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GNC Holdings’ 3Q16 Revenue Fell 8.1%: What Does It Mean?

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Nov. 2 2016, Published 3:25 p.m. ET

Price movement

GNC Holdings (GNC) has a market cap of $977.2 million. It fell 10.9% to close at $13.48 per share on October 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -35.3%, -32.2%, and -55.5%, respectively, as of October 28.

GNC is trading 34.0% below its 20-day moving average, 33.8% below its 50-day moving average, and 45.9% below its 200-day moving average.

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Related ETFs and peers

The iShares Morningstar Small-Cap Value (JKL) invests 0.28% of its holdings in GNC Holdings. The YTD price movement of JKL was 11.3% on October 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): $88.0 billion
  • Rite Aid (RAD): $7.2 billion
  • Staples (SPLS): $4.8 billion

Performance of GNC Holdings in 3Q16

GNC Holdings reported 3Q16 revenue of $628.0 million, a fall of 8.1% compared to 3Q15. The company’s gross profit margin and operating margin fell 240 bps (basis points) and 170 bps, respectively, in 3Q16 compared to 3Q15.

Sales for its U.S. & Canada segment fell 7.0%. It saw negative same-store sales due to a fall in sales for protein, vitamins, and food and drink. Sales also fell for e-commerce.

Sales for GNC’s International segment fell 18.7% due to challenges faced by franchisees in Chile, Saudi Arabia, and Mexico, and the termination of the agreement in Turkey. However, the fall was offset by its business in China. Its operating margin rose 380 bps from the rise in product margin due to a mix of proprietary sales.

Sales for its Manufacturing/Wholesale segment fell 0.50%. Third-party contract manufacturing sales rose 6.3%, which was offset by the fall in wholesale sales. Its operating margin fell 220 bps due to the fall in its intersegment sales and a mix of third-party contract manufacturing sales.

Its net income and EPS (earnings per share) fell to $32.4 million and $0.47, respectively, in 3Q16 compared to $45.8 million and $0.54, respectively, in 3Q15. It reported adjusted EPS of $0.59 in 3Q16, a fall of 21.3% compared to 3Q15.

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GNC’s cash and cash equivalents fell 34.2%, and its inventory rose 11.9% in 3Q16 compared to 4Q15. Its current ratio fell to 2.6x, and its debt-to-equity ratio rose to 6.3x in 3Q16 compared to 2.9x and 4.5x, respectively, in 4Q15. It reported free cash flow of $162.8 million YTD, a fall of 33.2% compared to the prior year’s period.

Quarterly dividend

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

Performance of GNC Holdings’ competitors

Walgreens Boots Alliance (WBA) reported its fiscal 4Q16 results on October 20, 2016. The company’s sales and adjusted EPS rose 0.35% and 21.6%, respectively, in fiscal 4Q16 compared to fiscal 4Q15.

Rite Aid (RAD) reported its fiscal 2Q17 results on September 22, 2016. The company’s sales rose 4.8%, and its adjusted EPS fell 50.0% in fiscal 2Q17 compared to 2Q16.

In the next part, we’ll compare GNC Holdings with its peers.

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