Severe and unusual winter weather has affected the entire US economy. And it has affected supplements retailing giant GNC, too; in its Q4 2013 earnings posted yesterday the company cited winter storms as the prime factor in missing its projections despite postings gains in both earnings and revenue.
Far reaching effects
A CNBC survey released yesterday says business activity has taken a $50 billion hit as a result of the unusually severe weather that has impacted large swaths of the country. For example, the southeast, an area of the country ill equipped to deal with heavy snow and ice, is suffering its second major winter storm coming hard on the heels of a paralyzing snowstorm in late January. A so-called “polar vortex” gripped a large portion of the country in sub-zero cold for a number of days in December. And it’s snowed hard again recently in the Northeast and Mid Atlantic states.
For a company like GNC with stores sprinkled throughout the country, the effects add up and cannot be brushed aside, said CEO Joseph Fortunato in an earnings call with analysts.
“I've had days when I've seen 50% decline comp, and sometimes 250 stores are closed, sometimes 350,” he said.
And Fortunato said the unsual weather depressed results even in stores that were open. With the weather patterns continuing, it has led the company to downgrade its expectations for the present quarter.
“That means you're doing 50% of the business you should be doing in those stores. So it's really hard to get a gauge. I mean, when you start getting Alabama and San Antonio and all through Texas at 20-degree weather patterns, and we have plants now that have been closed in South Carolina for 2 days, nobody can get through Georgia, and we can't get orders to . . . I mean, the whole thing just has a compounding effect that has somewhat made us be more conservative with our outlook for the first quarter,” he said. (Transcript provided by seekingalpha.com .)
To put its results in perspective, the company still posted a strong quarter, just not quite as vibrant as analysts had been expecting. GNC reported revenue of $613.7, an 8.6% rise. Same store sales rose 5% and adjusted earnings for the quarter came in at $60.6 million, or 63 cents per share.
Analysts had forecast earnings of 64 cents per share, and the markets reacted strongly, sending GNC’s share price down by as much as 15% after the news broke on Thursday.
As for the outlook for 2014, the company revised its forecast down to an earnings range of $3.18 to $3.24 per share. Analysts had projected the company to earn about $3.46 per share in 2014, another factor that depressed the stock price.