Name a leading food retailer with healthy double digit margins? There’s a clue in the question.

The clothing sector has historically contained many of the most profitable UK retailers. Surprising perhaps, therefore, that UK health food market leader Holland & Barrett (H&B) also has an enviable profit record. RWKB’s latest profile update shows the £250m business had operating margins between 20% and 30% every year from 2001 to 2007, although they have drifted in the past two years to 18.3% and 16.5%.

H&B has been owned since 1997 by NBTY of New York, a vertically integrated producer, wholesaler and retailer of nutritional supplements, with group sales of $2.6bn (£1.62bn). In the USA its main retail chain is Vitamin World while in the UK it also operates the GNC chain and Vitamin World home shopping. They also enjoy elevated margins, but in 2008 the UK profit circle was kinked when NBTY bought loss-making Julian Graves from Baugur, converting about 50 of its stores to H&Bs.

The latter’s sales have been on a plateau since the mid-2000s, but the indications are that NBTY’s UK sterling sales in the 2009/10 year just finished increased, with H&B’s turnover expected by RWKB to have grown to a new high, boosted by the ex-Julian Graves units. A key question is whether H&B also restored operating margins to the 20% level as well. Going forward, the situation is complicated by NBTY having just been acquired and taken private by The Carlyle Group. In addition to speculation about whether the new owners will preside over the restoration of H&B’s margin levels, NBTY had started franchising H&B internationally, initially in South Africa. Will the new owners also pursue the internationalisation of a hitherto very profitable British niche retailer?