A Member of Pat McKeough’s Inner Circle recently asked for his advice on a health and wellness products company that sells online and in 45 countries worldwide.
Pat likes the rising revenues and earnings. The firm also seems well capable of leveraging high-profit-margin products and a significant e-commerce platform. However, he notes that the company has made a recent large acquisition, which adds risk as well as opportunity.
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Jamieson Wellness Inc. (Symbol JWEL on Toronto; www.jamiesonwellness.com), produces health and wellness products under several brands including Jamieson Vitamins, Iron Vegan, Progressive, Precision, and Smart Solutions.
Established in 1922, the company’s products are now distributed to over 10,000 retail locations across Canada. They’re also sold online and in 45 countries worldwide.
As part of a plan to grow significantly in the U.S. market, Jamieson announced on June 1, 2022, that it would acquire Nutrawise Health & Beauty Corporation. The sales price is $265.0 million. In addition, Jamieson could pay post-closing costs to Nutrawise for achieving growth targets.
Nutrawise markets premium supplements under the Youtheory brand in the U.S. and in international markets. That brand offers a variety of products addressing beauty, general wellness, emotional wellness, digestive health, joint support, and men’s health.
Nutrawise is expected to generate $157 million in revenue in 2022.
Over the last five years, Jamieson’s revenue increased 50.0%, from $300.6 million in 2017 to $451.0 million in 2021. Meanwhile, earnings, excluding one-time items, jumped 100.2%, from $27.6 million, or $0.70 a share, in 2017 to $55.2 million, or $1.32 a share, in 2021.
Growth by acquisition adds risk, especially with a purchase as big as Nutrawise, However, the company should be a good fit for Jamieson. The acquisition provides Jamieson with a platform for growth in the huge but highly competitive U.S. market for vitamins, minerals, and other food supplements.
Nutrawise owns a state-of-the-art manufacturing facility in Irvine, California. The 150,000-square-foot plant is one of the largest manufacturers of collagen and turmeric in the U.S. It also has a diverse product distribution network with a strong presence in club stores including Costco and Sam’s Club. It also has a growing presence in FDM (Food Drug Mass-Merchandise) and e-commerce. Still, there’s lots of room to expand on its 60,000 retailers worldwide served through three distribution centres in Irvine, California, Tokyo, and London.
At the same time, Jamieson is still in the very early stages of building a significant e-commerce platform, an area where it has strong capabilities.
The company’s shares yield 1.9%.
Recommendation in Pat’s Inner Circle: Jamieson Wellness Inc. is a buy.
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