In his first earnings call with investors, Mike Archbold said that the company is evolving, and consumers can expect to see more functional foods like nut butters, healthy snacks, and natural sweeteners on its shelves, as well as more of focus on organic and vegetarian.
“We're going to be offering far more plant-based and nature-based proteins in our store,” he said. “We're also bringing together our women's assortment in a more concentrated area within the store. All of this has been accomplished with very little, if any, SKU elimination.
“[W]e believe that this is the start of us being able to focus on taking care of both the customer we've got, who wants to proceed with nature-based proteins and plant-based proteins, but also a customer that we don't have and to be able to attract that customer in.
“So what you'll see, if you go into our store, is a number of products so that our proteins have now been expanded to include soy, hemp, pea, rice and blends of all the above, and include national brands such as Garden of Life, Vega and SPIRU-TEIN. So these will all play an important role as we continue to grow and expand our customer base.”
Despite a plan to engage with the more natural and vegetarian consumer, the company is “unequivocally committed” to sports nutrition, he said. “Sports nutrition represents 45% of our sales. It is a core customer of ours.”
The supplements industry has seen a slowing in some key categories over the past couple of years, with the like of multivitamins and omega-3s highlighted previously by GNC.
“[T]he industry is continuing to grow at good rates, better than most other areas within retail and much better than population growth in a lot of other places that are experiencing much lower growth rates. So I'm actually very excited about the future for the growth rate in the industry,” said Archbold.
“[W]ith a great industry growth rate and our great brand and our ability to deliver for our customers that branded customer experience, I am confident in this team's ability to really drive meaningful growth, as well as drive shareholder value, going forward.”
Breaking the numbers down, GNC reported that consolidated revenue decreased by 2.7% to $656.3 million, compared to the third quarter of 2013. Revenue decreased in each of the Company's segments: retail by 1.4%, franchise by 3.1%, and manufacturing/wholesale by 11.4%.
"With our strategic review well underway, we have begun to make progress in key areas,” said Archbold. “This quarter - despite the 6.9% decrease in same-store sales - we achieved incremental gross margin dollars in our retail segment as we began to reduce our dependence on extensive promotions.”
Archbold succeeded Joe Fortunato earlier this year. The company also announced other senior level changes, including Jeffrey Hennion arriving as the new Executive Vice President, Chief Marketing and eCommerce Officer, Daisy Vanderlinde joining as Chief Human Resource Officer, Carl Seletz, GNC's Senior Vice President of International Business Development, assuming the additional responsibility of leading the Company's domestic and international franchise operations.
The Company's third quarter 2014 results reflect the $7.5 million non-recurring cost relating to this ‘management realignment’.
Parts of this article were made possible by a transcript available from Seeking Alpha.