangible assets and store fixed-assets impairment charges	274,876			40,027			1,177			419			—
Income (loss) from operations	(262,813		)	45,577			88,993			102,656			110,292
Interest expense, net	9,701			9,523			1,105			495			495
Income (loss) before provision (benefit) for income taxes	(272,514		)	36,054			87,888			102,161			109,797
Provision (benefit) for income taxes	(20,363		)	11,090			34,717			40,920			43,251
Net income (loss)	$	(252,151	)	$	24,964		$	53,171		$	61,241		$	66,546
Weighted average shares outstanding:
Basic	23,137,977			23,875,540			28,954,804			30,239,183			29,992,620
Diluted	23,137,977			24,067,686			29,203,429			30,664,105			30,541,057
Net income (loss) per share:
Basic	$	(10.90	)	$	1.05		$	1.84		$	2.03		$	2.22
Diluted	$	(10.90	)	$	1.04		$	1.82		$	2.00		$	2.18
Other Financial Data:
Depreciation and amortization of fixed and intangible assets	$	39,204		$	38,780		$	38,495		$	34,219		$	28,026
Acquisition and integration related costs (1)	$	—		$	—		$	1,874		$	10,242		$	4,336
Operating Data:
Number of stores at end of period	785			775			758			717			659
Total retail square feet at end of period	2,737			2,709			2,662			2,568			2,390
Average store square footage at end of period	3,486			3,495			3,511			3,582			3,627
Net sales per store (2)	$	1,303		$	1,431		$	1,426		$	1,453		$	1,471
Comparable store net sales (3)	(6.9		)%	(1.5		)%	0.1		%	2.8		%	3.5		%
VS.com comparable net sales (4)	(12.3		)%	7.3		%	(6.5		)%	9.0		%	13.9		%
Balance Sheet Data:
Working capital	$	155,231		$	151,548		$	157,089		$	125,382		$	172,341
Total assets	488,753			734,184			748,691			722,391			682,064
Total debt, including capital lease obligations	140,327			133,371			123,525			8,195			347
Stockholders’ equity	195,367			439,996			475,301			551,934			528,340


(1)	For Fiscal 2015, these amounts represent costs incurred related to the integration of Nutri-Force. In Fiscal 2014, these amounts related to acquisition costs of $3.4 million and integration costs of $1.4 million ($0.6 million for Nutri-Force and $0.8 million for Super Supplements), charges to cost of goods sold for the inventory valuation step-up of $4.5

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million and the contingent consideration adjustment for the Nutri-Force acquisition of $1.0 million. In Fiscal 2013, these amounts represent costs incurred related to the acquisition and integration of Super Supplements.


(2)	Net sales per store are calculated by dividing retail net sales fulfilled in stores by the number of stores open at the end of the period.


(3)	A new retail store is included in comparable store net sales after 410 days of operation, and acquired retail stores from the Super Supplements acquisition are included in comparable store net sales after 365 days. For Fiscal 2016, comparable store net sales growth is based on a 52-week period.


(4)	For Fiscal 2016, VS.com comparable net sales is based on a 52-week period.

For additional information on certain costs included in our operating results, refer to Note 17., “Selected Quarterly Financial Information (unaudited)” to our consolidated financial statements included in this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual Report on Form 10-K. The discussion in this section contains forward-looking statements that are based upon current information and expectations. We sometimes identify forward-looking statements with such words as “may”, “expect”, “intend”, “anticipate”, “plan”, “believe”, “seek”, “should”, “estimate”, “outlook”, “trends”, “future benefits”, “strategies”, “goals” and similar words. The forward-looking statements contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, general and administrative expenses, capital resources, liquidity, capital expenditures, new stores, integration of acquisitions, retail inflation, additional financings or borrowings and are subject to risks and uncertainties including, but not limited to, those discussed below and elsewhere in this Annual Report on Form 10-K that could cause actual results to differ materially from the results contemplated by these forward-looking statements. We also urge you to carefully review the risk factors set forth in Item 1A. – “Risk Factors”. See also “Forward-Looking Statements” for additional information regarding forward-looking statements.

References to “Fiscal” or “Fiscal Year” mean the fifty-two weeks ended December 30, 2017, the fifty-three weeks ended December 31, 2016 and the fifty-two weeks ended December 26, 2015 for Fiscal Year 2017, Fiscal Year 2016 and Fiscal Year 2015, respectively.

Overview

We are an omni-channel specialty retailer and contract manufacturer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products. We market approximately 900 nationally recognized brands as well as our own brands, which include The Vitamin Shoppe®, BodyTech®, True Athlete®, Mytrition®, plnt®, ProBioCare®, Next Step® and Betancourt Nutrition®. We believe we offer one of the largest varieties of products among VMS retailers and continue to refine our assortment with approximately 7,000 SKUs offered in our typical store and approximately 10,000 additional SKUs available through e-commerce. We believe our product offering and emphasis on product knowledge and customer service helps us meet the needs of our target customer and serves as a foundation for enhancing strong customer loyalty.

We continue to focus on our strategy to improve the customer experience through the roll-out of initiatives including increasing customer engagement and personalization, redesigning the omni-channel experience (including in stores as well as through the internet and mobile devices), growing our private brands and improving the effectiveness of pricing and promotions. As part of this strategy, we have developed several initiatives, including a new remodeled store format that is being piloted in 20 stores as of December 30, 2017. This new store format includes a new layout, revised product assortment and other instore experiences (hereafter referred to as "transformations").

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2017, the Company renegotiated rent expenses with a number of landlords resulting in lower occupancy costs of $9.5 million over the remaining lease periods, or approximately $0.9 million on average per year through 2027.

Impairment of long-lived assets :

During the second quarter of Fiscal 2017, the Company had experienced a significant reduction to its market capitalization. Additionally, as a result of changed market conditions and the Company's updated initiatives for the second half of Fiscal 2017, the Company revised the outlook for Fiscal 2017 and updated its long-range plan to reflect its operations in this increasingly competitive environment. Based on these factors, the Company concluded that an impairment trigger occurred for the retail reporting unit and therefore interim impairment tests of goodwill and other intangible assets were performed. The results of the interim goodwill impairment test indicated that the carrying value of the retail reporting unit exceeded its fair value, and in accordance with the early adoption of ASU 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment, the Company recorded an impairment charge on the goodwill of its retail segment of $164.3 million during the second quarter of Fiscal 2017, of which $130.9 million is not deductible for income tax purposes.

During the third quarter of Fiscal 2017, the Company experienced another significant reduction to its market capitalization. As a result, the Company concluded that an impairment trigger occurred for the retail reporting unit and therefore interim impairment tests of goodwill and other intangible assets were performed. The Company also had recently updated its long-range plan. The results of the interim goodwill and other intangible assets impairment tests indicated that the carrying value of the Vitamin Shoppe tradename exceeded its fair value and that the carrying value of the retail reporting unit exceeded its fair value. The Company recorded an impairment charge on the Vitamin Shoppe tradename of $59.4 million during the third quarter of Fiscal 2017. The Company also recorded an impairment charge for the remaining goodwill of its retail segment of $46.3 million during the third quarter of Fiscal 2017, which is not deductible for income tax purposes.

Should the financial performance of the retail reporting unit not meet or exceed current forecasts, or if the long-range plan is lowered, or if the rate used to discount cash flows is increased due to the associated risk, estimates of future cash flows may be insufficient to support the Vitamin Shoppe tradename of $9.0 million as of December 30, 2017 and this may result in further impairment charges.

In addition, the Company recognized store impairment charges of $4.8 million during Fiscal 2017 on fixed assets related to 34 of its underperforming retail locations still in use in the Company's operations.

Manufacturing turnaround:

In the fourth quarter of Fiscal 2016 the Company recorded impairment charges of $32.6 million on goodwill and $6.6 million on the customer relationships intangible asset of Nutri-Force, as our manufacturing operations continued to perform below expectations. During the first quarter of Fiscal 2017, the Company engaged outside consultants to perform an assessment of the operations of Nutri-Force and to assist in the development of initiatives required to turnaround this business unit. These initiatives were focused on improving the efficiency of manufacturing processes, eliminating unprofitable SKUs, reducing third-party customers, and reducing costs. The implementation of this plan began during the second quarter of Fiscal 2017 and has been substantially completed in Fiscal 2017. As a result, the Company incurred costs of approximately $12.3 million during Fiscal 2017 related to the turnaround of Nutri-Force including inventory charges, consulting expenses and other related charges.

Closing of distribution center:

In August 2017, the Company announced its intention to close the North Bergen, New Jersey distribution center prior to or by the August 31, 2018 lease expiration. Distribution operations have been transitioned to the Company's other distribution centers. Costs related to this closure, such as severance, inventory related costs and other charges are $3.1 million in Fiscal 2017. As a result of this closure, the Company anticipates annualized savings between $4.0 million to $5.0 million upon lease expiration.

Trends and Other Factors Affecting Our Business

Our performance is affected by industry trends including, among others, demographic, health and lifestyle preferences, as well as other factors, such as industry media coverage and governmental actions. For example, our industry is subject to

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potential regulatory activity and other legal matters that could affect the credibility of a given product or category of products. Consumer trends, the overall impact on consumer spending, which may be affected heavily by current economic conditions, and limited product innovation and introductions in the VMS industry can dramatically affect purchasing patterns. Even though our business model allows us to respond to changing industry trends by introducing new products and adjusting our product mix and sales incentives, such actions may not offset adverse trends.

Additionally, our performance is affected by competitive trends such as the entry and expansion of competitors, changes in pricing and promotional strategies or expansion of product assortment by various competitors. Over recent years, there has been a shift of market share from specialty retailers to other channels such as mass market retailers, supermarket chains, club chains, drug store chains and e-commerce companies. This broader competitive channel availability of VMS products represents a challenge for the Company to keep pace with industry growth rates. We also have observed more competition in our assortment, and more competitive pricing and promotional strategies by competitors and increased levels of marketing spending.

Our historical results have also been significantly influenced by our new store openings. Since the beginning of Fiscal 2015, we have opened 91 stores and as of December 30, 2017 operate 785 stores located in 45 states, the District of Columbia and Puerto Rico. At this point we have significantly slowed new store growth while we complete an evaluation of our store network strategy. In addition, we remain committed to innovation at the store level and we have been rolling out two key elements of new category innovation with our new Kombucha bar on tap and Fit Freezer / Cooler section to over 80 stores in Fiscal 2017.

New stores have typically required approximately four to five years to mature, generating lower store level sales in the initial years than our mature stores. As a result, new stores generally have a negative impact on our overall operating margin. In addition, our new stores since the beginning of Fiscal 2013 are approximately 2,900 square feet compared to the average of our total store portfolio of approximately 3,500 square feet. Additionally, stores opened in new markets have lower brand awareness compared to stores in existing markets, and as a result initially experience a lower sales volume than stores opened in existing markets. As these stores mature, we expect them to contribute positively to our operating results.

Beginning in Fiscal 2016, the Company implemented enhancements to its loyalty program, including the issuance of credit certificates on a quarterly basis compared with the annual issuances under the previous program. Under the enhanced loyalty program, the related benefits are spread on a quarterly basis throughout the fiscal year. As a result, in the first quarter of Fiscal 2017, the related benefits of the quarterly program resulted in lower loyalty program related sales than the first quarter of Fiscal 2016 which were based on the annual cadence of the previous program.

In the fourth quarter of 2016, the Company entered into an agreement to lease a warehousing and distribution facility in Avondale, Arizona, which opened in the third quarter of Fiscal 2017. We incurred approximately $16.0 million of capital expenditures related to the opening of this facility. We previously utilized a third-party logistics provider to service the west coast. We believe operating our own facility will provide improved service levels and network efficiencies.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those that are the most important portrayal of our financial condition and results of operations, and require our most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements, our most critical accounting policies, discussed below, pertain to revenue recognition, inventories, impairment of long-lived assets, and goodwill and other intangible assets. In applying such policies, we must use some amounts that are based upon our informed judgments and best estimates. Estimates, by their nature, are based on judgments and available information. The estimates that we make are based upon historical factors, current circumstances and the experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis.

Revenue Recognition . We recognize revenue upon sale of our products when merchandise is sold “at point of sale” in retail stores or upon delivery to a customer. Wholesale revenue is recognized when risk of loss, title and insurable risks have transferred to the customer. All revenue is recognized net of sales returns. In addition, we classify amounts billed to customers that represent shipping fees as sales. To arrive at net sales, gross sales are reduced by deferred sales, customer discounts, actual customer returns, and a provision for estimated future customer returns, which is based on management’s review of historical and current customer returns. Sales taxes collected from customers are presented on a net basis and as such are excluded from revenue.

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Inventories . Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing the product to its existing condition and location. Finished goods inventory includes costs on freight on internally transferred merchandise, and costs associated with our buying department, distribution facilities, and manufacturing overhead, which are capitalized into inventory and then expensed as merchandise is sold. In addition, the cost of inventory is reduced by purchase discounts and other allowances received from certain of our vendors. We adjust our inventory to reflect situations in which the cost of inventory is not expected to be recovered. We regularly review our inventory, including when a product is close to expiration and not expected to be sold, when a product has reached its expiration date, or when a product is not expected to be saleable. In determining the reserves for these products we consider factors such as the amount of inventory on hand and its remaining shelf life, and current and expected market conditions, including management forecasts and levels of competition. In addition, we have established a reserve for estimated inventory shrinkage between physical inventories. Physical inventories and cycle counts are taken on a regular basis, and inventory is adjusted accordingly. For each reporting period, we estimate inventory shrinkage based on a historical trend analysis. We have evaluated the current level of inventory considering historical trends and other factors, and based on our evaluation, have recorded adjustments to reflect inventory at net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions, customer demand or competition differ from expectations. These estimates require us to make assessments about the future demand for our products in order to identify such inventory items as slow moving, expiring, obsolete or in excess of need. These future estimates are subject to the ongoing accuracy of management’s forecasts of market conditions, industry trends and competition. We are also subject to volatile changes in specific product demand as a result of unfavorable publicity, government regulation and rapid changes in demand for new and improved products or services. Inventory reserves were $6.5 million and $8.6 million at December 30, 2017 and December 31, 2016, respectively.

Long-Lived Assets. The Company reviews the carrying value of all long-lived assets for impairment, primarily at an individual store level, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The frequency of these tests may change in future periods if performance warrants. Our impairment analyses determine whether projected cash flow from operations are sufficient to recover the carrying value of these assets. Impairment may result when the carrying value of the asset exceeds the estimated undiscounted future cash flows over its remaining useful life. For store impairment, our estimate of undiscounted future cash flows over the store lease term is based upon our experience, the historical operations of the stores and estimates of future store profitability and economic conditions. The estimates of future store profitability and economic conditions require estimating various factors including sales growth, gross margin, employment costs and inflation, and as a result are subject to variability. Actual future results may differ from those estimates. If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the difference between the asset's carrying value and its fair value. Long-lived assets are measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. The fair value is based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital.

Significant assumptions used in these projections include an assessment of future store profitability, future overall economic conditions, our ability to control future costs and successfully implement initiatives designed to enhance sales and gross margins. To the extent that management's estimates of future performance are not realized, future assessments could result in material impairment charges.

The Company is exploring strategic alternatives related to Nutri-Force, including the potential sale of this subsidiary. In the event suitable terms related to a potential divestiture of Nutri-Force are negotiated, Company management is required to obtain approval from its Board of Directors in order to move forward with a transaction.

As of December 30, 2017, in accordance with ASC 360, Property, Plant and Equipment, the Company prepared a probability-weighted undiscounted cash flow estimate considering the likelihood of the possible outcomes in order to assess the recoverability of the net assets of Nutri-Force. The results of this analysis demonstrated that the probability-weighted undiscounted cash flows associated with the possible outcomes exceeded the carrying value of the net assets of Nutri-Force, which are classified as held and used until management obtains approval from its Board of Directors.

If a sale of Nutri-Force were to occur, the negotiated terms could result in a material change from the probability-weighted undiscounted cash flows used in the recoverability analysis, and could result in a loss being recognized by the Company for this transaction.

Indefinite-lived Intangible Asset. The Company's one indefinite-lived intangible asset is the Vitamin Shoppe tradename. On an annual basis, or whenever impairment indicators exist, we perform an evaluation of our tradename. In the absence of any impairment indicators, our tradename is tested in the fourth quarter of each fiscal year. The evaluation of our tradename may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the tradename is less than its carrying value. A quantitative

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evaluation is performed if the qualitative evaluation results in a more likely than not determination or if a qualitative evaluation is not performed. For the indefinite-lived tradename, we utilize the royalty relief method in our quantitative evaluations.

Based on the existence of an impairment indicator during the third quarter of Fiscal 2017, namely the sustained decrease in our market capitalization, the Company performed an interim quantitative assessment of the fair value of the Vitamin Shoppe tradename based on the royalty relief method. The significant inputs to this valuation model were the Company’s revenue projections, the royalty rate and the discount rate. The revenue projections were based on the Company’s updated long-range plan and excluded the net sales attributable to the manufacturing reporting segment. The royalty rate was derived using a Company specific profit split analysis, as compared to royalty data from the market, given the recent circumstances regarding the Company's performance. The discount rate was based on a weighted average cost of capital calculation, which was adjusted for the associated risk.

Based on this analysis, the fair value of the Vitamin Shoppe tradename was $9.0 million as compared to the carrying value of $68.4 million. As a result, the Company recorded an impairment charge on the Vitamin Shoppe tradename of $59.4 million in the third quarter of Fiscal 2017.

Our annual and interim impairment reviews require extensive use of accounting judgment and financial estimates. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business. Future events could cause us to conclude that impairment indicators exist, and therefore that our tradename may be further impaired. The valuation of our tradename is affected by, among other things, our business plan for the future and estimated results of future operations. Changes in the business plan, operating results, or application of alternative assumptions that are different than the estimates used to develop the valuation of the asset may materially impact the valuation.

General Definitions for Operating Results

Net Sales consist of sales, net of sales returns, deferred sales, customer incentives and a provision for estimated future returns. Total comparable net sales include retail sales fulfilled in stores and direct to consumer sales. Sales generated by retail stores after 410 days of operation are included in comparable net sales. Sales to third parties of manufactured products generated by Nutri-Force are considered non-comparable sales.

Cost of goods sold includes the cost of inventory sold, costs of warehousing, distribution, manufacturing and store occupancy costs. Warehousing, distribution and manufacturing costs, which are capitalized into inventory and then expensed as merchandise is sold, include freight to transfer merchandise, costs associated with our buying department, distribution facilities and manufacturing overhead. Store occupancy costs include rent, common area maintenance, real estate taxes and utilities.

Gross profit is net sales minus cost of goods sold.

Selling, general and administrative expenses consist of operating payroll and related benefits, advertising and promotion expense, depreciation and amortization expenses not capitalized in cost of goods sold, and other selling, general and administrative expenses.

Income (loss) from operations consists of gross profit minus selling, general and administrative expenses.

Interest expense, net includes interest on our Convertible Notes and Revolving Credit Facility, letters of credit fees, interest on our capital leases, as well as amortization of financing costs, reduced by interest income earned from highly liquid investments (investments purchased with an original maturity of three months or less).

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Key Performance Indicators and Statistics

We use a number of key indicators of financial condition and operating results to evaluate the performance of our business, including the following (in thousands):



	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Net sales	$	1,178,694		$	1,289,243		$	1,266,549
Decrease in total comparable net sales (1)	(6.5		)%	(0.9		)%	—		%
Increase (Decrease) in comparable store net sales	(6.9		)%	(1.5		)%	0.1		%
Increase (Decrease) in VS.com comparable net sales (2)	(12.3		)%	7.3		%	(6.5		)%
Gross profit as a percent of net sales	30.3		%	33.1		%	33.1		%
Income (loss) from operations	$	(262,813	)	$	45,577		$	88,993


(1)	Total comparable net sales are comprised of comparable fulfilled in retail store sales and direct to consumer sales.


(2)	VS.com comparable net sales excludes sales from third party marketplaces.

The following table shows the growth in our network of stores for Fiscal 2017, 2016 and 2015:



	Fiscal Year
	2017		2016		2015
Stores open at beginning of year	775		758		717
Stores opened	15		26		50
Stores closed	(5	)	(9	)	(9	)
Stores open at end of year	785		775		758

Results of Operations

The information presented below is for the Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015 and was derived from our audited consolidated financial statements, which, in the opinion of management, includes all adjustments necessary for a fair presentation of our financial position and operating results for such periods and as of such dates. The following table summarizes our results of operations for the Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015 as a percentage of net sales:



	Fiscal Year Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Net sales	100.0	%	100.0	%	100.0	%
Cost of goods sold	69.7	%	66.9	%	66.9	%
Gross profit	30.3	%	33.1	%	33.1	%
Selling, general and administrative expenses	29.3	%	26.4	%	26.0	%
Goodwill, intangible assets and store fixed-assets impairment charges	23.3	%	3.1	%	0.1	%
Income (loss) from operations	(22.3	)%	3.5	%	7.0	%
Interest expense, net	0.8	%	0.7	%	0.1	%
Income (loss) before provision (benefit) for income taxes	(23.1	)%	2.8	%	6.9	%
Provision (benefit) for income taxes	(1.7	)%	0.9	%	2.7	%
Net income (loss)	(21.4	)%	1.9	%	4.2	%

Figures may not sum due to rounding.

The results of operations presented for the Fiscal years ended December 30, 2017 and December 26, 2015 are each based on a 52-week period ("Fiscal 2017" and "Fiscal 2015"). The results of operations presented for the Fiscal year ended December 31, 2016 are based on a 53-week period ("Fiscal 2016").

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Fiscal 2017 Compared to Fiscal 2016

The following tables summarize our results of operations for Fiscal 2017 and Fiscal 2016 (in thousands):



	Fiscal Years Ended
	December 30, 2017			December 31, 2016			$ Change			% Change
Net sales	$	1,178,694		$	1,289,243		$	(110,549	)	(8.6	)%
Cost of goods sold	821,137			862,887			(41,750		)	(4.8	)%
Cost of goods sold as % of net sales	69.7		%	66.9		%
Gross profit	357,557			426,356			(68,799		)	(16.1	)%
Gross profit as % of net sales	30.3		%	33.1		%
Selling, general and administrative expenses	345,494			340,752			4,742			1.4	%
SG&A expenses as % of net sales	29.3		%	26.4		%
Goodwill, intangible assets and store fixed-asset impairment charges	274,876			40,027			234,849			nm
Goodwill, intangible assets and store fixed-asset impairment charges as % of net sales	23.3		%	3.1		%
Income (loss) from operations	(262,813		)	45,577			(308,390		)	nm
Income (loss) from operations as % of net sales	(22.3		)%	3.5		%
Interest expense, net	9,701			9,523			178			1.9	%
Income (loss) before provision (benefit) for income taxes	(272,514		)	36,054			(308,568		)	nm
Provision (benefit) for income taxes	(20,363		)	11,090			(31,453		)	nm
Net income (loss)	$	(252,151	)	$	24,964		$	(277,115	)	nm

nm - not meaningful

Net Sales

The decrease in net sales was primarily due to the decrease in total comparable net sales of $78.8 million, or 6.5%, and the 53rd week sales of $20.2 million in Fiscal 2016. On a 52 week basis, the decrease in net sales was primarily the result of decreases in Sports Nutrition product categories of $48.6 million and Nutri-Force net merchandise sales to third parties of $17.2 million.

Net sales for our two business segments, as well as a discussion of the changes in each segment’s net sales from the comparable prior year period, are provided below (in thousands):



	Fiscal Years Ended
	December 30, 2017			December 31, 2016 *			$ Change			% Change
Net Sales:
Retail (a)	$	1,146,500		$	1,239,226		$	(92,726	)	(7.5	)%
Manufacturing (b)	81,607			87,684			(6,077		)	(6.9	)%
Segment net sales	1,228,107			1,326,910			(98,803		)	(7.4	)%
Elimination of intersegment revenues	(49,413		)	(37,667		)	(11,746		)	31.2	%
Total net sales	$	1,178,694		$	1,289,243		$	(110,549	)	(8.6	)%

* Prior period has been revised to present the Company's new reportable segments.


(a)	The change in retail sales resulted from a decrease in our total comparable net sales of $78.8 million, or 6.5% and the 53rd week sales of $19.6 million in Fiscal 2016 partially offset by an increase in our total non-comparable sales of $5.7 million. The decrease in total comparable net sales was primarily due to lower sales in the Sports Nutrition product categories.


(b)	Manufacturing sales reflect a decrease in product manufactured for third parties of $17.8 million partially offset by an increase of $11.7 million in product manufactured for the Vitamin Shoppe assortment. Manufacturing sales in the 53rd

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week of Fiscal 2016 were $1.2 million of which $0.6 million was product manufactured for the Vitamin Shoppe assortment and $0.6 million was product manufactured for third parties.

Cost of Goods Sold

The dollar decrease of cost of goods sold was primarily due to the decrease in sales, including sales from the 53rd week of Fiscal 2016. Cost of goods sold as a percentage of net sales increased 1.2% due to supply chain costs, 1.1% of deleverage of retail occupancy costs and 0.5% related to Nutri-Force. Cost of goods sold for Fiscal 2017 includes $7.2 million of restructuring costs related to the turnaround of Nutri-Force and $2.8 million for the closing of our North Bergen, New Jersey distribution center and for Fiscal 2016 includes $0.4 million related to Super Supplements conversion costs and Canada stores closing costs.

Selling, General and Administrative Expenses



	Fiscal Years Ended
	December 30, 2017			December 31, 2016			$ Change			% Change
SG&A Expenses (in thousands):
Store Payroll and Benefits (a)	$	137,941		$	135,722		$	2,219		1.6	%
Store Payroll & benefit as % of net sales	11.7		%	10.5		%
Advertising and Promotion (b)	27,283			21,897			5,386			24.6	%
Advertising & promotion as % of net sales	2.3		%	1.7		%
Other SG&A (c)	180,270			183,133			(2,863		)	(1.6	)%
Other SG&A as % of net sales	15.3		%	14.2		%
Total SG&A Expenses	$	345,494		$	340,752		$	4,742		1.4	%


(a)	Store payroll and benefits increased primarily due to an increase in average wage rate and higher health insurance costs.


(b)	Advertising and promotion expenses increased primarily due to higher retail expenditures focused on improving customer acquisition trends as a result of the competitive environment in our industry.

(c)

Other selling, general and administrative expenses in Fiscal 2017 includes Nutri-Force turnaround costs of $5.1 million and costs related to the closing of our North Bergen, New Jersey distribution center of $0.3 million and Fiscal 2016 included outside consulting costs relating to a project to identify and implement cost reduction opportunities of $3.8 million, costs related to the closing of the Canada stores of $2.1 million, Super Supplements conversion costs of $1.3 million and reinvention strategy costs of $0.5 million.

Goodwill, Intangible Assets and Store Fixed-Asset Impairment Charges

Fiscal 2017 includes impairment charges on the goodwill of the retail segment of $210.6 million, an impairment charge related to the Vitamin Shoppe tradename of $59.4 million and impairment charges on the fixed assets of retail stores of $4.8 million. Fiscal 2016 includes an impairment charge on the goodwill of the manufacturing segment of $32.6 million, an impairment charge on the customer relationships intangible asset of the manufacturing segment of $6.6 million and impairment charges on the fixed assets of retail stores of $0.8 million. For additional information, refer to Note 4., "Goodwill and Intangible Assets" to our consolidated financial statements included in this Annual Report on Form 10-K.

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Income (Loss) from Operations

Operating income (loss) for our two business segments are provided below (in thousands):



	Fiscal Years Ended
	December 30, 2017			December 31, 2016 *			$ Change			% Change
Income (loss) from operations:
Retail (a)	$	85,016		$	148,552		$	(63,536	)	(42.8	)%
% of net sales	7.4		%	12.0		%
Manufacturing (b)	(18,305		)	(44,223		)	25,918			(58.6	)%
% of net sales	(22.4		)%	(50.4		)%
Corporate costs (c)	(329,524		)	(58,752		)	(270,772		)	nm
% of net sales	(28.0		)%	(4.6		)%
Income (loss) from operations	$	(262,813	)	$	45,577		$	(308,390	)	nm

* Prior period has been revised to present the Company's new reportable segments.

nm - not meaningful


(a)	The decrease in retail income from operations as a percentage of sales is primarily due to supply chain deleverage of 1.2%, occupancy deleverage of 1.1%, store payroll and benefits of 1.1%, advertising and promotion expenses of 0.7% and store impairment charges of 0.4%.


(b)	The loss from operations of the manufacturing segment increased approximately $1.0 million after considering Fiscal 2017 includes Nutri-Force turnaround costs of $12.3 million and Fiscal 2016 includes impairment charges of $32.6 million on goodwill and $6.6 million on the customer relationships intangible asset of Nutri-Force.


(c)	Corporate costs in Fiscal 2017 includes goodwill impairment charges of $210.6 million and a tradename impairment charge of $59.4 million and corporate costs in Fiscal 2016 included outside consulting costs relating to a project to identify and implement cost reduction opportunities of $3.8 million and reinvention strategy costs of $0.5 million.

Interest Expense, Net

The increase in interest expense, net was primarily due to an increase in borrowing activity on the Revolving Credit Facility in Fiscal 2017 as compared to Fiscal 2016.

Provision (Benefit) for Income Taxes

The effective provision (benefit) tax rate for Fiscal 2017 was (7.5%), compared to 30.8% for Fiscal 2016. The change in the effective tax rate is primarily due to the non-deductible portion of the goodwill impairment charges and $15.3 million of tax expense resulting from the change in valuation of deferred tax assets and liabilities under the Tax Cut and Jobs Act of 2017. The effective tax rate in Fiscal 2016 included a $3.0 million tax benefit resulting from the write-off of the Canada investment.

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Fiscal 2016 Compared To Fiscal 2015

The following tables summarize our results of operations for Fiscal 2016 and Fiscal 2015 (in thousands):



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			$ Change			% Change
Net sales	$	1,289,243		$	1,266,549		$	22,694		1.8	%
Cost of goods sold	862,887			847,634			15,253			1.8	%
Cost of goods sold as % of net sales	66.9		%	66.9		%
Gross profit	426,356			418,915			7,441			1.8	%
Gross profit as % of net sales	33.1		%	33.1		%
Selling, general and administrative expenses	340,752			328,745			12,007			3.7	%
SG&A expenses as % of net sales	26.4		%	26.0		%
Goodwill, intangible assets and store fixed-asset impairment charges	40,027			1,177			38,850			nm
Goodwill, intangible assets and store fixed-asset impairment charges as % of net sales	3.1		%	0.1		%
Income from operations	45,577			88,993			(43,416		)	(48.8	)%
Income from operations as % of net sales	3.5		%	7.0		%
Interest expense, net	9,523			1,105			8,418			nm
Income before provision for income taxes	36,054			87,888			(51,834		)	(59.0	)%
Provision for income taxes	11,090			34,717			(23,627		)	(68.1	)%
Net income	$	24,964		$	53,171		$	(28,207	)	(53.0	)%

nm - not meaningful

Net Sales

The increase in net sales was primarily the result of our 53rd week sales of $20.2 million. On a 52 week basis, increases in specialty supplements product categories of $13.9 million and in vitamins, minerals, herbs and homeopathy product categories of $12.9 million were offset by decreases in sports nutrition product categories of $19.1 million and Nutri-Force net merchandise sales to third parties of $7.2 million.

Net sales for our two business segments, as well as a discussion of the changes in each segment’s net sales from the comparable prior year period, are provided below (in thousands):



	Fiscal Years Ended
	December 31, 2016 *			December 26, 2015 *			$ Change			% Change
Net Sales:
Retail (a)	$	1,239,226		$	1,209,948		$	29,278		2.4	%
Manufacturing (b)	87,684			91,159			(3,475		)	(3.8	)%
Segment net sales	1,326,910			1,301,107			25,803			2.0	%
Elimination of intersegment revenues	(37,667		)	(34,558		)	(3,109		)	9.0	%
Total net sales	$	1,289,243		$	1,266,549		$	22,694		1.8	%

* Prior periods have been revised to present the Company's new reportable segments.


(a)	The change in retail sales resulted from an increase in our total non-comparable net sales of $20.4 million and retail sales in the 53rd week of $19.6 million partially offset by a decrease in our total comparable net sales of $10.8 million, or 0.9%. The decrease in total comparable net sales was primarily driven by a decline in average transaction value and lower customer traffic.

(b)

Manufacturing sales reflect a decrease in product manufactured for third parties of $6.6 million partially offset by an increase of $3.1 million in product manufactured for the Vitamin Shoppe assortment. Manufacturing sales in the 53rd week were $1.2 million of which $0.6 million was product manufactured for the Vitamin Shoppe assortment and $0.6 million was product manufactured for third parties.

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Cost of Goods Sold

The dollar increase of cost of goods sold was primarily due to the increase in sales resulting from the 53rd week. Cost of goods sold as a percentage of net sales was flat. Improvement in product margin of 0.5% was offset by 0.3% related to Nutri-Force and 0.2% of deleverage of retail occupancy costs. Cost of goods sold for Fiscal 2016 includes $0.4 million related to Super Supplements conversion costs and Canada stores closing costs and for Fiscal 2015 includes a $1.3 million charge for the write-off of USPlabs ® products which the Company ceased selling.

Selling, General and Administrative Expenses



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			$ Change		% Change
SG&A Expenses (in thousands):
Store Payroll and Benefits (a)	$	135,722		$	128,217		$	7,505	5.9	%
Store Payroll & benefit as % of net sales	10.5		%	10.1		%
Advertising and Promotion (b)	21,897			21,621			276		1.3	%
Advertising & promotion as % of net sales	1.7		%	1.7		%
Other SG&A (c)	183,133			178,907			4,226		2.4	%
Other SG&A as % of net sales	14.2		%	14.1		%
Total SG&A Expenses	$	340,752		$	328,745		$	12,007	3.7	%


(a)	Store payroll and benefits increased primarily due to the increase in head count added to operate new stores and an increase in the average wage rates.


(b)	Advertising and promotion as a percentage of net sales was flat. Higher retail expenditures and digital advertising was substantially offset by lower expenditures related to Nutri-Force.


(c)	Other selling, general and administrative expenses as a percentage of net sales were relatively flat.

Goodwill, Intangible Assets and Store Fixed-Asset Impairment Charges

Goodwill, intangible assets and store fixed-asset impairment charges increased primarily due to impairment charges of $32.6 million on goodwill and $6.6 million on the customer relationships intangible asset of Nutri-Force.

Income from Operations

Operating income (loss) for our two business segments are provided below (in thousands):



	Fiscal Years Ended
	December 31, 2016 *			December 26, 2015 *			$ Change			% Change
Income (loss) from operations:
Retail (a)	$	148,552		$	154,569		$	(6,017	)	(3.9	)%
% of net sales	12.0		%	12.8		%
Manufacturing (b)	(44,223		)	(1,977		)	(42,246		)	nm
% of net sales	(50.4		)%	(2.2		)%
Corporate costs (c)	(58,752		)	(63,599		)	4,847			(7.6	)%
% of net sales	(4.6		)%	(5.0		)%
Income from operations	$	45,577		$	88,993		$	(43,416	)	(48.8	)%

* Prior periods have been revised to present the Company's new reportable segments.

nm - not meaningful

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(a)	Retail income from operations as a percentage of net sales decreased primarily due to 0.6% related to overhead costs, 0.4% from store payroll and benefits costs and 0.2% related to occupancy costs, partially offset by 0.5% improvement in product margin.

(b)

The year ended December 31, 2016 includes impairment charges of $32.6 million on goodwill and $6.6 million on the customer relationships intangible asset of Nutri-Force. In addition, the manufacturing segment recognized an increase in costs as compared to the prior year due to operational inefficiencies. The year ended December 26, 2015 includes a $1.4 million charge for accounts receivable for one wholesale customer which were deemed uncollectible.

(c)

The year ended December 31, 2016 includes outside consulting costs relating to a project to identify and implement cost reduction opportunities of $3.8 million and outside consultants fees in connection with the Company's reinvention strategy of $0.5 million. The year ended December 26, 2015 includes management realignment charges of $3.4 million, outside consultants fees in connection with the Company's reinvention strategy of $2.7 million and integration costs related to the acquisition of Nutri-Force of $1.9 million, consisting primarily of professional fees.

Interest Expense, Net

The increase in interest expense, net was primarily due to the recognition of a full year of amortization of the debt discount and interest on the Convertible Notes in Fiscal 2016. The Convertible Notes were issued on December 9, 2015.

Provision for Income Taxes

The effective tax rate for Fiscal 2016 was 30.8%, compared to 39.5% for Fiscal 2015. The effective tax rate decreased primarily due to a $3.0 million tax benefit resulting from the write-off of the Canada investment.

Key Indicators of Liquidity and Capital Resources

The following table provides key indicators of our liquidity and capital resources (in thousands):



	As of
	December 30, 2017		December 31, 2016
Balance Sheet Data:
Cash and cash equivalents	$	1,985	$	2,833
Working capital (a)	155,231		151,548
Total assets	488,753		734,184
Total debt (b)	140,327		133,371

(a) Working capital is total current assets minus total current liabilities.

(b) Total debt includes the outstanding balance on the Company's Revolving Credit Facility, the net balance of its Convertible Notes and its capital lease obligations.



	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Other Information:
Depreciation and amortization of fixed and intangible assets	$	39,204		$	38,780		$	38,495
Cash Flows Provided By (Used In):
Operating activities	$	56,227		$	93,373		$	60,667
Investing activities	(55,448		)	(40,359		)	(39,430		)
Financing activities	(1,662		)	(65,304		)	(18,428		)
Effect of exchange rate changes on cash and cash equivalents	35			19			129
Net (decrease) increase in cash and cash equivalents	$	(848	)	$	(12,271	)	$	2,938

Liquidity and Capital Resources

Historically, our primary uses of cash have been to fund working capital, operating expenses and capital expenditures related primarily to the build-out of new stores, the transformation of existing stores and information technology investments as

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well as to repurchase shares of our common stock. We have financed our requirements predominately through internally generated cash flow, supplemented with short-term financing. In Fiscal 2015, we issued $143.8 million of Convertible Notes to fund the repurchase of shares of our common stock. Refer to Note 7., “Credit Arrangements”, to our consolidated financial statements included in this Annual Report on Form 10-K for additional information. We believe that the cash generated by operations and cash and cash equivalents, together with the borrowing availability under our Revolving Credit Facility, will be sufficient to meet our working capital needs for the next twelve months, our store transformation growth plans, costs and investments related to our current initiatives, systems development, store improvements and interest payments on the Convertible Notes, as well as the repurchase of shares of our common stock and our Convertible Notes from time to time in negotiated or open market transactions subject to market conditions.

We invested $55.0 million in capital expenditures during Fiscal 2017, including costs for building new stores, transforming existing stores, information technology, the opening of our new distribution center and investments resulting from our current initiatives. During Fiscal 2018 we plan to spend approximately $30.0 million in capital expenditures, including costs for information technology, remodeling of existing stores and the build-out of corporate offices. We opened 15 new stores and closed 5 stores during Fiscal 2017. We plan to open two new stores in Fiscal 2018.

The Company is subject to concentrations of credit risk associated with cash and cash equivalents, and at times holds cash balances in excess of Federal Deposit Insurance Corporation limits. Currently, the Company’s cash management practice is to hold cash balances in quality institutions and invest in highly liquid and secure investments.

We were in compliance with all covenants relating to our Revolving Credit Facility and Convertible Notes as of December 30, 2017. We expect to be in compliance with these same covenants during Fiscal 2018 as well.

Cash Provided by Operating Activities

Net cash provided by operating activities was $56.2 million and $93.4 million during Fiscal 2017 and Fiscal 2016, respectively. The $37.1 million decrease in net cash flows from operating activities is primarily due to the decrease in net income before impairment charges.

Net cash provided by operating activities was $93.4 million and $60.7 million during Fiscal 2016 and Fiscal 2015 respectively. The $32.7 million increase in net cash flows from operating activities is primarily due to the timing of accounts payable disbursements and an increase in inventory purchases in Fiscal 2015 related primarily to the transition of Vitamin Shoppe production of private brands to Nutri-Force and the opening of new stores.

Cash Used in Investing Activities

Net cash used in investing activities was $55.4 million during Fiscal 2017 as compared to $40.4 million during Fiscal 2016. Capital expenditures during Fiscal 2017 were used primarily for the new distribution center, the transformation of existing stores and information technology investments. Capital expenditures during Fiscal 2016 were used primarily for the build-out of new stores, the remodeling of existing stores and information technology investments.

Net cash used in investing activities was $40.4 million during Fiscal 2016 as compared to $39.4 million during Fiscal 2015. Capital expenditures during Fiscal 2016 and 2015 were used primarily for the buildout of new stores, the remodeling of existing stores and information technology investments.

Cash Used in Financing Activities

Net cash used in financing activities was $1.7 million in Fiscal 2017 as compared to $65.3 million in Fiscal 2016. The $63.6 million decrease in cash used in financing activities is primarily due to a decrease in purchases of common stock under the Company's share repurchase programs.

Net cash used in financing activities was $65.3 million in Fiscal 2016 as compared to $18.4 million in Fiscal 2015. The $46.9 million increase in cash used in financing activities was primarily due to purchases of common stock under the Company’s share repurchase programs of $66.0 million in Fiscal 2016 and $146.1 million in Fiscal 2015 partially offset by the net proceeds from the issuance of Convertible Notes of $125.7 million in Fiscal 2015.

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Revolving Credit Facility

The terms of our Revolving Credit Facility, which were amended on May 9, 2017, extend through May 9, 2022, and allow the Company to borrow up to $90.0 million, subject to the terms of the facility, with a Company option to increase the facility up to a total of $150.0 million. For information regarding the terms of our Revolving Credit Facility, refer to Note 7., “Credit Arrangements”, to our consolidated financial statements included in this Annual Report on Form 10-K. As of December 30, 2017, the Company had $12.0 million of borrowings outstanding on its Revolving Credit Facility. The largest amount outstanding during Fiscal 2017 was $38.0 million. The unused available line of credit under the Revolving Credit Facility at December 30, 2017 was $74.4 million.

Convertible Notes

On December 9, 2015, the Company issued $143.8 million of its 2.25% Convertible Notes. The Convertible Notes are senior unsecured obligations of the Company. Interest is payable on the Convertible Notes on June 1 and December 1 of each year until their maturity date of December 1, 2020. For additional information regarding the terms of our Convertible Notes, refer to Note 7., “Credit Arrangements”, to our consolidated financial statements included in this Annual Report on Form 10-K.

Contractual Obligations and Commercial Commitments

As of December 30, 2017, our lease commitments and contractual obligations were as follows (in thousands):



Fiscal year ending	Total		Operating Leases Real Estate (1)		Convertible Notes		Interest on Convertible Notes		Operating Leases Equipment		Capital Lease Obligations
2018	$	128,238	$	124,086	$	—	$	3,234	$	360	$	558
2019	114,221		110,121		—		3,234		308		558
2020	242,513		94,710		143,750		3,234		261		558
2021	81,964		81,384		—				166		414
2022	68,096		68,014		—		—		77		5
Thereafter	162,108		162,108		—		—		—		—
	$	797,140	$	640,423	$	143,750	$	9,702	$	1,172	$	2,093


(1)	Store operating leases included in the above table do not include contingent rent based upon sales volume. Operating leases do not include common area maintenance costs or real estate taxes that are paid to the landlord during the year, which combined represented approximately 18.3% of our minimum lease obligations for Fiscal 2017.

We are not party to any long-term purchase commitments. Our typical merchandise purchase orders are generally performed upon within a four to six week period. However, as of December 30, 2017, we have an obligation, excluded from the above commitments, of approximately $11.1 million to purchase an agreed upon supply of our own branded merchandise and raw materials during Fiscal 2018 which has been produced by, and resides with, the applicable vendors.

In addition to the contractual obligations set forth in the table above, we have employment agreements with certain of our executives and an executive severance policy for all our officers that provide for compensation and certain other benefits. Under certain circumstances, these agreements and the policy provide for severance or other payments.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. The Company has commitments for its operating leases, primarily related to its stores, distribution centers, as well as its manufacturing and corporate facilities, which are not reflected on our balance sheet.

Effects of Inflation

We do not believe that our sales or operating results have been materially affected by inflation during the periods presented in our financial statements. During Fiscal 2017, cost inflation was approximately 1%. During Fiscal 2018, we anticipate market driven cost inflation to be in the range of 0% to 2%. Additionally, we may experience increased cost pressure from our suppliers which could have an adverse effect on our gross profit results in the future.

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Recent Accounting Pronouncements

Except as discussed in Note 2., “Summary of Significant Accounting Policies”, to our consolidated financial statements included in this Annual Report on Form 10-K, we have considered all new accounting pronouncements and have concluded that there are no new pronouncements that may have a material impact on our results of operations, financial condition, or cash flows, based on current information.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s market risks relate primarily to changes in interest rates. Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows.

Our Revolving Credit Facility carries a floating interest rate and, therefore, our statements of operations and our cash flows are exposed to changes in interest rates. As of December 30, 2017, there was $12.0 million of borrowings outstanding on our Revolving Credit Facility. At December 30, 2017, a hypothetical 10% change in the floating interest rate would have a de minimis impact on our consolidated financial statements.

Our Convertible Notes carry a fixed interest rate and, therefore, have no market risk.

Item 8. Financial Statements and Supplementary Data

The response to this item is incorporated herein by reference to the financial statements and supplementary financial data in Item 15. “ Exhibits and Financial Statement Schedules ” appearing at the end of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officer, respectively, of the design and operation of our disclosure controls and procedures as such term is defined in Rules 13a-15(e) and 15d—15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 30, 2017, pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 30, 2017.

Management’s Report on Internal Control Over Financial Reporting

See Item 15. “ Exhibits and Financial Statement Schedules ” appearing at the end of this Annual Report on Form 10-K for Management’s Report on Internal Control Over Financial Reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

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Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information with respect to this Item will be included in the Company’s Proxy Statement to be filed in April 2018, which is incorporated herein by reference under the captions “Proposal One – Election of Directors”, “Corporate Governance”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance”.

Item 11. Executive Compensation

Information with respect to this Item will be included in the Company’s Proxy Statement to be filed in April 2018, which is incorporated herein by reference under the captions, “Director Compensation”, “Compensation Discussion and Analysis” and “Executive Compensation”.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information with respect to this Item will be included in the Company’s Proxy Statement to be filed in April 2018, which is incorporated herein by reference under the captions “Security Ownership” and “Equity Compensation Plan Information”.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information with respect to this Item will be included in the Company’s Proxy Statement to be filed in April 2018, which is incorporated herein by reference under the captions “Corporate Governance – Director Independence”, “Corporate Governance – Policies with Respect to Transactions with Related Persons” and “Certain Relationships and Related Party Transactions, and Director Independence”.

Item 14. Principal Accounting Fees and Services

Information with respect to this Item will be included in the Company’s Proxy Statement to be filed in April 2018, which is incorporated herein by reference under the caption “Principal Accountant Fees and Services”.

PART IV

Item 15. Exhibits, Financial Statement Schedules


(a)	The following documents are filed as part of this annual report on Form 10-K:


1.	The following consolidated financial statements listed below are filed as a separate section of this annual report on Form 10-K:

Management’s Reports and Reports of Independent Registered Public Accounting Firm—Deloitte & Touche LLP.

Consolidated Balance Sheets as of December 30, 2017 and December 31, 2016 .

Consolidated Statements of Operations for the Fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 .

Consolidated Statements of Comprehensive Income (Loss) for the Fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 .

Consolidated Statements of Stockholders’ Equity for the Fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 .

Consolidated Statements of Cash Flows for the Fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 .

Notes to Consolidated Financial Statements for the Fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 .

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2.	Exhibits:



Exhibit No.			Description

2.1			Asset Purchase Agreement, dated as of December 17, 2012, by and among Super Supplements, Inc., John Wurts, Vitamin Shoppe Mariner, Inc. and, solely for certain specified provisions thereof, Vitamin Shoppe, Inc. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on December 18, 2012 (File No. 001-34507))

2.2			Amendment No. 1 to Asset Purchase Agreement, dated as of December 30, 2012, by and among Super Supplements, Inc., John Wurts, Vitamin Shoppe Mariner, Inc. and Vitamin Shoppe, Inc. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 2, 2013 (File No. 001-34507))

2.3			LLC Interest Purchase Agreement, dated as of June 6, 2014, by and among VS Hercules LLC, FDC Vitamins, LLC, MBF/FDC Acquisition, LLC, FDC Management, LLC, FDC Limited II, LLC, Nutri-Force Nutrition, Inc., the individuals listed therein and, solely for certain specified provisions thereof, Vitamin Shoppe, Inc. (Incorporated by reference to Exhibit 2.1 in our Current report on Form 8-K filed on June 9, 2014 (File No. 001-34507))

3.1			Amended and Restated Certificate of Incorporation of Vitamin Shoppe, Inc. (Incorporated by reference to Exhibit 3.1 in our Current Report on Form 8-K filed on June 10, 2016 (File No. 001-34507))

3.2			Fourth Amended and Restated By-laws of Vitamin Shoppe Inc. (Incorporated by reference to Exhibit 3.2 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507))

4.1			Specimen certificate for shares of common stock, $0.01 par value, of Vitamin Shoppe, Inc. (Incorporated by reference to Exhibit 4.4 in Amendment No. 4 to our Registration Statement No. 333-160756 on Form S-1 filed on October 14, 2009 (File No. 333-160756))

4.2			Indenture, dated as of December 9, 2015, by and between Vitamin Shoppe, Inc. and Wilmington Trust, National Association. (Incorporated by reference to Exhibit 4.1 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.1			Base Convertible Bond Hedge Confirmation, dated as of December 3, 2015, by and between Vitamin Shoppe, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.2			Base Convertible Bond Hedge Confirmation, dated as of December 3, 2015, by and between Vitamin Shoppe, Inc. and J.P. Morgan Chase Bank, National Association, London Branch. (Incorporated by reference to Exhibit 10.3 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.3			Base Warrant Confirmation, dated as of December 3, 2015, by and between Vitamin Shoppe, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.4 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.4			Base Warrant Confirmation, dated as of December 3, 2015, by and between Vitamin Shoppe, Inc. and J.P. Morgan Chase Bank, National Association, London Branch. (Incorporated by reference to Exhibit 10.5 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.5			Additional Convertible Bond Hedge Confirmation, dated as of December 8, 2015, by and between Vitamin Shoppe, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.6 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.6			Additional Convertible Bond Hedge Confirmation, dated as of December 8, 2015, by and between Vitamin Shoppe, Inc. and J.P. Morgan Chase Bank, National Association, London Branch. (Incorporated by reference to Exhibit 10.7 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

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10.7			Additional Warrant Confirmation, dated as of December 8, 2015, by and between Vitamin Shoppe, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.8 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.8			Additional Warrant Confirmation, dated as of December 8, 2015, by and between Vitamin Shoppe, Inc. and J.P. Morgan Chase Bank, National Association, London Branch. (Incorporated by reference to Exhibit 10.9 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.9			Amended and Restated Loan and Security Agreement, dated as of January 20, 2011, by and among Vitamin Shoppe Industries Inc. and VS Direct Inc., as Borrowers, Vitamin Shoppe, Inc., as Guarantor, the Lenders and Issuing Bank from time to time party thereto, and JPMorgan Chase Bank, N.A. as Administrative Agent. (Incorporated by reference to Exhibit 10.2 in our Annual Report on Form 10-K filed on March 9, 2011 (File No. 001-34507))

10.10			First Amendment to Amended and Restated Loan and Security Agreement, dated as of January 10, 2013, by and among Vitamin Shoppe Industries Inc., VS Direct Inc. and Vitamin Shoppe Mariner, Inc., as Borrowers, each guarantor party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Agent, the Issuing Bank and a Lender. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.11			Second Amendment to Amended and Restated Loan and Security Agreement and First Amendment to Existing Guarantees, dated as of October 11, 2013, by and among Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., and Vitamin Shoppe Global, Inc., as Borrowers, each guarantor party thereto, and JPMorgan Chase Bank, N.A., as Agent. (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.12			Third Amendment to Amended and Restated Loan and Security Agreement, dated as of December 2, 2015, by and among Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., and Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins LLC, Betancourt Sports Nutrition, LLC, Vitamin Shoppe Procurement Services, Inc., as Borrowers, the guarantors parties thereto, the lenders parties thereto, and JPMorgan Chase Bank, N.A., as Agent. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on December 10, 2015 (File No. 001-34507))

10.13			Letter Agreement, dated as of January 29, 2016, by and among Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., and Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins LLC, Betancourt Sports Nutrition, LLC, Vitamin Shoppe Procurement Services, Inc., as Borrowers, the guarantors parties thereto, the lenders parties thereto, and JPMorgan Chase Bank, N.A., as Agent. (Incorporated by reference to Exhibit 10.13 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507))

10.14			Fourth Amendment to the Amended and Restated Loan and Security Agreement, dated as of May 9, 2017, by and among itself, Vitamin Shoppe Industries Inc., Vitamin Shoppe Mariner, Inc., Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins, LLC, Betancourt Sports Nutrition, LLC, Vitamin Shoppe Procurement, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders from time to time parties thereto (Incorporated by reference to Exhibit 99.1 in our Current Report on Form 8-K filed on May 10, 2017 (File No. 001-34507))

10.15			Second Amended and Restated Intellectual Property Security Agreement, dated as of October 6, 2014, by and between Vitamin Shoppe Industries Inc., as Grantor and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on October 10, 2014 (File No. 001-34507))

10.16			Stock Pledge Agreement, dated as of September 25, 2009, by and between Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.), as Pledgor, and JPMorgan Chase Bank, N.A., as Pledgee. (Incorporated by reference to Exhibit 99.6 in our Current Report on Form 8-K filed on September 30, 2009 (File No. 333-134983-02))

10.17			Amended and Restated Stock Pledge Agreement, dated as of October 11, 2013, by and between Vitamin Shoppe Industries Inc., as Pledgor, and JPMorgan Chase Bank, N.A., as Pledgee. (Incorporated by reference to Exhibit 10.3 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

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10.18			Stock Pledge Agreement, dated as of August 21, 2014, by and between Vitamin Shoppe Global, Inc., as Pledgor, and JPMorgan Chase Bank, N.A., as Pledgee. (Incorporated by reference to Exhibit 10.3 in our Current Report on Form 8-K filed on August 27, 2014 (File No. 001-34507))

10.19			Stock Pledge Agreement, dated as of August 21, 2014, by and between VS Hercules LLC, as Pledgor, and JPMorgan Chase Bank, N.A., as Pledgee. (Incorporated by reference to Exhibit 10.4 in our Current Report on Form 8-K filed on August 27, 2014 (File No. 001-34507))

10.20			Stock Pledge Agreement, dated as of August 21, 2014, by and between FDC Vitamins, LLC, as Pledgor, and JPMorgan Chase Bank, N.A., as Pledgee. (Incorporated by reference to Exhibit 10.5 in our Current Report on Form 8-K filed on August 27, 2014 (File No. 001-34507))

10.21			Guarantee of Vitamin Shoppe Industries Inc. and Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.), dated as of September 25, 2009, of obligations of VS Direct Inc. under the Amended and Restated Loan and Security Agreement, as amended. (Incorporated by reference to Exhibit 99.8 in our Current Report on Form 8-K filed on September 30, 2009 (File No. 333-134983-02))

10.22			Guarantee of VS Direct Inc. and Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.), dated as of September 25, 2009, of obligations of Vitamin Shoppe Industries Inc. under the Amended and Restated Loan and Security Agreement, as amended. (Incorporated by reference to Exhibit 99.9 in our Current Report on Form 8-K filed on September 30, 2009 (File No. 333-134983-02))

10.23			Guarantee of Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and VS Direct Inc., dated as of January 10, 2013, of obligations of Vitamin Shoppe Mariner, Inc. under the Amended and Restated Loan Agreement, as amended. (Incorporated by reference to Exhibit 10.5 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.24			Guarantee of Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc., VS Direct Inc. and Vitamin Shoppe Mariner, Inc., dated as of October 11, 2013, of the obligations of Vitamin Shoppe Global, Inc. under the Amended and Restated Loan Agreement, as amended. (Incorporated by reference to Exhibit 10.7 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.25			Guarantee, dated as of August 21, 2014, by Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc., VS Direct Inc., Vitamin Shoppe Mariner, Inc., Vitamin Shoppe Global, Inc., VS Hercules LLC, FDC Vitamins, LLC and Betancourt Sports Nutrition, LLC, of the obligations of one another under the Amended and Restated Loan Agreement, as amended. (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on August 27, 2014 (File No. 001-34507))

10.26			Joinder Agreement, dated as of January 10, 2013, by and between Vitamin Shoppe Mariner, Inc., and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.4 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.27			Joinder Agreement, dated as of October 11, 2013, by and between Vitamin Shoppe Global, Inc., and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.6 in our Current Report on Form 8-K filed on October 16, 2013 (File No. 001-34507))

10.28			Joinder Agreement, dated as of August 21, 2014, by and between VS Hercules LLC, FDC Vitamins, LLC, Betancourt Sports Nutrition, LLC, and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on August 27, 2014 (File No. 001-34507))

10.29			Joinder Agreement, dated as of March 20, 2015 by and between Vitamin Shoppe Procurement Services and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.29 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507))

10.30			Form of Indemnification Agreement by and among executive officer, Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.) and Vitamin Shoppe Industries Inc. * (Incorporated by reference to Exhibit 10.29 in Amendment No. 4 to our Registration Statement No. 333-160756 on Form S-1 filed on October 14, 2009 (File No. 333-160756))

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10.31			Form of Indemnification Agreement by and among director, Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.) and Vitamin Shoppe Industries Inc. * (Incorporated by reference to Exhibit 10.30 in Amendment No. 4 to our Registration Statement No. 333-160756 on Form S-1 filed on October 14, 2009 (File No. 333-160756))

10.32			VS Parent, Inc. 2006 Stock Option Plan. * (Incorporated by reference to Exhibit 10.27 in Amendment No. 5 to our Registration Statement No. 333-160756 on Form S-1 filed on October 22, 2009 (File No. 333-160756))

10.33			Vitamin Shoppe 2009 Equity Incentive Plan Amended and Restated Through April 6, 2012 * (Incorporated by reference to Annex A of the Definitive Proxy Statement of Vitamin Shoppe, Inc. filed on April 12, 2012 (File No. 001-34507))

10.34			Amended 2009 Equity Incentive Plan* (Incorporated by reference to Annex A of the Definitive Proxy Statement of Vitamin Shoppe, Inc. filed on April 27, 2017 (File No. 001-34507))

10.35			Vitamin Shoppe 2010 Employee Stock Purchase Plan. * (Incorporated by reference to Exhibit 10.16 in our Annual Report on Form 10-K filed on March 17, 2010 (File No. 001-34507))

10.36			Vitamin Shoppe, Inc. Executive Severance Pay Policy, amended and restated effective as of October 29, 2014. (Incorporated by reference to Exhibit 10.35 in our Annual Report on Form 10-K filed on February 23, 2016 (File No. 001-34507))

10.37			Director Compensation Plan and Stock Ownership Guidelines.* (Incorporated by reference to Exhibit 10.2 in our Current Report on Form 8-K filed on January 4, 2016 (File No. 001-34507))

10.38			Vitamin Shoppe, Inc. Executive Severance Pay Policy, amended and restated effective as of March 4, 2016 (Incorporated by reference to Exhibit 10.01 in our Quarterly Report on Form 10-Q filed on May 4, 2016 (File No. 001-34507))

10.39			Employment and Non-Competition Agreement, dated as of September 9, 2009, among Richard Markee, VS Parent, Inc., VS Direct, Inc. Vitamin Shoppe, Inc. (f/k/a VS Holdings, Inc.) and Vitamin Shoppe Industries Inc. * (Incorporated by reference to Exhibit 10.26 in Amendment No. 2 to our Registration Statement No. 333-160756 on Form S-1 filed on September 22, 2009 (File No. 333-160756))

10.40			Employment and Non-Competition Agreement, dated as of March 3, 2015, among Colin Watts and Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and all of their subsidiaries and affiliates. * (Incorporated by reference to Exhibit 99.2 in our Current Report on Form 8-K filed on March 4, 2015 (File No. 001-34507))

10.41			Lease Agreement, dated as of May 2, 2002, by and between Hartz Mountain Industries, Inc. and Vitamin Shoppe Industries Inc. (Incorporated by reference to Exhibit 10.22 in our Registration Statement No. 333-134983 on Form S-4 filed on June 13, 2006 (File No. 333-134983-02))

10.42			Lease Agreement, dated as of August 27, 2012, by and between CLF Ashland, LLC and Vitamin Shoppe Industries Inc. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on August 31, 2012 (File No. 001-34507))

10.43			Offer Letter, dated as of March 24, 2016 among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Brenda Galgano * (Incorporated by reference to Exhibit 10.03 in our Quarterly Report on Form 10-Q filed on May 4, 2016 (File No. 001-34507))

10.44			Separation Agreement, dated as of December 9, 2017, by and between Michael Beardall and Vitamin Shoppe Industries Inc.* (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on December 5, 2017 (File No. 34507))

10.45			Agreement, dated as of January 12, 2016, by and between the Company and Carlson Capital. (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on January 12, 2016 (File No. 001-34507))

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10.46			Agreement, dated as of February 21, 2017, by and among Vitamin Shoppe, Inc. and Carlson Capital (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on February 21, 2017 (File No. 001-34507))

10.47			Lease Agreement dated as of December 21, 2016, by and between Vitamin Shoppe Procurement Services, Inc. and Coldwater Industrial Associates 3, LLC (Incorporated by reference to Exhibit 10.65 in our Annual Report on Form 10-K filed on March 1, 2017 (File No. 001-34507))

10.48			Offer Letter, dated as of June 6, 2016, among Vitamin Shoppe, Inc., Vitamin Shoppe Industries Inc. and Jason Reiser * (Incorporated by reference to Exhibit 10.1 in our Current Report on Form 8-K filed on June 16, 2016 (File No. 001-34507))

10.49			Form of Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.06 in our Quarterly Report on Form 10-Q filed on May 4, 2016 (File No. 001-34507))

10.50			Form of Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.07 in our Quarterly Report on Form 10-Q filed on May 4, 2016 (File No. 001-34507))

10.51			Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.08 in our Quarterly Report on Form 10-Q filed on May 4, 2016 (File No. 001-34507))

10.52			Form of Restricted Cash Award Agreement* (Filed herewith)

10.53			Form of Performance Cash Award Agreement* (Filed herewith)

21.1			Subsidiaries of the Registrant. (Filed herewith)

23.1			Consent of Independent Registered Public Accounting Firm. (Filed herewith)

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

32.1			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer. (Filed herewith )

32.2			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer. (Filed herewith )

101			The following financial information from the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (a) Consolidated Balance Sheets as of December 30, 2017 and December 31, 2016; (b) Consolidated Statements of Operations for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015; (c) Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015; (d) Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015; (e) Consolidated Statements of Cash Flows for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015; and (f) Notes to Consolidated Financial Statements for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015.

* Management contract or compensation plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 27, 2018 .



V ITAMIN S HOPPE , I NC .

By:		/s/ Colin Watts
		Colin Watts Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



	Name	Title	Date

By:	/s/ Alexander W. Smith	Executive Chairman, Director	February 27, 2018
	Alexander W. Smith

By:	/s/ Colin Watts	Chief Executive Officer, Director (Principal Executive Officer)	February 27, 2018
	Colin Watts

By:	/s/ Brenda Galgano	EVP, Chief Financial Officer (Principal Financial and Accounting Officer)	February 27, 2018
	Brenda Galgano

By:	/s/ B. Michael Becker	Director	February 27, 2018
	B. Michael Becker

By:	/s/ John D. Bowlin	Director	February 27, 2018
	John D. Bowlin

By:	/s/ Deborah M. Derby	Director	February 27, 2018
	Deborah M. Derby

By:	/s/ Tracy Dolgin	Director	February 27, 2018
	Tracy Dolgin

By:	/s/ David H. Edwab	Director	February 27, 2018
	David H. Edwab

By:	/s/ Guillermo G. Marmol	Director	February 27, 2018
	Guillermo G. Marmol

By:	/s/ Beth M. Pritchard	Director	February 27, 2018
	Beth M. Pritchard

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined under the Exchange Act) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Such internal control includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; and (ii) provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and (B) regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 30, 2017 . In making this assessment, it used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) published in 2013. Based on this assessment, management has determined that, as of December 30, 2017 , our internal control over financial reporting is effective based on those criteria.

The Company’s internal control over financial reporting as of December 30, 2017 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which appears herein.

February 27, 2018



/s/ Colin Watts		/s/ Brenda Galgano
Colin Watts		Brenda Galgano
Chief Executive Officer		EVP and Chief Financial Officer

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Vitamin Shoppe, Inc. is responsible for the preparation, objectivity and integrity of the consolidated financial statements and other information contained in this Annual Report on Form 10-K. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include some amounts that are based on management’s informed judgments and best estimates.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and has expressed herein their unqualified opinion on those financial statements.

The Audit Committee of the Board of Directors, which oversees all of the Company’s financial reporting process on behalf of the Board of Directors, consists solely of independent directors, meets with the independent registered public accounting firm, internal auditors and management periodically to review their respective activities and the discharge of their respective responsibilities. Both the independent registered public accounting firm and the internal auditors have unrestricted access to the Audit Committee, with or without management, to discuss the scope and results of their audits and any recommendations regarding the system of internal controls.

February 27, 2018



/s/ Colin Watts		/s/ Brenda Galgano
Colin Watts		Brenda Galgano
Chief Executive Officer		EVP and Chief Financial Officer

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Vitamin Shoppe, Inc.

Secaucus, New Jersey

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Vitamin Shoppe, Inc. and Subsidiary (the "Company") as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 30, 2017, of the Company and our report dated February 27, 2018 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

February 27, 2018

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Vitamin Shoppe, Inc.

Secaucus, New Jersey

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vitamin Shoppe, Inc. and Subsidiary (the "Company") as of December 30, 2017 and December 31, 2016, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three fiscal years in the period ended December 30, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2017 and December 31, 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2018 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

February 27, 2018

We have served as the Company's auditor since 1997.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	December 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,985		$	2,833
Accounts receivable, net of allowance of $827 and $1,061 in 2017 and 2016, respectively	3,435			7,367
Inventories	234,400			241,736
Prepaid expenses and other current assets	39,634			33,717
Total current assets	279,454			285,653
Property and equipment, net	150,033			139,132
Goodwill	—			210,633
Other intangibles, net	19,417			79,489
Deferred taxes	37,278			16,847
Other long-term assets	2,571			2,430
Total assets	$	488,753		$	734,184
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving credit facility	$	12,000		$	11,000
Accounts payable	46,945			65,606
Deferred sales	5,710			5,209
Accrued expenses and other current liabilities	59,568			52,290
Total current liabilities	124,223			134,105
Convertible notes, net	126,415			120,874
Deferred rent	40,832			37,489
Other long-term liabilities	1,916			1,720
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 250,000,000 shares authorized and no shares issued and outstanding at December 30, 2017 and December 31, 2016	—			—
Common stock, $0.01 par value; 400,000,000 shares authorized, 24,220,509 shares issued and 24,021,948 shares outstanding at December 30, 2017, and 23,585,240 shares issued and 23,424,055 shares outstanding at December 31, 2016	242			236
Additional paid-in capital	88,823			80,727
Treasury stock, at cost; 198,561 shares at December 30, 2017 and 161,185 shares at December 31, 2016	(7,010		)	(6,430		)
Retained earnings	113,312			365,463
Total stockholders’ equity	195,367			439,996
Total liabilities and stockholders’ equity	$	488,753		$	734,184

See accompanying notes to consolidated financial statements.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)



	Fiscal Year Ended
	December 30, 2017			December 31, 2016		December 26, 2015
Net sales	$	1,178,694		$	1,289,243	$	1,266,549
Cost of goods sold	821,137			862,887		847,634
Gross profit	357,557			426,356		418,915
Selling, general and administrative expenses	345,494			340,752		328,745
Goodwill, intangible assets and store fixed-assets impairment charges	274,876			40,027		1,177
Income (loss) from operations	(262,813		)	45,577		88,993
Interest expense, net	9,701			9,523		1,105
Income (loss) before provision (benefit) for income taxes	(272,514		)	36,054		87,888
Provision (benefit) for income taxes	(20,363		)	11,090		34,717
Net income (loss)	$	(252,151	)	$	24,964	$	53,171
Weighted average common shares outstanding
Basic	23,137,977			23,875,540		28,954,804
Diluted	23,137,977			24,067,686		29,203,429
Net income (loss) per common share
Basic	$	(10.90	)	$	1.05	$	1.84
Diluted	$	(10.90	)	$	1.04	$	1.82

See accompanying notes to consolidated financial statements.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)



	Fiscal Year Ended
	December 30, 2017			December 31, 2016		December 26, 2015
Net income (loss)	$	(252,151	)	$	24,964	$	53,171
Other comprehensive income:
Foreign currency translation adjustments	—			60		23
Other comprehensive income	—			60		23
Comprehensive income (loss)	$	(252,151	)	$	25,024	$	53,194

See accompanying notes to consolidated financial statements.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)



	Common Stock					Treasury Stock					Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings
	Shares		Amounts			Shares		Amounts			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total
Balance at December 27, 2014	30,106,337		$	301		(57,456	)	$	(2,695	)	$	267,083		$	(83	)	$	287,328		$	551,934
Comprehensive income	—		—			—		—			—			23			53,171			53,194
Equity compensation	—		—			—		—			5,402			—			—			5,402
Issuance of restricted shares	271,716		3			—		—			(3		)	—			—			—
Issuance of shares	5,184		—			—		—			167			—			—			167
Purchases of treasury stock	—		—			(62,678	)	(2,530		)	—			—			—			(2,530		)
Purchases of shares under Share Repurchase Programs	(4,328,055	)	(43		)	—		—			(146,065		)	—			—			(146,108		)
Cancellation of restricted shares	(145,117	)	(2		)	—		—			2			—			—			—
Issuance of shares under employee stock purchase plan	27,187		—			—		—			892			—			—			892
Exercises of stock options	56,463		1			—		—			1,351			—			—			1,352
Equity portion of convertible notes, net	—		—			—		—			24,948			—			—			24,948
Bond hedge purchase	—		—			—		—			(26,407		)	—			—			(26,407		)
Warrant sale	—		—			—		—			12,966			—			—			12,966
Tax benefits on exercise of equity awards	—		—			—		—			(509		)	—			—			(509		)
Balance at December 26, 2015	25,993,715		260			(120,134	)	(5,225		)	139,827			(60		)	340,499			475,301
Comprehensive income	—		—			—		—			—			60			24,964			25,024
Equity compensation	—		—			—		—			6,380			—			—			6,380
Issuance of restricted shares	196,777		2			—		—			(2		)	—			—			—
Issuance of shares	11,942		—			—		—			333			—			—			333
Purchases of treasury stock	—		—			(41,051	)	(1,205		)	—			—			—			(1,205		)
Purchases of shares under Share Repurchase Programs	(2,552,556	)	(26		)	—		—			(65,985		)	—			—			(66,011		)
Cancellation of restricted shares	(103,362	)	(1		)	—		—			1			—			—			—
Issuance of shares under employee stock purchase plan	33,442		1			—		—			822			—			—			823
Exercises of stock options	5,282		—			—		—			90			—			—			90
Tax benefits on exercise of equity awards	—		—			—		—			(739		)	—			—			(739		)
Balance at December 31, 2016	23,585,240		236			(161,185	)	(6,430		)	80,727			—			365,463			439,996
Comprehensive loss	—		—			—		—			—			—			(252,151		)	(252,151		)

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Equity compensation	—		—			—		—			6,122			—		—		6,122
Issuance of restricted shares	607,161		6			—		—			(6		)	—		—		—
Purchases of treasury stock	—		—			(37,376	)	(580		)	—			—		—		(580		)
Cancellation of restricted shares	(140,391	)	(2		)	—		—			2			—		—		—
Issuance of shares under employee stock purchase plan	68,499		1			—		—			468			—		—		469
Exercises of stock options	100,000		1			—		—			1,510			—		—		1,511
Balance at December 30, 2017	24,220,509		$	242		(198,561	)	$	(7,010	)	$	88,823		$	—	$	113,312	$	195,367

See accompanying notes to consolidated financial statements.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Cash flows from operating activities:
Net income (loss)	$	(252,151	)	$	24,964		$	53,171
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of fixed and intangible assets	39,204			38,780			38,495
Impairment charges on goodwill	210,633			32,636			—
Impairment charges on intangible assets	59,405			6,594			—
Impairment charges on fixed assets	6,658			797			1,177
Contingent consideration for acquisition of FDC Vitamins, LLC	—			—			(959		)
Amortization of deferred financing fees	898			957			237
Amortization of debt discount on convertible notes	4,781			4,690			223
Deferred income taxes	(19,834		)	(13,683		)	(1,364		)
Deferred rent	(2,431		)	(3,226		)	(2,294		)
Equity compensation expense	6,122			6,292			5,491
Issuance of shares for services rendered	—			333			167
Tax benefits on exercises of equity awards	1,017			739			509
Changes in operating assets and liabilities:
Accounts receivable	3,932			70			2,939
Inventories	10,460			(13,078		)	(38,284		)
Prepaid expenses and other current assets	(5,916		)	(8,521		)	3,889
Other long-term assets	(598		)	116			(139		)
Accounts payable	(15,595		)	26,522			(3,709		)
Deferred sales	501			(15,277		)	(2,011		)
Accrued expenses and other current liabilities	7,047			2,921			394
Other long-term liabilities	2,094			747			2,735
Net cash provided by operating activities	56,227			93,373			60,667
Cash flows from investing activities:
Capital expenditures	(55,020		)	(40,068		)	(39,403		)
Acquisition of FDC Vitamins, LLC	—			—			487
Trademarks and other intangible assets	(428		)	(291		)	(514		)
Net cash used in investing activities	(55,448		)	(40,359		)	(39,430		)
Cash flows from financing activities:
Borrowings under revolving credit facility	118,000			82,000			47,000
Repayments of borrowings under revolving credit facility	(117,000		)	(79,000		)	(47,000		)
Proceeds from issuance of convertible notes	—			—			143,750
Debt issuance costs on convertible notes	—			(2		)	(4,593		)
Bond hedge purchase	—			—			(26,407		)
Proceeds from sale of warrants	—			—			12,966
Contingent consideration payment for acquisition of FDC Vitamins, LLC	—			—			(4,041		)
Bank overdraft	(3,265		)	(1,041		)	6,973

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Payments of capital lease obligations	(451		)	(207		)	(80		)
Proceeds from exercises of common stock options	1,511			90			1,352
Issuance of shares under employee stock purchase plan	469			823			892
Purchases of treasury stock	(580		)	(1,205		)	(2,530		)
Purchases of shares under Share Repurchase Programs	—			(66,011		)	(146,108		)
Tax benefits on exercises of equity awards	—			(739		)	(509		)
Deferred financing fees and other	(346		)	(12		)	(93		)
Net cash used in financing activities	(1,662		)	(65,304		)	(18,428		)
Effect of exchange rate changes on cash and cash equivalents	35			19			129
Net increase (decrease) in cash and cash equivalents	(848		)	(12,271		)	2,938
Cash and cash equivalents beginning of year	2,833			15,104			12,166
Cash and cash equivalents end of year	$	1,985		$	2,833		$	15,104
Supplemental disclosures of cash flow information:
Interest paid	$	3,953		$	3,715		$	440
Income taxes paid	$	6,610		$	33,655		$	33,659
Supplemental disclosures of non-cash investing activities:
Liability for purchases of property and equipment	$	4,457		$	4,630		$	7,497
Assets acquired under capital leases	$	891		$	1,589		$	—
Assets acquired under tenant incentives	$	2,986		$	—		$	—

See accompanying notes to consolidated financial statements.

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VITAMIN SHOPPE, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Vitamin Shoppe, Inc. (“VSI”), is incorporated in the State of Delaware, and through its wholly-owned subsidiary, Vitamin Shoppe Industries Inc. (“Subsidiary” or “Industries” together with VSI, the “Company”), is an omni-channel specialty retailer and contract manufacturer of nutritional products. Sales of both national brands and our own brands of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products (“VMS products”) are made through VSI-operated retail stores and the internet to customers located primarily in the United States. The Company manufactures products for the VSI product assortment as well as sales to third parties.

The consolidated financial statements for the fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 include the accounts of VSI and Subsidiary. All intercompany transactions and balances have been eliminated in consolidation.

The Company’s fiscal year ends on the last Saturday in December. As used herein, the term “Fiscal Year” or “Fiscal” refers to a 52-week or 53-week period, ending on the last Saturday in December. Fiscal 2016 was a 53-week fiscal year.

2. Summary of Significant Accounting Policies

Use of Estimates —The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents —Cash and cash equivalents include all highly liquid investments with original maturities of ninety days or less. The Company reclassifies cash overdrafts to accounts payable.

Accounts Receivable —Through FDC Vitamins, LLC d/b/a Nutri-Force Nutrition (“Nutri-Force”), a subsidiary of Industries, the Company sells product to third-party wholesale customers. The Company monitors the financial condition of its third-party wholesale customers and establishes an allowance for doubtful accounts for balances estimated to be uncollectible. In addition, customer allowances including promotional discounts and allowances are provided to wholesale customers based on various contract terms and are recorded as a reduction to revenue.

The following table details the activity and balances for the Company’s customer allowances for the years ended December 30, 2017 , December 31, 2016 and December 26, 2015 (in thousands):



	Balance at Beginning of Fiscal Year		Additions		Deductions			Balance at End of Fiscal Year
Period Ended December 30, 2017	$	1,061	$	2,919	$	(3,153	)	$	827
Period Ended December 31, 2016	$	897	$	3,097	$	(2,933	)	$	1,061
Period Ended December 26, 2015	$	1,883	$	2,752	$	(3,738	)	$	897

Inventories —Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method. Finished goods inventory includes costs of freight on internally transferred merchandise, and costs associated with our buying department and distribution facilities, as well as manufacturing overhead which are capitalized into inventory and then expensed as merchandise is sold. In addition, the cost of inventory is reduced by purchase discounts and other allowances received from certain of our vendors. The Company estimates losses for expiring inventory and the net realizable value of inventory based on when a product is close to expiration and not expected to be sold, when a product has reached its expiration date, or when a product is not expected to be saleable. In determining the reserves for these products, consideration is given to such factors as the amount of inventory on hand, the remaining shelf life, current and expected market conditions, historical trends and the likelihood of recovering the inventory costs based on anticipated demand. The following table details the activity and balances for the Company’s reserve for inventory for the years ended December 30, 2017 , December 31, 2016 and December 26, 2015 (in thousands):

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	Balance at Beginning of Fiscal Year		Amounts Charged to Cost of Goods Sold		Write-Offs Against Reserves			Balance at End of Fiscal Year
Fiscal Year Ended December 30, 2017	$	8,613	$	23,092	$	(25,169	)	$	6,536
Fiscal Year Ended December 31, 2016	$	7,253	$	11,067	$	(9,707	)	$	8,613
Fiscal Year Ended December 26, 2015	$	5,797	$	11,088	$	(9,632	)	$	7,253

Property and Equipment, Net —Property and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets. Furniture, fixtures and equipment are generally depreciated over seven years . Leasehold improvements are amortized generally over the shorter of their useful lives or related lease terms. The direct internal and external costs associated with the development of the features and functionality of the Company’s website, transaction processing systems, telecommunications infrastructure and network operations, are capitalized and are amortized on a straight line basis over the estimated useful lives of generally five years . Capitalization of costs begins when the preliminary project stage is completed and management authorizes and commits to funding the computer software project and that it is probable that the project will be completed and the software will be used to perform the function intended. Depreciation of the assets commences when they are put into use. Expenditures for repairs and maintenance are expensed as incurred and expenditures for major renovations and improvements are capitalized. Upon retirement or disposition of property and equipment, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the results of operations.

Impairment of Long-Lived Assets —The Company reviews its long-lived assets for impairment whenever events or changes in circumstances, including store closures, indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted pre-tax future net cash flows expected to be generated by that asset. If the undiscounted future cash flows are not adequate to recover the carrying value of the asset, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Goodwill and Other Intangibles —Goodwill and other indefinite-lived intangibles are not amortized. Evaluations for impairment are performed at least annually, in the fourth quarter of each year, or whenever impairment indicators exist. Goodwill is evaluated for impairment at the reporting unit level (the Company’s operating segments). The evaluation of goodwill and other indefinite-lived intangibles may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value is less than its carrying value. A quantitative evaluation is performed if the qualitative evaluation results in a more likely than not determination or if a qualitative evaluation is not performed. The Company’s quantitative impairment tests involve calculating the fair value of each reporting unit using the discounted cash flow analysis method along with the market multiples method which is used for additional validation of the fair value calculated. These valuation methods require certain assumptions and estimates be made by the Company regarding certain industry trends and future profitability. It is the Company’s policy to conduct goodwill impairment testing from information based on current business projections, which include projected future revenues and cash flows. The cash flows utilized in the discounted cash flow analysis are based on five-year financial forecasts developed internally by management. Cash flows for each reporting unit are discounted using an internally derived weighted average cost of capital which reflects the costs of borrowing for the funding of each unit as well as the risk associated with the units themselves. In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (“ASU 2017-04”), Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment (Topic 350). Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount and should recognize an impairment charge for the amount by which that carrying amount exceeds the reporting unit's fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company elected to early adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. For indefinite-lived tradenames, we utilize the royalty relief method in our quantitative evaluations. Under the royalty relief method, a royalty rate is determined based on comparable licensing arrangements which is applied to the revenue projections for the applicable indefinite-lived tradename and the fair value is calculated using a discounted cash flow analysis. Cash flows are discounted using an internally derived weighted average cost of capital which reflects the costs of borrowing as well as the associated risk. Impairment tests between annual tests may be undertaken if an event occurs or circumstances change that could reduce the fair value of a reporting unit below its carrying value. The valuation of the goodwill and indefinite-lived intangible assets is affected by, among other things, the Company’s projections for the future and estimated results of future operations. Changes in the business plan or operating results that are different than the estimates used to develop the valuation of the assets may impact these valuations. For those

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intangible assets which have definite lives, the Company amortizes their cost on a straight-line basis over their estimated useful lives, the periods of which vary based on their particular contractual terms.

During Fiscal 2017, the Company performed quantitative analyses of its retail reporting unit and determined the carrying value of the retail reporting unit exceeded its fair value, resulting in an impairment of the corresponding goodwill of $210.6 million and an impairment charge on the Vitamin Shoppe tradename of $59.4 million . Refer to Note 4. Goodwill and Intangible Assets for additional information.

During Fiscal 2016, the Company performed quantitative analyses of its manufacturing reporting unit and determined the carrying value of the manufacturing reporting unit exceeded its fair value, which resulted in the write-off of the corresponding goodwill of $32.6 million and the customer relationship intangible asset of $6.6 million . Refer to Note 4. Goodwill and Intangible Assets for additional information.

There have been no impairment charges related to goodwill or other intangibles during Fiscal 2015 , or in prior years.

Rent Expenses, Deferred Rent and Landlord Construction Allowances —Rent expense and rent incentives, including landlord construction allowances, are recognized on a straight-line basis over the lease term. The Company records rent expense for stores, distribution centers and manufacturing facilities as a component of cost of goods sold. The Company accounts for landlord construction allowances as lease incentives and records them as a component of deferred rent, which is recognized in cost of goods sold over the lease term.

Revenue Recognition —The Company recognizes revenue when merchandise is sold “at point of sale” in retail stores or upon delivery to a customer. In addition, shipping fees billed to customers are classified as sales. Amount recognized as shipping revenue during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 , were $2.2 million , $2.2 million and $2.0 million respectively. Nutri-Force sells product primarily to our retail segment and to third-party customers. Wholesale revenue is recognized when risk of loss, title and insurable risks have transferred to the customer, net of estimated returns and allowances. To arrive at net sales, gross sales are reduced by deferred sales, customer discounts, actual customer returns and a provision for estimated future customer returns, which is based on management’s review of historical and current customer returns. Sales taxes collected from customers are presented on a net basis and as such are excluded from revenue.

Cost of Goods Sold —The Company includes the cost of inventory sold, costs of warehousing, distribution, manufacturing and store occupancy costs. Warehousing, distribution and manufacturing costs, which are capitalized into inventory and then expensed as merchandise is sold, include freight to transfer merchandise, costs associated with our buying department, distribution facilities and manufacturing overhead. Store occupancy costs include rent, common area maintenance, real estate taxes and utilities.

Vendor Allowances —Vendor allowances include discounts, allowances and rebates received from vendors and are based on various contract terms. Vendor allowances are recognized as either purchase discounts which represent a reduction of product cost, funding which is capitalized into inventory and recognized in the statement of operations as the merchandise is sold, or direct offset which represents funding subject to immediate recognition in the statement of operations, depending on the nature of the allowance.

Frequent Buyer Program —The Company has a frequent buyer program (“Healthy Awards Program”), whereby customers earn points toward free merchandise based on the dollar volume of purchases. Beginning in Fiscal 2016, points are earned each calendar quarter and must be redeemed within the subsequent calendar quarter or they expire. In previous years, points were earned each calendar year and must be redeemed within the first three months of the following year or they expire. Sales are deferred at the time points are earned based on the value of points that are projected to be redeemed, which are based on historical redemption data. The Company records a liability in the period points are earned with a corresponding reduction of sales.

Store Pre-opening Costs —Costs associated with the opening of new retail stores and start up activities are expensed as incurred.

Advertising Costs —The costs of advertising for online marketing arrangements, magazines, direct mail and radio are expensed as incurred, or the first time the advertising takes place. Advertising expense was $27.3 million , $21.9 million and $21.6 million for Fiscal 2017 , Fiscal 2016 and Fiscal 2015 , respectively.

Online Marketing Arrangements —The Company has entered into online marketing arrangements with various online companies. These agreements are established for periods of 24 months , 12 months or, in some cases, a lesser period and generally provide for compensation based on revenue sharing upon the attainment of stipulated revenue amounts, a percentage

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of the media expenditure managed by the online partner, or based on the number of visitors that the online company refers to the Company. The Company had no fixed payment commitments during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 .

Income Taxes —Deferred income tax assets and liabilities are recorded in accordance with the liability method. Deferred income taxes have been provided for temporary differences between the tax bases and financial reporting bases of the Company’s assets and liabilities using the tax rates and laws in effect for the periods in which the differences are expected to reverse.

The Tax Cut and Jobs Act of 2017 was enacted on December 22, 2017, reducing the statutory federal income tax rate from 35% to 21%, effective January 1, 2018. As required, the Company determined a reasonable estimate for certain effects of tax reform and recorded that estimate as a provisional amount. Refer to Note 8. Income Taxes for additional information.

The Company accounts for tax positions based on the provisions of the accounting literature related to accounting for uncertainty in income tax positions. Such literature provides guidance for the recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For tax positions that are not more likely than not sustainable upon audit, the Company recognizes the largest amount of the benefit that is more likely than not to be sustained. The Company makes estimates of the potential liability based on our assessment of all potential tax exposures. In addition, the Company uses factors such as applicable tax laws and regulations, current information and past experience with similar issues to make these assessments. The tax positions are analyzed regularly and adjustments are made as events occur that warrant adjustments for those positions. These tax positions were not significant for Fiscal 2017, 2016 and 2015. The Company records interest expense and penalties payable to relevant tax authorities as income tax expense.

Concentrations of Credit Risk —Financial instruments, which potentially subject the Company to concentrations of credit risk, include debit and credit card processors of retail transactions as well as accounts receivable from wholesale customers. Accounts receivable from debit and credit card processors, included in prepaid expenses and other current assets on the consolidated balance sheets, totaled $10.7 million at December 30, 2017 and $10.6 million at December 31, 2016 . As of December 30, 2017 and December 31, 2016 , five customers represented approximately 67% and 58% , respectively, of the accounts receivable from wholesale customers.

The Company had two suppliers from whom we purchased at least 5% of our merchandise during Fiscal 2017 and 2015, and one supplier from whom we purchased at least 5% of our merchandise during Fiscal 2016 . We purchased approximately 15% of our total merchandise from these suppliers during Fiscal 2017 , approximately 11% during Fiscal 2016 and 17% during Fiscal 2015 .

The Company is subject to concentrations of credit risk associated with cash and cash equivalents, and at times holds cash balances in excess of Federal Deposit Insurance Corporation limits.

Stock-Based Compensation —Stock-based compensation cost is measured at the grant date based on the fair value of awards and is recognized as expense on a straight-line basis over the requisite service period for each separately vesting portion of the award, net of anticipated forfeitures. With the exception of restricted shares, performance share units and restricted share units, determining the fair value of stock-based awards at the grant date requires considerable judgment, including estimating expected volatility, expected term and risk-free rate. Compensation expense resulting from the granting of restricted shares, performance share units and restricted share units is based on the grant date fair value of those common shares and is recognized generally over the two to three year vesting period for restricted shares, the approximately three year vesting period for performance share units and over the quarterly or one year vesting periods for restricted share units. For accounting purposes, the expense for performance based stock options, performance based restricted shares and performance share units is calculated and recorded, based on the determination that the achievement of the pre-established performance targets are probable, over the relevant service period. The vesting requirements for performance based stock options and performance based restricted shares permit a catch-up of vesting at the end of the vesting period.

Expense related to shares purchased under the Company’s Employee Stock Purchase Plan (“ESPP”) is accounted for based on fair value recognition requirements similar to stock options. ESPP participation occurs each calendar quarter (the “Participation Period”) and the expense of which is subject to employee participation in the plan. Under the ESPP, participating employees are allowed to purchase shares at 85% of the lower of the market price of the Company’s common stock at either the first or last trading day of the Participation Period. Compensation expense related to the ESPP is based on the estimated fair value of the discount and purchase price offered on the estimated shares to be purchased under the ESPP. Expense is calculated quarterly, based on the employee contributions made over the applicable three-month Participation Period, using volatility and risk free rates applicable to that three -month period.

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Net Income (Loss) Per Share —The Company’s basic net income (loss) per share excludes the dilutive effect of stock options, unvested restricted shares, unvested performance share units and unvested restricted share units. It is based upon the weighted average number of common shares outstanding during the period divided into net income (loss).

Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock options, unvested restricted shares, unvested performance share units, warrants and unvested restricted share units are included as potential dilutive securities for the periods applicable, using the treasury stock method to the extent dilutive.

The components of the calculation of basic net income (loss) per common share and diluted net income (loss) per common share are as follows (in thousands except share and per share data):



	Fiscal Year Ended
	December 30, 2017			December 31, 2016		December 26, 2015
Numerator:
Net income (loss)	$	(252,151	)	$	24,964	$	53,171
Denominator:
Basic weighted average common shares outstanding	23,137,977			23,875,540		28,954,804
Effect of dilutive securities (a):
Stock options	—			68,272		97,114
Restricted shares	—			115,287		150,353
Performance share units	—			7,173		—
Restricted share units	—			1,414		1,158
Diluted weighted average common shares outstanding	23,137,977			24,067,686		29,203,429
Basic net income (loss) per common share	$	(10.90	)	$	1.05	$	1.84
Diluted net income (loss) per common share	$	(10.90	)	$	1.04	$	1.82

(a) For Fiscal 2017, due to a loss for the period, no incremental shares are included because the effect would be anti-dilutive.

Securities for the fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 for 657,823 , 24,140 and 48,538 shares, respectively, have been excluded from the above calculation as they were anti-dilutive.

The Company has the intent and ability to settle the principal portion of its Convertible Notes in cash, and as such, has applied the treasury stock method, which has resulted in the underlying convertible shares, and related warrants, being anti-dilutive in Fiscal 2017 , 2016 and 2015 as the Company’s average stock price from the date of issuance of the Convertible Notes through December 30, 2017 was less than the conversion price as well as less than the strike price of the warrant transaction. Refer to Note 7. Credit Arrangements for additional information on the Convertible Notes.

Recent Accounting Pronouncements — Except as noted below, the Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on its results of operations, financial condition, or cash flows, based on current information.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606). Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 for public companies and early adoption of ASU 2014-09 is permitted for public companies for annual reporting periods beginning after December 15, 2016. The Company has completed the assessment of each of its performance obligations, has developed processes to identify and analyze its contract assets and contract liabilities and to compile the information necessary to comply with the related disclosure requirements. Based on this assessment, the Company will apply the modified retrospective method for the transition to ASU 2014-09 and no adjustments to the opening balance of retained earnings for Fiscal 2018 will be required to be recorded under this guidance.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842). ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference

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between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 will require modified retrospective application at the beginning of our first quarter of Fiscal 2019, but permits adoption in an earlier period. Although the Company is still evaluating ASU 2016-02, the Company currently expects this guidance will not have a material impact on its results of operations, however, this guidance will result in a significant increase to long-term assets and liabilities on the Company's balance sheet given the Company has a significant number of leases. The Company is also in the process of identifying changes to its business processes, systems and controls to support the adoption of ASU 2016-02 in Fiscal 2019.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (“ASU 2016-09”), Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 addresses simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted ASU 2016-09 prospectively in the first quarter of Fiscal 2017. All excess tax benefits and deficiencies in the current and future periods will be recognized in income tax expense in the Company's consolidated statements of operations in the reporting period in which they occur. This will result in increased volatility in the Company's effective tax rate. For Fiscal 2017, the Company recognized discrete tax expense related to the excess tax deficiencies from stock-based compensation of $1.0 million .

3. Inventories

The components of inventories are as follows (in thousands):



	December 30, 2017		December 31, 2016
Finished goods	$	221,381	$	222,046
Work-in-process	4,436		7,566
Raw materials	8,583		12,124
	$	234,400	$	241,736

4. Goodwill and Intangible Assets

The following table discloses the carrying value of all intangible assets (in thousands):



	December 30, 2017								December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment Charges (1)		Net		Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment Charges (1)		Net
Intangible assets:
Goodwill	$	243,269	$	—	$	243,269	$	—	$	243,269	$	—	$	32,636	$	210,633
Tradenames - Indefinite-lived	68,405		—		59,405		9,000		68,405		—		—		68,405
Brands	10,000		1,991		—		8,009		10,000		1,435		—		8,565
Customer relationships	7,500		906		6,594		—		7,500		906		6,594		—
Tradenames - Definite-lived	5,392		3,352		—		2,040		4,964		3,073		—		1,891
Software	1,300		932		—		368		1,300		672		—		628
	$	335,866	$	7,181	309,268		$	19,417	$	335,438	$	6,086	$	39,230	$	290,122

(1)

During the second quarter of Fiscal 2017, the Company experienced a significant reduction to its market capitalization. As a result of changed market conditions and the Company's updated initiatives for the second half of Fiscal 2017, the Company revised the outlook for Fiscal 2017 and updated its long-range plan to reflect its operations in this increasingly competitive environment. Based on these factors, the Company concluded that an impairment trigger occurred for the retail reporting unit and therefore interim impairment tests of goodwill and other intangible assets were performed. The results of the interim goodwill impairment test indicated that the carrying value of the

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retail reporting unit exceeded its fair value, and in accordance with the early adoption of ASU 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment, the Company recorded an impairment charge on the goodwill of its retail segment of $164.3 million during the second quarter of Fiscal 2017, of which $130.9 million is not deductible for income tax purposes.

In the fourth quarter of Fiscal 2016, the Company recorded impairment charges on goodwill of $32.6 million and on the customer relationships intangible asset of $6.6 million . Both of these charges were on the intangible assets of the manufacturing reporting unit.

There have been no impairment charges related to goodwill or other intangibles during Fiscal 2015, or in prior years.

Total goodwill impairment charges during Fiscal 2017 were $210.6 million , of which $177.2 million is not deductible for income tax purposes, as reflected in the effective tax rate benefit for the fiscal year ended December 30, 2017. In addition, the tradename impairment charge of $59.4 million and the tax deductible portion of the goodwill impairment charges of $33.4 million resulted in an increase to the Company's net deferred tax assets of $23.7 million for the fiscal year ended December 30, 2017.

Intangible amortization expense for Fiscal 2017 , Fiscal 2016 and Fiscal 2015 was $1.1 million , $1.5 million and $2.3 million , respectively.

The useful lives of the Company’s definite-lived intangible assets are between 5 years to 18 years . The expected amortization expense on definite-lived intangible assets on the Company’s consolidated balance sheet at December 30, 2017 , is as follows (in thousands):



Fiscal 2018	$	1,089
Fiscal 2019	958
Fiscal 2020	850
Fiscal 2021	850
Fiscal 2022	850
Thereafter	5,820
	$	10,417

5. Property and Equipment

Property and equipment consists of the following (in thousands):



	December 30, 2017			December 31, 2016
Leasehold improvements	$	183,657		$	173,216
Furniture, fixtures and equipment	205,738			184,786
Software	98,359			78,089
	487,754			436,091
Less: accumulated depreciation and amortization	(341,396		)	(305,777		)
Subtotal	146,358			130,314
Construction in progress	3,675			8,818
	$	150,033		$	139,132

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Depreciation and amortization expense on property and equipment for the fiscal years ended December 30, 2017 , December 31, 2016 and December 26, 2015 was approximately $38.1 million , $37.3 million and $36.1 million , respectively. The Company recognized store impairment charges of $4.8 million during Fiscal 2017 on fixed assets related to 34 of its underperforming retail locations still in use in the Company’s operations. The Company recognized store impairment charges of $0.8 million during Fiscal 2016 on fixed assets related to five of its underperforming retail locations still in use in the Company’s operations. The Company recognized store impairment charges of $1.2 million during Fiscal 2015 on fixed assets related to five of its underperforming retail locations, two of which are still in use in the Company's operations and three retail locations in Ontario, Canada which the Company closed during Fiscal 2016. Impairment charges on the fixed assets of retail locations during Fiscal 2017, 2016 and 2015 represented the full net book value of the fixed assets of these retail locations.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):



	December 30, 2017		December 31, 2016
Accrued salaries and related expenses	$	18,094	$	13,861
Sales tax payable and related expenses	7,138		7,669
Other accrued expenses	34,336		30,760
	$	59,568	$	52,290

7. Credit Arrangements

Convertible Senior Notes due 2020

On December 9, 2015 , the Company issued $143.8 million of its 2.25% Convertible Senior Notes due 2020 (the “Convertible Notes”). The Convertible Notes are senior unsecured obligations of VSI. Interest on the Convertible Notes is payable on June 1 and December 1 of each year until their maturity date of December 1, 2020 . The Company may not redeem the Convertible Notes prior to the maturity date.

Prior to July 1, 2020, the Convertible Notes will be convertible only under the following circumstances: (1) during any calendar quarter if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after July 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The Convertible Notes are convertible at an initial conversion rate of 25.1625 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to a conversion price of approximately $39.74 . The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” as defined. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election.

The Company allocated the principal amount of the Convertible Notes between its liability and equity components (see table below). The carrying amount of the liability component was determined by measuring the fair value of a similar debt instrument of similar credit quality and maturity that did not have the conversion feature. The carrying amount of the equity component, representing the embedded conversion option, was determined by deducting the fair value of the liability component from the principal amount of the Convertible Notes as a whole. The equity component was recorded to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the Convertible Notes over the carrying amount of the liability component was recorded as a debt discount, and is being amortized to interest expense using an effective interest rate of 3.8% over the term of the Convertible Notes. The Company allocated the total amount of transaction costs incurred to the liability and equity components using the same proportions as the proceeds from the Convertible Notes. Transaction costs attributable to the liability component were recorded

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as a direct deduction from the liability component of the Convertible Notes, and are being amortized to interest expense using the effective interest method through the maturity date. Transaction costs attributable to the equity component were netted with the equity component of the Convertible Notes in additional paid-in capital.

The Convertible Notes consist of the following components (in thousands):



	December 30, 2017			December 31, 2016
Liability component:
Principal	$	143,750		$	143,750
Conversion feature	(24,800		)	(24,800		)
Liability portion of debt issuance costs	(3,802		)	(3,802		)
Amortization	11,267			5,726
Net carrying amount	$	126,415		$	120,874
Equity component:
Conversion feature	$	24,800		$	24,800
Equity portion of debt issuance costs	(793		)	(793		)
Deferred taxes	941			941
Net carrying amount	$	24,948		$	24,948

In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge transactions for which it paid an aggregate $26.4 million . In addition, the Company sold warrants for which it received aggregate proceeds of $13.0 million . The convertible note hedge transactions are expected generally to reduce potential dilution of the Company’s common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes. However, the warrant transaction could separately have a dilutive effect to the extent that the market value per share of the Company’s common stock exceeds the applicable strike price of the warrant transactions, which is approximately $52.99 at inception. As these transactions meet certain accounting criteria, the convertible note hedge and warrant transactions are recorded in stockholders’ equity, are not accounted for as derivatives and are not remeasured each reporting period.

The net proceeds from the Convertible Notes and related transactions of $125.7 million , net of commissions and offering costs of $4.6 million , were used to repurchase shares of the Company’s common stock under the Company’s share repurchase programs. Refer to Note 11. Share Repurchase Programs for additional information.

Revolving Credit Facility

As of December 30, 2017 and December 31, 2016 , the Company had $12.0 million and $11.0 million of borrowings outstanding on its Revolving Credit Facility, respectively.

In May 2017, the Company executed an amendment to its Revolving Credit Facility, which provides for an extension of the maturity date to May 9, 2022, provided that the maturity date would be any day on or after September 2, 2020 only if the Company did not on any such day have enough liquidity to retire its Convertible Notes then outstanding, if any. The amendment also provides for a reduction of the interest rate under the Revolving Credit Facility, as noted below.

Subject to the terms of the Revolving Credit Facility, the Company may borrow up to $90.0 million , with a Company option to increase the facility up to a total of $150.0 million . The availability under the Revolving Credit Facility is subject to a borrowing base calculated on the value of certain accounts receivable as well as certain inventory of the Company. The obligations thereunder are secured by a security interest in substantially all of the assets of the Company. Under the Revolving Credit Facility, VSI has guaranteed the Company’s obligations, and Industries and its wholly-owned subsidiaries have each guaranteed the obligations of the other respective entities. The Revolving Credit Facility provides for affirmative and negative covenants affecting the Company. The Revolving Credit Facility restricts, among other things, the Company’s ability to incur indebtedness, create or permit liens on the Company’s assets, declare or pay dividends and make certain other restricted payments, consolidate, merge or recapitalize, sell assets, make certain investments, loans or other advances, enter into transactions with affiliates, change our line of business, and restricts the types of hedging activities the Company can enter into. The largest amount borrowed during Fiscal 2017 was $38.0 million . The unused available line of credit under the Revolving Credit Facility at December 30, 2017 was $74.4 million .

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Borrowings under the Revolving Credit Facility accrue interest, at the Company’s option, at the rate per annum based on an “alternative base rate” plus 0.00% , 0.125% or 0.25% or the adjusted Eurodollar rate plus 1.00% , 1.125% or 1.25% , in each case with the highest spread applicable in the event that the average excess collateral availability under the Revolving Credit Facility is less than 33% of the borrowing base availability under the Revolving Credit Facility, the second highest spread applicable in the event that the average excess collateral availability under the Revolving Credit Facility is less than 66% and greater than or equal to 33% of the borrowing base availability under the Revolving Credit Facility and the lowest spread applicable in the event that the average excess collateral availability under the Revolving Credit Facility is greater than or equal to 66% of the borrowing base availability under the Revolving Credit Facility. The weighted average interest rate for the Revolving Credit Facility for Fiscal 2017 was 2.21% . The commitment fee on the undrawn portion of the $90.0 million Revolving Credit Facility was 0.25% as of December 30, 2017 and December 31, 2016 .

Interest expense, net for Fiscal 2017 , 2016 and 2015 consists of the following (in thousands):



	Fiscal Year Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Amortization of debt discount on Convertible Notes	$	4,781	$	4,690	$	223
Interest on Convertible Notes	3,270		3,335		159
Amortization of deferred financing fees	898		957		237
Interest / fees on the Revolving Credit Facility and other interest	752		541		487
Interest income	—		—		(1		)
Interest expense, net	$	9,701	$	9,523	$	1,105

8. Income Taxes

The provision (benefit) for income taxes for Fiscal 2017 , Fiscal 2016 and Fiscal 2015 consists of the following (in thousands):



	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Current:
Federal	$	(501	)	$	20,923		$	30,696
State	(28		)	3,850			5,385
Total current	(529		)	24,773			36,081
Deferred:
Federal	(14,461		)	(11,655		)	(1,283		)
State	(5,373		)	(2,028		)	(81		)
Total deferred	(19,834		)	(13,683		)	(1,364		)
Provision (benefit) for income taxes	$	(20,363	)	$	11,090		$	34,717

A reconciliation of the statutory Federal income tax rate and effective rate for income taxes is as follows:



	Fiscal Year Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of Federal income tax benefit	4.0	%	2.5	%	3.4	%
Impairment of goodwill	(25.5	)%	—		—
Revaluation of deferred tax assets and liabilities (1)	(5.6	)%	—		—
Write-off of Canada investment	(0.1	)%	(8.3	)%	—
Other	(0.3	)%	1.6	%	1.1	%
Effective tax rate	7.5	%	30.8	%	39.5	%

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(1)

The Tax Cut and Jobs Act of 2017 (“U.S. Tax Reform”) was enacted on December 22, 2017, reducing the statutory federal income tax rate from 35% to 21%, effective January 1, 2018. As required, the Company determined a reasonable estimate for certain effects of U.S. Tax Reform and recorded that estimate as a provisional amount. Due to the Company’s deferred tax position being a net asset, the provisional remeasurement of the deferred tax assets and liabilities resulted in a $15.3 million discrete tax expense which lowered the effective tax rate by 5.6% in Fiscal 2017. Our federal income tax expense for periods beginning in Fiscal 2018 will be based on the new tax rate. The provisional remeasurement amount is anticipated to change as data becomes available allowing more accurate scheduling of the deferred tax assets and liabilities primarily related to depreciable assets, inventory, employee compensation and commissions.

Additionally on December 22, 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes in the U.S. Tax Reform. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. As such, the Company is reporting the impacts of the U.S. Tax Reform provisionally based upon reasonable estimates. The impacts are not yet finalized as they are dependent on factors and analysis not yet known or fully completed, including but not limited to, depreciation, additional effect of the rate change on the ending deferred balances and the issuance of additional guidance, as well as our ongoing analysis of the U.S Tax Reform.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 30, 2017 and December 31, 2016 are as follows (in thousands):



	December 30, 2017			December 31, 2016
Deferred tax assets:
Net operating loss carryforward	$	2,820		$	2,535
Deferred rent	7,012			10,775
Tenant allowance	3,659			3,938
Deferred sales	—			1,019
General accrued liabilities	4,660			7,132
Deferred wages and compensation	1,594			863
Inventory	8,078			7,443
Equity compensation expense	2,582			3,815
Debt	583			995
Trade name and goodwill	10,850			—
Other	2,830			2,735
	44,668			41,250
Valuation allowance	(2,820		)	(2,535		)
Deferred tax assets	41,848			38,715
Deferred tax liabilities:
Trade name and goodwill	—			(15,590		)
Accumulated depreciation	(3,078		)	(4,589		)
Prepaid expenses	(1,492		)	(1,689		)
Deferred tax liabilities	(4,570		)	(21,868		)
Net deferred tax asset	$	37,278		$	16,847

Management periodically assesses whether the Company is more likely than not to realize some or all of its deferred tax assets. As of December 30, 2017 , with the exception of $2.8 million of deferred tax assets arising from a foreign and state

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net operating loss carryforward against which there is a valuation allowance (see above table), management determined that the Company is more likely than not to realize the deferred tax assets detailed above. Realization of deferred tax assets associated with the state net operating loss carryforwards is dependent upon generating sufficient taxable income prior to their expiration by tax jurisdiction.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, Puerto Rico and Canada. The Company recognizes interest related to uncertain tax positions in income tax expense. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2014 and for state examinations before 2011. However, the tax authorities still have the ability to review the relevance of net operating loss carryforwards created in closed years if such tax attributes are utilized in open years (subsequent to 2011).

The Company has domestic (U.S. state) and foreign net operating losses of approximately $15.5 million and $7.9 million at December 30, 2017 , against which a full valuation allowance is recorded. Domestic net operating losses generated will continue to expire annually through Fiscal 2033 . The Company’s foreign net operating loss is generated through operations in Canada, and will expire in Fiscal 2035 .

9. Stock Based Compensation

Equity Incentive Plans - The Company has two equity incentive plans that provide stock based compensation to certain directors, officers, consultants and employees of the Company; the 2006 Stock Option Plan (the “2006 Plan”) and the Vitamin Shoppe 2009 Equity Incentive Plan amended and restated through April 2012 (the “2009 Plan”), under which the Company has granted stock options (includes non-qualified as well as performance based stock options), restricted shares (includes time based as well as performance based restricted shares), performance share units and restricted share units. The issuance of up to 7,453,678 shares of common stock is authorized under these plans. As of December 30, 2017 , there were 1,532,141 shares available to grant under both plans, which includes 198,561 shares currently held by the Company as treasury stock. Restricted shares, performance share units and restricted share units are issued at a value not less than the fair market value of the common shares on the date of the grant and stock options are exercisable at no less than the fair market value of the underlying shares on the date of grant. Equity awards of restricted shares generally shall become vested between two and three years subsequent to the date on which such equity grants were awarded. Performance share units shall become vested approximately three years subsequent to the date on which such equity grants were awarded. Stock options awarded shall become vested in three or four equal increments on each of the anniversaries of the date on which such equity grants were awarded and generally have a maximum term of 10 years . However, regarding performance based restricted shares, performance share units and performance based stock options, vesting is dependent not only on the passage of time, but also on the attainment of certain internal performance metrics. The vesting requirements for performance based restricted shares and performance based stock options permit a catch-up of vesting at the end of the vesting period. For accounting purposes, the expense for performance based stock options, performance based restricted shares and performance share units is calculated and recorded, based on the determination that the achievement of the pre-established performance targets are probable, over the relevant service period. Restricted share units generally shall become vested quarterly, or one year , subsequent to the date on which such equity grants were awarded.

The following table summarizes restricted shares for the 2009 Plan as of December 30, 2017 and changes during Fiscal 2017 :



	Number of Unvested Restricted Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	372,817		$	35.20
Granted	587,181		$	13.86
Vested	(95,503	)	$	41.44
Canceled/forfeited	(140,391	)	$	27.05
Unvested at December 30, 2017	724,104		$	18.65

The total intrinsic value of restricted shares vested during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 was $1.5 million , $2.5 million and $6.3 million , respectively.

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The following table summarizes stock options for the 2006 Plan and 2009 Plan as of December 30, 2017 and changes during Fiscal 2017 :



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2016	502,797		$	25.30
Granted	—		$	—
Exercised	(100,000	)	$	15.11
Canceled/forfeited	(93,909	)	$	28.09
Outstanding at December 30, 2017	308,888		$	27.74	5.86	$	—
Vested or expected to vest at December 30, 2017	300,494		$	27.74	5.86	—
Vested and exercisable at December 30, 2017	180,126		$	26.83	4.12	$	—

The total intrinsic value of options exercised during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 was $0.7 million , $0.1 million and $1.0 million , respectively. The cash received from options exercised during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 was $1.5 million , $0.1 million and $1.4 million , respectively.

No stock options were granted in Fiscal 2017 and in Fiscal 2015 . The weighted average grant date fair value of stock options was $7.96 for Fiscal 2016 . The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:



	December 31, 2016
Expected dividend yield	—	%
Weighted average expected volatility	32.4	%
Weighted average risk-free interest rate	1.2	%
Expected holding period	4.00 years

The following table summarizes performance share units for the 2009 Plan as of December 30, 2017 and changes during Fiscal 2017:



	Number of Unvested Performance Share Units		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	125,015		$	30.43
Granted	241,485		$	19.10
Vested	—		$	—
Canceled/forfeited	(78,135	)	$	24.94
Unvested at December 30, 2017	288,365		$	22.43

Performance share units granted during Fiscal 2017 and 2016 shall vest on December 28, 2019 and December 29, 2018, respectively, if the performance criteria are achieved. Performance share units can vest at a range of 0% to 150% based on the achievement of pre-established performance targets.

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The following table summarizes restricted share units for the 2009 Plan as of December 30, 2017 and changes during Fiscal 2017 :



	Number of Unvested Restricted Share Units		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	15,390		$	30.71
Granted	54,078		$	12.04
Vested	(29,760	)	$	21.89
Canceled/forfeited	—		$	—
Unvested at December 30, 2017	39,708		$	11.90

The total intrinsic value of restricted share units vested during Fiscal 2017 , Fiscal 2016 and Fiscal 2015 was $0.1 million , $0.4 million and $0.6 million , respectively.

Compensation expense attributable to stock-based compensation for Fiscal 2017 was $6.1 million , for Fiscal 2016 was $6.3 million and for Fiscal 2015 was $5.5 million . As of December 30, 2017 , the remaining unrecognized stock based compensation expense for non-vested stock options, restricted shares, performance share units and restricted share units to be expensed in future periods is $7.2 million , and the related weighted average period over which it is expected to be recognized is 1.6 years . Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate since the inception of granting stock based awards. The estimated value of future forfeitures for stock options, restricted shares, performance share units and restricted share units as of December 30, 2017 is approximately $0.6 million .

Treasury Stock — As part of the Company’s equity incentive plans, the Company makes required tax payments on behalf of employees as their restricted shares vest. The Company withholds the number of vested shares having a value on the date of vesting equal to the minimum statutory tax obligation. The shares withheld are recorded as treasury shares. During Fiscal 2017 , the Company purchased 37,376 shares in settlement of employees’ tax obligations for a total of $0.6 million . The Company accounts for treasury stock using the cost method. These shares are available to grant under the Company’s equity incentive plans.

10. Restructuring Costs

Nutri-Force Restructuring

During Fiscal 2017, the Company engaged outside consultants to perform an assessment of the operations of Nutri-Force and to assist in the development of initiatives required to improve the performance of this business. The initiatives identified are focused on improving the efficiency of manufacturing processes, eliminating unprofitable SKUs, reducing third party sales, and reducing costs. The implementation of this plan began during the second quarter of Fiscal 2017 and has been substantially completed in Fiscal 2017.

Costs incurred for the restructuring of Nutri-Force during the fiscal year ended December 30, 2017 are as follows (in thousands):



	Fiscal Year Ended
	December 30, 2017
Inventory obsolescence charges	$	5,375
Outside consulting fees	3,304
Equipment impairment charges	1,820
Severance and other expenses and charges	1,809
	$	12,308

The inventory and equipment impairment charges are included in cost of goods sold and the outside consulting fees are included in selling, general and administrative expenses in the consolidated statements of operations.

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The following table summarizes the activity related to the Company's liabilities for the restructuring of Nutri-Force (in thousands):



Balance as of December 31, 2016	$	—
Outside consulting fees expense	3,304
Severance and other expense	1,612
Outside consulting fees payments	(3,304		)
Severance and other payments	(1,124		)
Balance as of December 30, 2017	$	488

Closing of Distribution Center

In August 2017, the Company announced its intention to close the North Bergen, New Jersey distribution center prior to or by the August 31, 2018 lease expiration. The transition of distribution operations to the Company's other distribution centers has been substantially completed during Fiscal 2017.

Costs incurred related to the closing of the North Bergen, New Jersey distribution center for the fiscal year ended December 30, 2017 are as follows (in thousands):



	Fiscal Year Ended
	December 30, 2017
Inventory obsolescence charges	$	1,422
Severance and other expenses (1)	1,448
Acceleration of depreciation	233
	$	3,103


(1)	Approximately $0.9 million of severance and other expenses related to the closing of the North Bergen, New Jersey distribution center were paid during Fiscal 2017.

Substantially all of these costs are included in cost of goods sold in the consolidated statements of operations.

11. Share Repurchase Programs

Beginning in August 2014, the Company’s board of directors approved share repurchase programs that enable the Company to purchase up to an aggregate of $370 million of its shares of common stock and/or its Convertible Notes, from time to time. As of December 30, 2017 , 8,064,325 shares of common stock pursuant to these programs, and no Convertible Notes, have been repurchased for a total of $269.9 million . There is approximately $100.1 million remaining in this program which expires on November 22, 2018. The repurchase programs do not obligate the Company to acquire any specific number of securities and may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing securities, the availability of alternative investment opportunities, liquidity, restrictions under the Company's credit agreement, applicable law and other factors deemed appropriate.

No shares or other securities of the Company were repurchased under these programs during Fiscal 2017. During Fiscal 2016 , the Company repurchased 1,670,837 shares of its common stock in the open market. The shares were retired upon repurchase. Open market share repurchases were $47.0 million in Fiscal 2016 with an average repurchase price per share of $28.13 . In Fiscal 2016, the Company also repurchased 646,666 shares of its common stock for $19.0 million , or $29.40 per share, under a 10b5-1 program which the Company entered into to purchase shares under predetermined criteria.

Additionally, the Company has entered into accelerated share repurchase (“ASR”) arrangements with financial institutions. In exchange for an up-front payment, the financial institutions initially deliver shares of the Company’s common stock. The total number of shares ultimately delivered, and therefore the average repurchase price paid per share, is determined at the end of the purchase period of each ASR based on the volume weighted-average price of the Company’s common stock during that period. The shares are retired in the periods they are delivered, and each up-front payment is accounted for as a reduction to stockholders’ equity in the Company’s Consolidated Balance Sheet in the period the payment was made. The Company reflects each ASR as a repurchase of common stock in the period delivered for purposes of calculating earnings per

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share and as a forward contract indexed to its own common stock. The ASRs met all of the applicable criteria for equity classification, and therefore, were not accounted for as derivative instruments.

The following table summarizes the Company’s ASR arrangements:



Beginning of ASR Period	Up-front Payment (in millions)		Initial Share Deliveries	End of ASR Period	Final Shares Delivered	Average Repurchase Price
December, 2015	$	50.0	1,391,940	February, 2016	235,053	$	30.73

12. Benefit Plans

The Company sponsors the Vitamin Shoppe Industries, Inc. 401(k) Plan (“401k Plan”). Employees who have completed one month of service are eligible to participate in the 401k Plan. The 401k Plan provides for participant contributions of 1% to 100% of participant compensation into deferred savings, subject to IRS limitations. The 401k Plan provides for Company contributions upon the participant meeting the eligibility requirements. Participants are 100% vested in the Company matching contribution upon receipt. The Company matching contribution is 100% of the first 3% of participant compensation contributed to the 401k Plan and 50% of the next 2% of participant compensation contributed to the 401k Plan. The Company may make discretionary contributions for each 401k Plan year.

The Company recognized expenses for the 401k Plan of $2.3 million in Fiscal 2017 , $2.2 million in Fiscal 2016 and $1.9 million in Fiscal 2015 .

13. Lease Commitments

The Company has non-cancelable real estate operating leases, which expire through 2036 . These leases generally contain renewal options for periods ranging from 1 to 10 years and require the Company to pay costs such as real estate taxes and common area maintenance. Contingent rentals are paid based on a percentage of gross sales as defined by lease agreements. The following table provides the net rental expense for all real estate operating leases (in thousands):



	Fiscal Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Minimum rentals	$	124,150		$	122,039		$	117,578
Contingent rentals	88			88			154
	124,238			122,127			117,732
Less: Sublease rentals	(360		)	(274		)	(273		)
Net rental expense	$	123,878		$	121,853		$	117,459

As of December 30, 2017 , the Company’s real estate lease commitments are as follows (in thousands):



Fiscal year	Total Operating Leases (1)
2018	$	124,086
2019	110,121
2020	94,710
2021	81,384
2022	68,014
Thereafter	162,108
	$	640,423


(1)	Store operating leases included in the above table do not include contingent rent based upon sales volume. Operating leases do not include common area maintenance costs or real estate taxes that are paid to the landlord during the year, which combined represented approximately 18.3% of our minimum lease obligations for Fiscal 2017 .

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14. Legal Proceedings

15. Segment and Product Data

We have increased our focus on customer centric initiatives and being an omni-channel based retailer. As initiatives, including buy online pickup in store and auto-delivery subscription sales, continue to develop, the interrelationship among the ways customers can purchase products from VSI results in sales that are generated and fulfilled across multiple channels. The Company has revised its internal management structure and reporting to align with our omni-channel strategy. The Company believes the historical structure of separate segments for retail stores and e-commerce is no longer representative of the way the business is managed. As a result, in Fiscal 2017, the Company updated its segment reporting to better align with its omni-channel strategy. These changes resulted in a single retail segment that includes fulfilled in store and direct to consumer sales channels. In addition, certain costs previously classified as corporate costs, such as retail and direct management costs, are now allocated to the retail operating segment. Segment results related to prior periods have been revised to conform with this omni-channel structure.

Based upon the revised structure of the Company, there are two reporting segments, retail and manufacturing. The reporting segments have separate financial information available for which operating results are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. The Company's management evaluates segment operating results based on several indicators. The primary key performance indicators are sales and operating income for each segment. The table below represents key financial information for each of the Company's business segments as well as corporate costs.

The retail segment includes the Company's retail stores and websites. The retail segment generates revenue through the sale of VMS products through Vitamin Shoppe and Super Supplements retail stores in the United States and Puerto Rico, and the Company's websites offer customers online access to a full assortment of approximately 17,000 SKUs. The manufacturing segment supplies the retail segment, along with various third parties, with finished products for sale. The Company is currently exploring strategic alternatives related to Nutri-Force, including the potential sale of this subsidiary.

Corporate costs represent all other expenses not allocated to the retail or manufacturing segments which include, but are not limited to: human resources, legal, finance, information technology, and various other corporate level activity related expenses.

The Company does not have identifiable assets separated between its retail segment assets and corporate assets. The identifiable assets of the manufacturing segment were $49.3 million and $62.3 million as of December 30, 2017 and December 31, 2016, respectively. Capital expenditures for the manufacturing segment during Fiscal 2017 were $1.6 million , during Fiscal 2016 were $2.5 million and during Fiscal 2015 were $3.5 million . At December 30, 2017 and December 31, 2016, long lived assets of the manufacturing segment were $16.9 million and $20.1 million , respectively. Depreciation and amortization expense, included in selling, general and administrative expenses, for the manufacturing segment during Fiscal 2017 was $1.1 million , during Fiscal 2016 was $1.7 million and during Fiscal 2015 was $1.5 million .

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The following table contains key financial information of the Company’s business segments (in thousands):



	Fiscal Year Ended
	December 30, 2017			December 31, 2016(1)*			December 26, 2015*
Net sales:
Retail	$	1,146,500		$	1,239,226		$	1,209,948
Manufacturing	81,607			87,684			91,159
Segment net sales	1,228,107			1,326,910			1,301,107
Elimination of intersegment revenues	(49,413		)	(37,667		)	(34,558		)
Net sales	1,178,694			1,289,243			1,266,549
Income (loss) from operations:
Retail	85,016			148,552			154,569
Manufacturing	(18,305		)	(44,223		)	(1,977		)
Corporate costs	(329,524		)	(58,752		)	(63,599		)
Income (loss) from operations (2)	$	(262,813	)	$	45,577		$	88,993

* Prior year periods have been revised to present the Company's new reportable segments.


(1)	Fiscal 2016 includes a 53rd week. Net sales for the 53rd week were $20.2 million and income from operations for the 53rd week was $3.3 million .


(2)	Income (loss) from operations includes (in thousands):



	Fiscal Year Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Goodwill impairment charges (a)	$	210,633	$	32,636	$	—
Intangible assets impairment charges (b)	59,405		6,594		—
Nutri-Force restructuring costs (c)	12,308		—		—
Store impairment charges (d)	4,838		797		1,177
Distribution center closing costs (e)	3,103		—		—
Cost reduction project (f)	—		3,761		—
Canada stores closing costs (g)	—		1,889		885
Super Supplements conversion costs (h)	—		1,046		1,766
Reinvention strategy costs (i)	—		541		2,723
Management realignment charges (j)	—		—		3,396
Integration costs (k)	—		—		1,874
Accounts receivable bad debt reserve charge (l)	—		—		1,370
Product write-off (m)	—		—		1,330


(a)	Impairment charges on the goodwill of the retail segment in Fiscal 2017 and on the goodwill of the manufacturing segment in Fiscal 2016. See Note 4., Goodwill and Intangible Assets for additional information.


(b)	Impairment charges on the Vitamin Shoppe tradename in Fiscal 2017 and on the customer relationships intangible asset of Nutri-Force in Fiscal 2016. See Note 4., Goodwill and Intangible Assets for additional information.


(c)	The costs represent restructuring costs in the manufacturing segment. See Note 10., Restructuring Costs for additional information.


(d)	Impairment charges on the fixed assets of retail locations.


(e)	The costs represent restructuring costs in the retail segment. See Note 10., Restructuring Costs for additional information.


(f)	Outside consulting costs relating to a project to identify and implement costs reduction opportunities included in corporate costs.


(g)	Costs primarily include lease termination charges included in the retail segment and corporate costs.

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(h)	Costs primarily related to the closure of the Seattle distribution center included in the retail segment and corporate costs.


(i)	The costs represent outside consultants fees in connection with the Company's "reinvention strategy" included in corporate costs.


(j)	Management realignment charges primarily consist of severance, sign-on bonuses, recruiting and relocation costs.


(k)	Represents integration costs related to the acquisition of Nutri-Force, consisting primarily of professional fees.


(l)	Represents a charge to increase the allowance for doubtful accounts for Nutri-Force, related to one wholesale customer that abruptly ceased operations.


(m)	Represents a charge to inventory reserves for the write-off of USPlabs® products which the Company ceased selling.

The following table represents net merchandise sales by major product category (in thousands):



	Fiscal Year Ended
Product Category	December 30, 2017		December 31, 2016 (a)		December 26, 2015
Vitamins, Minerals, Herbs and Homeopathy	$	328,986	$	339,597	$	320,872
Sports Nutrition	353,578		408,288		421,293
Specialty Supplements	294,546		308,945		289,938
Other	199,418		230,252		232,399
Total	1,176,528		1,287,082		1,264,502
Delivery Revenue	2,166		2,161		2,047
	$	1,178,694	$	1,289,243	$	1,266,549


(a)	Fiscal 2016 includes a 53rd week.

For each of the last three years, less than 1.0% of our sales have been derived from international sources.

16. Fair Value of Financial Instruments

The fair value hierarchy requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:


•	Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.


•	Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.


•	Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The Company’s financial instruments include cash, accounts receivable, accounts payable and its Revolving Credit Facility. The Company believes that the recorded values of these financial instruments approximate their fair values due to their nature and respective durations.

The Company's financial instruments also include its Convertible Notes (in thousands):



	December 30, 2017		December 31, 2016
Fair Value	$	91,612	$	132,677
Carrying Value (1)	126,415		120,874

(1) Represents the net carrying amount of the liability component of the Convertible Notes.

Subsequent to the issuance of the Company’s 2016 consolidated financial statements, management determined that the allocation of fair value between the liability and equity portion of the Convertible Notes needed to be revised, and accordingly, the fair value previously reported as $111.6 million has been revised to $132.7 million as of December 31, 2016 in the table above.

The fair value of the Convertible Notes was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of the Company’s Convertible Notes,

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when available, the Company’s stock price and interest rates based on similar debt issued by parties with credit ratings similar to the Company (Level 1 or 2).

Goodwill, intangible assets and fixed assets are measured at fair value on a non-recurring basis, that is, the assets are subject to fair value adjustments in certain circumstances such as when there is evidence of impairment. These measures of fair value, and related inputs, are considered Level 3 measures under the fair value hierarchy.

17. Selected Quarterly Financial Information (unaudited)

The following table summarizes the Fiscal 2017 and Fiscal 2016 quarterly results (in thousands, except for share data):



	Fiscal Quarter Ended
	March		June			September			December (1)
Fiscal Year Ended December 30, 2017
Net sales	$	316,901	$	304,837		$	288,186		$	268,770
Gross profit	98,814		86,615			86,124			86,004
Income (loss) from operations	15,609		(168,254		)	(108,335		)	(1,833		)
Net income (loss)	7,996		(156,419		)	(86,150		)	(17,578		)
Net income (loss) per common share:
Basic	$	0.35	$	(6.73	)	$	(3.72	)	$	(0.75	)
Diluted	$	0.35	$	(6.73	)	$	(3.72	)	$	(0.75	)
Fiscal Year Ended December 31, 2016 (2)
Net sales	$	336,774	$	332,717		$	314,887		$	304,865
Gross profit	116,247		107,824			102,125			100,160
Income (loss) from operations	27,262		20,724			20,273			(22,682		)
Net income (loss)	14,782		10,433			11,363			(11,614		)
Net income (loss) per common share:
Basic	$	0.60	$	0.44		$	0.48		$	(0.50	)
Diluted	$	0.59	$	0.44		$	0.48		$	(0.50	)

(1) Net loss for the fiscal quarter ended December 2017 reflects $15.3 million of tax expense resulting from the change in valuation of deferred tax assets and liabilities under U.S. Tax Reform. Net loss for the fiscal quarter ended December 2016 reflects a $3.0 million tax benefit resulting from the write-off of the Canada investment.


(2)	Fiscal 2016 includes a 53rd week.

The following table summarizes certain items for Fiscal 2017 and Fiscal 2016 which impacted quarterly results on a pre-tax basis (in thousands):



	Fiscal Quarter Ended
	March		June		September			December
Fiscal Year Ended December 30, 2017
Goodwill impairments (a)	$	—	$	164,325	$	46,308		$	—
Tradename impairment (b)	—		—		59,405			—
Nutri-Force restructuring costs (c)	671		13,655		1,676			(3,694		)
Store impairment charges (d)	—		3,765		287			786
Distribution center closing costs (e)	—		—		2,257			846
Fiscal Year Ended December 31, 2016
Super Supplements conversion costs (f)	$	1,046	$	—	$	—		$	—
Canada stores closing costs (g)	931		1,864		(906		)	—
Reinvention strategy costs (h)	541		—		—			—
Store impairment charges (d)	218		—		197			382
Cost reduction project (i)	—		1,492		2,269			—
Goodwill impairment (j)	—		—		—			32,636
Customer relationships intangible asset impairment (k)	—		—		—			6,594

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(a)	Impairment charges on the goodwill of the retail segment.


(b)	Impairment charge on the Vitamin Shoppe tradename.


(c)	The costs represent restructuring costs in the manufacturing segment. See Note 10., Restructuring Costs for additional information.


(d)	Impairment charges on the fixed assets of retail locations.


(e)	The costs represent restructuring costs in the retail segment. See Note 10., Restructuring Costs for additional information.


(f)	Costs primarily related to the closure of the Seattle distribution center.


(g)	Costs primarily include lease termination charges. The credit during the three months ended September 24, 2016 relates to a reversal of lease liabilities previously accrued.


(h)	The costs represent outside consultants fees in connection with the Company's "reinvention strategy".


(i)	Outside consulting costs relating to a project to identify and implement cost reduction opportunities.


(j)	Impairment charge on the goodwill of Nutri-Force.


(k)	Impairment charge on the customer relationships intangible asset of Nutri-Force.

Exhibit 10.52

VITAMIN SHOPPE, INC.

RESTRICTED CASH AWARD AGREEMENT

* * * * *

Participant: ____________________

Grant Date: ____________________

Value of Award: $____________________

* * * * *

THIS RESTRICTED CASH AWARD AGREEMENT (this “ Agreement ”), dated as of the Grant Date specified above, is entered into by and between Vitamin Shoppe, Inc., a company organized in the State of Delaware (the “ Company ”), and the Participant specified above; and

WHEREAS, it has been determined that it would be in the best interests of the Company to grant this restricted cash award (“ Award ”) provided herein to the Participant.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Grant of Award . The Company hereby grants to the Participant, as of the Grant Date specified above, the amount of the Award specified above.

2. Time Vesting . Provided the Participant is then employed by the Company and/or one of its subsidiaries, the Award subject to this grant shall become unrestricted and vested as described below. For purposes of this Agreement, “Employed by, or employed with,” means continued service to the Company and/or one of its subsidiaries, as an employee, independent contractor or member of the board of directors of the Company (the “Board”).

2.1 The Award subject to this grant shall become unrestricted and vested: (i) as to the first 1/2 of the Award, on the second anniversary of the Grant Date specified above; and (ii) as to the second 1/2 of the Award, on the third anniversary of the Grant Date specified above.

2.2 Except as otherwise provided in this Section 2 , if the Participant is no longer Employed by the Company and/or its subsidiaries for any reason prior to the vesting of all or any portion of the Award awarded under this Agreement, such unvested portion of the Award shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any Award. The Committee, in its sole discretion, may determine, prior to or within ninety (90) days after the date of any such termination, that all or a portion of any the Participant’s unvested Award shall not be so cancelled and forfeited.

2.3 If the Participant is no longer Employed by the Company and/or its subsidiaries due to the Participant’s death or Disability (as defined in Section 2.4 below), the Award shall become unrestricted and vested as of the date of any such termination.

2.4 For purposes of this Agreement, “ Disability ” shall mean the Participant’s inability, with reasonable accommodation, to perform effectively the essential functions of the Participant’s duties hereunder because of physical or mental disability for a cumulative period of 180 days in any consecutive 210-day period or other long term disability under the terms of the Company’s long-term disability plan, as then in effect.

2.5 Notwithstanding any provision contained in this Section 2 to the contrary, in the event of a Change of Control (as defined in the Company’s 2009 Equity Incentive Plan, as amended from time to time), if (i) the acquirer fails to assume the Award held by the Participant or (ii) the acquirer assumes the Award held by the Participant but within two years of a Change of Control following the Grant Date, the Participant is terminated by Company for any reason other than for Cause (as defined below) or terminates voluntarily after experiencing an Adverse Change in Status (as defined below), any Award then held by the Participant shall become unrestricted and vested upon such termination. For purposes of this Agreement “ Adverse Change in Status ” shall mean either of the following which occurs without written consent of the Participant and which is not remedied by the Company within thirty (30) days after the Participant gives written notice to the Board, which written notice must be provided within ninety (90) days of being advised of such change: (i) a material adverse change in the Participant’s total compensation, function, duties, title or responsibilities from those in effect at the time of the Change of Control; or (ii) if the Participant is required to permanently commute or relocate more than a fifty (50) mile radius from the Company’s office location at the time of the Change of Control but only if such new commute increases the Participant’s commute prior to the change.

2.6 If the Participant’s employer ceases to be an affiliate or subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 2.2 above.

3. Settlement . As soon as is reasonably practicable following the vesting of any portion of the Award (but in any event, within 30 days), the Participant will receive the applicable portion of the Award in cash.

4. Special Rules Regarding Restrictive Covenants .

4.1 Company Rights . In the event that the Participant’s employment with the Company or one of its subsidiaries is terminated for “Cause” (as defined below) or if Participant fails to comply with this Section 4.1 , the Company may cancel any outstanding Award or recoup funds.

4.1.1 For purposes of this Agreement, “ Cause ” means any of the following: (i) theft or misappropriation of funds or other property of the Company; (ii) alcoholism or drug abuse, either of which materially impair the ability of the Participant to perform his/her duties and responsibilities hereunder or is injurious to the business of the Company; (iii) the conviction of a felony or pleading guilty or nolo contender to a felony involving moral turpitude; (iv) intentionally causing the Company to violate any local, state or federal law, rule or regulation that harms or may harm the Company in any material respect; (v) gross negligence or willful misconduct in the conduct or management of the Company which materially affects the Company, not remedied within thirty (30) days after receipt of written notice from the Company; (vi) willful refusal to comply with any significant policy, directive or decision of the Chief Executive Officer, any other executive(s) of the Company to whom the

Participant reports, or the Board in furtherance of a lawful business purpose or willful refusal to perform the duties reasonably assigned to the Participant by the Chief Executive Officer, any other executive(s) of the Company to whom the Participant reports or the Board consistent with the Participant’s functions, duties and responsibilities, in each case, in any material respect, not remedied within thirty (30) days after receipt of written notice from the Company; (vii) breach (other than by reason of physical or mental illness, injury, or condition) of any other material obligation to the Company that is or could reasonably be expected to result in material harm to the Company not remedied within thirty (30) days after receipt of written notice of such breach from the Company; (viii) violation of the Company’s operating and or financial/accounting procedures which results in material loss to the Company, as determined by the Company; or (ix) violation of the Company’s confidentiality, non-compete or non-solicit requirements (including those set forth in this Agreement) or Code of Business Conduct.

4.2 Confidentiality . The obligation of confidentiality by the Participant set forth in the Company’s agreements(s) with the Participant or policies of the Company binding on or covering the Participant shall remain in effect for perpetuity regardless of any cessation of payment pursuant to this Agreement, such that the Participant shall not disclose confidential information of or pertaining to the Company at any time.

4.3 Non-Competition . During the period of a Participant’s employment and for one year thereafter (or two years thereafter, in the event of a termination following a Change of Control), the Participant shall not, without the Company’s prior written consent, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, any profit or non-profit business or organization in the United States that, directly or indirectly, manufactures, markets, distributes or sells (through wholesale, retail or direct marketing channels including, but not limited to, mail order and internet distribution) vitamins, minerals, nutritional supplements, herbal products, sports nutrition products, bodybuilding formulas or homeopathic remedies (the “ Competitive Products ”) if, except with respect to the companies listed below, the sale/distribution of the Competitive Products represent one third (1/3) or more of such business or organization’s gross sales in the proceeding twelve (12) months from the Participant’s termination of employment date (the “ Competitive Business ”); provided, however, that the Participant can work for a business or organization (other than the companies listed below) that sells Competitive Products that is less than one third (1/3) of such gross sales only if the Participant is not directly or indirectly involved in that part of the business or organization that deals with, or has knowledge of, the Competitive Products. Notwithstanding, and without limiting, the foregoing, the following companies constitute a Competitive Business: GNC, Rite Aid, Whole Foods, Vitacost, Walgreens, CVS, Nature’s Bounty, Bodybuilding.com, Swanson, Sprout’s Sunflower Markets and Vitamin Cottage. Notwithstanding the foregoing, the Participant may be a passive owner (which shall not prohibit the exercise of any rights as a shareholder) of not more than 5% of the outstanding stock of any class of any public corporation that engages in a Competitive Business.

4.4 Non-Solicitation . During the period of a Participant’s employment and for one year thereafter (or two years thereafter, in the event of a termination following a Change of Control), the Participant shall not directly or indirectly (i) cause any person or entity to, either for the Participant or for any other person, business, partnership, association, firm, company or corporation, hire from the Company or attempt to hire, divert or take away from the Company, any of the officers or employees of the Company who were employed by the Company during the twelve (12) months prior to the termination date of the Participant’s employment; or (ii) cause any other person or entity to, either for the Participant or for any other person, business, partnership, association, firm, company or corporation, attempt to divert or take away from the Company or its subsidiaries any of the business or vendors of the Company.

4.5 Remedies . The Participant and the Company acknowledge that the restrictions imposed by this Section 4.5 are reasonably necessary to protect the legitimate business interests of the Company, and that the Company would not be willing to offer the Award pursuant to this Agreement in the absence of such agreement. The Participant agrees that any breach of this Section 4.5 by the Participant would cause irreparable damage to the Company and that in the event of such breach the Company shall have, in addition to any and all remedies of law, the right to an injunction, specific performance or other equitable relief to prevent the violation of any obligations hereunder, without the necessity of posting a bond, plus if the Company prevails with respect to any dispute between the Company and the Participant as to the interpretation, terms, validity or enforceability of this Section 4.5 , the recovery of any and all costs and expenses incurred by the Company, including reasonable attorneys’ fees in connection with the enforcement of this Section 4.5 . The Participant further acknowledges and agrees that any period of time during which he or she is in violation of the covenants set forth in this Section 4.5 shall be added to the applicable restricted period. Resort to such equitable relief shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise.

4.6 Forfeiture and Repayment . The Participant may be required to repay to the Company the proceeds received in connection with, or return to the Company, the Award: (i) if during the course of employment the Participant engages in conduct, or it is discovered that the Participant has engaged in conduct, that is (x) materially adverse to the interest of the Company, which include failures to comply with the Company’s written rules or regulations and material violations of any agreement with the Company, (y) fraud, or (z) conduct contributing to any financial restatements or irregularities occurring during or after employment; (ii) if during the course of employment, the Participant competes with, or engages in the solicitation and/or diversion of customers, vendors or employees of, the Company or it is discovered that the executive employee has engaged in such conduct; (iii) if following termination of employment, the Participant violates any post-termination obligations or duties owed to, or any agreement with, the Company, which includes this Agreement, any employment agreement and other agreements restricting post-employment conduct; (iv) if following termination of employment, the Company discovers facts that would have supported a termination for Cause had such facts been known to the Company before the termination of employment; and (v) if compensation that is promised or paid to the Participant is required to be forfeited and/or repaid to the Company pursuant to applicable regulatory requirements as in effect from time to time and/or such forfeiture or repayment affects amounts or benefits payable under this Agreement.

5. Non-transferability . The Award, and any rights and interests with respect thereto, issued under this Agreement shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Award, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged, encumbered or otherwise hypothecated in any way by the Participant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of or hypothecate in any way any of the Award, or the levy of any execution, attachment or similar legal process upon the Award, contrary to the terms and provisions of this Agreement shall be null and void and without legal force or effect.

6. Entire Agreement; Amendment . This Agreement contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Compensation Committee of the Board (“Committee”) shall have the right, in its sole discretion, to modify or amend this Agreement from time to time. This Agreement may also be modified or amended by a writing

signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

7. Acknowledgment of Employee . The award of the Award does not entitle Participant to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Participant understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement at any time, at its sole discretion and without notice.

8. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

9. Withholding of Tax . The Company shall have the power and the right to deduct or withhold shares, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the Award or the vesting of such Award.

10. No Right to Employment . Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined in the sole discretion of the Company. Nothing in this Agreement shall interfere with or limit in any way the right of the Company or its subsidiaries to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

11. Notices . Any notice which may be required or permitted under this Agreement shall be in writing and shall be delivered in person, or via facsimile transmission, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

11.1 If such notice is to the Company, to the attention of the Secretary of Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

11.2 If such notice is to the Participant, at his or her address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

12. Compliance with Laws . The issuance of the Award pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the respective rules and regulations promulgated thereunder), and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Award pursuant to this Agreement if such issuance would violate any such requirements.

13. Binding Agreement; Assignment . This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.

14. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

15. Headings . The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

16. Further Assurances . Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated thereunder.

17. Waiver of Jury Trial . PARTICIPANT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO.

18. Severability . The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF , the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Grant Date specified above.

VITAMIN SHOPPE, INC.

By: ____________________________________________

Participant

Exhibit 10.53

VITAMIN SHOPPE, INC.

PERFORMANCE CASH AWARD AGREEMENT

* * * * *

Participant:

Grant Date:

Value of Award:$_____________________

* * * * *

THIS PERFORMANCE CASH AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Vitamin Shoppe, Inc., a company organized in the State of Delaware (the “Company”), and the Participant specified above; and

WHEREAS, it has been determined by the Compensation Committee of the Board of the Company (“ Committee ”) that it would be in the best interests of the Company to grant this performance cash award (“Award”) provided herein to the Participant.

1. Grant of Performance Cash Award . The Company hereby grants to the Participant, as of the Grant Date specified above, the amount of the Award specified above.

2. Vesting. The Award subject to this grant shall vest in accordance with the terms of Exhibit A attached hereto.

4. Special Rules Regarding Restrictive Covenants.

4.1 Company Rights . In the event that the Participant’s employment with the Company or one of its Subsidiaries or Related Companies is terminated for “Cause” (as defined below) or if Participant fails to comply with this Section 4, the Company may cancel any outstanding portion of this Award.

(a)

For purposes of this Agreement, “ Cause ” means any of the following: (i) theft or misappropriation of funds or other property of the Company; (ii) alcoholism or drug abuse, either of which materially impair the ability of the Participant to perform his/her duties and responsibilities hereunder or is injurious to the business of the Company; (iii) the conviction of a felony or pleading guilty or nolo contender to a felony involving moral turpitude; (iv) intentionally causing the Company to violate any local, state or

federal law, rule or regulation that harms or may harm the Company in any material respect; (v) gross negligence or willful misconduct in the conduct or management of the Company which materially affects the Company, not remedied within thirty (30) days after receipt of written notice from the Company; (vi) willful refusal to comply with any significant policy, directive or decision of the Chief Executive Officer, any other executive(s) of the Company to whom the Participant reports, or the Board in furtherance of a lawful business purpose or willful refusal to perform the duties reasonably assigned to the Participant by the Chief Executive Officer, any other executive(s) of the Company to whom the Participant reports or the Board consistent with the Participant’s functions, duties and responsibilities, in each case, in any material respect, not remedied within thirty (30) days after receipt of written notice from the Company; (vii) breach (other than by reason of physical or mental illness, injury, or condition) of any other material obligation to the Company that is or could reasonably be expected to result in material harm to the Company not remedied within thirty (30) days after receipt of written notice of such breach from the Company; (viii) violation of the Company's operating and or financial/accounting procedures which results in material loss to the Company, as determined by the Company; or (ix) violation of the Company's confidentiality, non-compete or non-solicit requirements (including those set forth in this Agreement) or Code of Business Conduct.

4.2 Nondisclosure of Confidential and Proprietary Information . The obligation of confidentiality by the Participant set forth in the Company's agreements(s) with the Participant or policies of the Company binding on or covering the Participant shall remain in effect for perpetuity regardless of any cessation of payment pursuant to this Agreement, such that the Participant shall not disclose confidential information of or pertaining to the Company at any time.

4.3 Non-Competition . During the period of a Participant’s employment and for one year thereafter (or two years thereafter, in the event of a termination following a Change of Control), the Participant shall not, without the Company's prior written consent, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, any profit or non-profit business or organization in the United States that, directly or indirectly, manufactures, markets, distributes or sells (through wholesale, retail or direct marketing channels including, but not limited to, mail order and internet distribution) vitamins, minerals, nutritional supplements, herbal products, sports nutrition products, bodybuilding formulas or homeopathic remedies (the "Competitive Products") if, except with respect to the companies listed below, the sale/distribution of the Competitive Products represent one third (1/3) or more of such business or organization’s gross sales in the proceeding twelve (12) months from the Participant’s termination of employment date (the "Competitive Business"); provided, however, that the Participant can work for a business or organization (other than the companies listed below) that sells Competitive Products that is less than one third (1/3) of such gross sales only if the Participant is not directly or indirectly involved in that part of the business or organization that deals with, or has knowledge of, the Competitive Products. Notwithstanding, and without limiting, the foregoing, the following companies constitute a Competitive Business: GNC, Rite Aid, Whole Foods, Vitacost, Walgreens, CVS, Nature's Bounty, Bodybuilding.com, Swanson, Sprout's Sunflower Markets and Vitamin Cottage. Notwithstanding the foregoing, the Participant may be a passive owner (which shall not prohibit the exercise of any rights as a shareholder) of not more than 5% of the outstanding stock of any class of any public corporation that engages in a Competitive Business.

shall not directly or indirectly (i) cause any person or entity to, either for the Participant or for any other person, business, partnership, association, firm, company or corporation, hire from the Company or attempt to hire, divert or take away from the Company, any of the officers or employees of the Company who were employed by the Company during the twelve (12) months prior to the termination date of the Participant’s employment; or (ii) cause any other person or entity to, either for the Participant or for any other person, business, partnership, association, firm, company or corporation, attempt to divert or take away from the Company or its subsidiaries any of the business or vendors of the Company.

4.5 Remedies . The Participant and the Company acknowledge that the restrictions imposed by this Section 4 are reasonably necessary to protect the legitimate business interests of the Company, and that the Company would not be willing to offer the Award pursuant to this Agreement in the absence of such agreement. The Participant agrees that any breach of this 6 by the Participant would cause irreparable damage to the Company and that in the event of such breach the Company shall have, in addition to any and all remedies of law, the right to an injunction, specific performance or other equitable relief to prevent the violation of any obligations hereunder, without the necessity of posting a bond, plus if the Company prevails with respect to any dispute between the Company and the Participant as to the interpretation, terms, validity or enforceability of this Section 4, the recovery of any and all costs and expenses incurred by the Company, including reasonable attorneys’ fees in connection with the enforcement of this Section 4. The Participant further acknowledges and agrees that any period of time during which he or she is in violation of the covenants set forth in this Section 4 shall be added to the applicable restricted period. Resort to such equitable relief shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise.

4.6 Forfeiture and Repayment . The Participant may be required to repay to the Company the proceeds received in connection with, or return to the Company, the Award: (i) if during the course of employment the Participant engages in conduct, or it is discovered that the Participant has engaged in conduct, that is (x) materially adverse to the interest of the Company, which include failures to comply with the Company's written rules or regulations and material violations of any agreement with the Company, (y) fraud, or (z) conduct contributing to any financial restatements or irregularities occurring during or after employment; (ii) if during the course of employment, the Participant competes with, or engages in the solicitation and/or diversion of customers, vendors or employees of, the Company or it is discovered that the executive employee has engaged in such conduct; (iii) if following termination of employment, the Participant violates any post-termination obligations or duties owed to, or any agreement with, the Company, which includes this Agreement, any employment agreement and other agreements restricting post-employment conduct; (iv) if following termination of employment, the Company discovers facts that would have supported a termination for Cause had such facts been known to the Company before the termination of employment; and (v) if compensation that is promised or paid to the Participant is required to be forfeited and/or repaid to the Company pursuant to applicable regulatory requirements as in effect from time to time and/or such forfeiture or repayment affects amounts or benefits payable under this Agreement.

execution, attachment or similar legal process upon the Award, contrary to the terms and provisions of this Agreement shall be null and void and without legal force or effect.

6. Entire Agreement; Amendment . This Agreement contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

7. Acknowledgment of Employee . The award of the Award does not entitle Participant to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Participant understands and accepts that the benefits granted under this Agreement are entirely at the grace and discretion of the Company and that the Company retains the right to amend or terminate this Agreement at any time, at its sole discretion and without notice.

8. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

9. Withholding of Tax . The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the Award or the vesting of such Award.

10. No Right to Employment . Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined in the sole discretion of the Company. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or Affiliates or Related Companies to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

12. Compliance with Laws . The issuance of the Award pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the 1934 Act and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable

thereto. The Company shall not be obligated to issue any of the Award pursuant to this Agreement if such issuance would violate any such requirements.

14. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

15. Section 409A . This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.

16. Headings . The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

17. Further Assurances . Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated thereunder.

18. Waiver of Jury Trial . PARTICIPANT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO.

19. Severability . The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

[Remainder of Page Left Intentionally Blank]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his/her hand, all as of the Grant Date specified above.

VITAMIN SHOPPE, INC.

By: _____________________________

_________________________________

Participant

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Vitamin Shoppe Industries Inc.

Vitamin Shoppe Mariner, Inc.

VS Hercules, LLC

Vitamin Shoppe Procurement Services, Inc.

Vitapath Canada Limited

Vitamin Shoppe Global, Inc.

FDC Vitamins, LLC

Betancourt Sports Nutrition, LLC

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-165897, No. 333-162990, No. 333-207800 and No. 333-219836 on Form S-8, of our reports dated February 27, 2018 , relating to the consolidated financial statements of Vitamin Shoppe, Inc. and Subsidiary and the effectiveness of Vitamin Shoppe, Inc. and Subsidiary’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Vitamin Shoppe, Inc. and Subsidiary for the year ended December 30, 2017 .

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

February 27, 2018

Exhibit 31.1

CERTIFICATIONS

I, Colin Watts, certify that:


1.	I have reviewed this Form 10-K of Vitamin Shoppe, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2018



By:		/s/ Colin Watts
		Colin Watts
		Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Brenda Galgano, certify that:


1.	I have reviewed this Form 10-K of Vitamin Shoppe, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2018



By:		/s/ Brenda Galgano
		Brenda Galgano
		EVP and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report on Form 10-K of Vitamin Shoppe, Inc. (the “Company”) for the year ended December 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Colin Watts, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and


(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 27, 2018

/s/ Colin Watts

Colin Watts

Chief Executive Officer

(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of this Report.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report on Form 10-K of Vitamin Shoppe, Inc. (the “Company”) for the year ended December 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brenda Galgano, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and


(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 27, 2018

/s/ Brenda Galgano

Brenda Galgano

EVP and Chief Financial Officer

(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of this Report.