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Analyzing GNC Holdings’ Performance in 2Q16

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Price movement

GNC Holdings (GNC) has a market cap of $1.5 billion. It fell by 25.5% and closed at $20.28 per share on July 28, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -25.4%, -14.2%, and -33.7%, respectively. GNC is trading 22.2% below its 20-day moving average, 20.9% below its 50-day moving average, and 29.9% below its 200-day moving average.

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Related ETFs and peers

The iShares Morningstar Small Value ETF (JKL) invests 0.35% of its holdings in GNC Holdings. JKL tracks a market-cap-weighted index of US small-cap value stocks. The index stocks from the 90th to the 97th percentile of the market-cap spectrum using fundamental factors. JKL’s YTD price movement was 11.8% on July 28. The SPDR S&P Retail ETF (XRT) invests 1.2% of its holdings in GNC.

The market caps of GNC Holdings’ competitors are as follows:

  • Walgreens Boots Alliance (WBA) – $86.4 billion
  • Rite Aid Corporation (RAD) – $7.4 billion

Performance of GNC Holdings in 2Q16

GNC Holdings reported 2Q16 revenue of $673.2 million—a fall of 2.4% compared to revenue of $689.6 million in 2Q15. The company’s gross profit margin and operating income fell by 4.6% and 1.2%, respectively, in 2Q16—compared to the same period last year. It opened 30 company-owned stores, 13 domestic franchise, 43 international stores, and 19 store-within-a-store (Rite Aid) in 1H16.

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Segments sales

The US & Canada segment’s sales fell by 2.0% due to a fall in same store sales in company-owned and franchise stores. Domestic same-store sales fell due to low demand in the vitamin and food/drink categories.

The International segment’s sales fell by 2.5% due to the drop in wholesale sales and royalties from franchisees and negative same-store sales from international franchisees.

The Manufacturing/Wholesale segment’s sales fell by 10.4%. This includes a fall of 22.5% in intersegment revenues and a rise of 5.3% in third-party revenues.

Net income and EPS

Its net income fell to $64.0 million and its EPS (earnings per share) rose to $0.94 in 2Q16—compared to net income and EPS of $67.4 million and $0.79, respectively, in 2Q15. It reported adjusted EPS of $0.79 in 2Q16—a rise of 2.6% compared to 2Q15.

GNC’s cash and cash equivalents fell by 14.7% and its inventory rose by 8.4% in 2Q16—compared to 4Q15. Its current ratio fell to 2.7x and its DE (debt-to-equity) ratio rose to 6.9x in 2Q16—compared to a current ratio and a DE ratio of 2.9x and 4.5x, respectively, in 4Q15. It reported free cash flow of $110.5 million in 1H16—a fall of 32.7% compared to 1H15.

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Quarterly dividend

GNC Holdings declared a quarterly cash dividend of $0.20 per share on its common stock. The dividend is payable on or about September 30, 2016, to shareholders of record at the close of business on September 16, 2016.

Performance of GNC Holdings’ competitors

Walgreens Boots Alliance (WBA) reported fiscal 3Q16 net sales of $29.5 billion—a rise of 2.4% compared to net sales of $28.8 billion in fiscal 3Q15. Its net income and EPS fell to $1.1 billion and $1.01, respectively, in fiscal 3Q16—compared to $1.3 billion and $1.18, respectively, in fiscal 3Q15.

Rite Aid (RAD) reported fiscal 1Q17 revenues of $8.2 billion—a rise of 24.2% compared to revenues of $6.6 billion in fiscal 1Q16. Its net income and EPS fell to -$4.6 million and -$0.00, respectively, in fiscal 1Q17—compared to $18.8 million and $0.02, respectively, in fiscal 1Q16.

In the next part of this series, we’ll compare GNC Holdings with its peers and ETFs based on various metrics.

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