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GNC revenues off 9.4% in year-end report

By Hank Schultz

17-Feb-2017
Last updated on 17-Feb-2017 at 17:35 GMT2017-02-17T17:35:54Z

GNC said its TV ad, which was rejected for the Super Bowl, has run on other venues, such as The Grammys telecast. GNC photo.
GNC said its TV ad, which was rejected for the Super Bowl, has run on other venues, such as The Grammys telecast. GNC photo.

The price of GNC shares hit a 52-week low after the company announced disappointing year-end earnings.

GNC’s fourth quarter consolidated revenue decreased 9.4% to $570 million. Revenue was down by 8% year-over-year in the US and Canada and was down 18.5% in GNC’s international stores.  Manufacturing and wholesale revenue also declined by 7.4%. Full year earnings declined to $2.5 billion, off from $2.7 billion in 2015. GNC’s share price declined to $6.94 a share following the announcement, and then rebounded to trade at close to $8 a share this morning. The company’s 52-week share price high is $35.60.

“The ongoing and increasingly dramatic revenue declines GNC has experienced over the last several quarters are indicative of a company that has lost touch with its customers, its solid competitive differentiators and its place in an attractive growing market segment, said acting CEO Robert F Moran in an earnings call with analysts. The call was posted in transcript form on the site seekingalpha.com .

One New GNC

Moran said that the company’s launch of its new business model, which it is calling One New GNC, is starting to show results.  Among the things the new initiative, which was put in place during a one-day shutdown of the company’s stores on Dec. 28, 2016,  is supposed to solve is the dizzying blizzard of prices that GNC used to have, with overlapping promotions, days on which discount cards could be used and times when they were invalid, etc.

“While we have only six weeks of system-wide data at this point, I can tell you that we are encouraged with the performance we're seeing. Since the launch of the One New GNC, transactions are up approximately 7% in company-owned stores, which means we are now generating the strongest transaction growth in several years,” Moran said. “In the One New GNC, we're no longer asking customers to sort through up to five different prices for the same product. Now, customers will find standardized competitive pricing across all our platforms.

Moran took the helm on an interim basis after former CEO Mike Archbold was ousted. Moran said during the call he has agreed to remain on the job for an additional six months while a search for a permanent replacement continues.

The company cautioned that its results for the first quarter were expected to be about as grim as the fourth quarter of 2016 was.  It also announced the suspension of it dividend, and during the earnings call it said it will close approximately 100 older or underperforming stores this coming year. It opened 69 new stores last year, and Moran said the pace of new store openings will be much slower in the coming year. 

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