TPG-Axon Capital buys CNX, M, OUTR, and DDS and decreases positions in ROC, GNC, and WYN—13F Flash F
TPG-Axon Capital starts new positions in 3Q 2013 (Part 6 of 7)
TPG-Axon Capital Management LP (TAC) is a privately owned $4 billion hedge fund firm founded by Dinakar Singh in February 2005, in partnership with private equity firm Texas Pacific Group. TPG-Axon Capital Management is based in New York, with additional offices in Hong Kong and Tokyo.
In this six-part series, we’ll go through some of the main positions TPG-Axon Capital traded this past quarter.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
The fund started new positions in Consol Energy (CNX), Macy’s Inc. (M), Outerwall Inc. (OUTR), and Dillard’s Inc. (DDS) and it decreased positions in Rockwood Holdings Inc. (ROC), GNC Holdings Inc. (GNC), and Wyndham Worldwide Corp. (WYN).
Why sell GNC Holdings Inc. (GNC)?
In 3Q 2013, GNC, the specialty retailer of health and wellness products reported consolidated revenue of $675.6 million, an increase of 8.7% over consolidated revenue of $621.6 million for the third quarter of 2012. Revenue increased in each of the company’s segments: retail by 9.5%, franchise by 9.3%, and manufacturing or wholesale by 2.4%. Same-store sales increased approximately 6.7% in domestic company-owned stores (including GNC.com sales) in 3Q 2013, while for domestic franchise locations, same-store sales increased 5.9%.
GNC said its Member Pricing program has evolved as it drives customers into the stores on an incremental basis. Also, it’s consistently exhibiting strong new-store productivity, and expanding its e-commerce businesses at a pace that exceeds market growth rates. GNC expects to make some major supply chain investments in 2014, including adding a fourth distribution center serving domestic stores, located near Indianapolis, in 1H 2014. It expects a consolidated adjusted earnings per share of approximately $2.85 to $2.89 for full-year 2013—a 22% to 24% increase over 2012 adjusted earnings per share of $2.33. The outlook is based on achieving a high single-digit increase in domestic company-owned same-store sales for the fourth quarter of 2013.
Analysts are bullish about the stock, as it has posted strong earnings in the past quarters as well. Challenges facing the company could include government regulations for wellness products and pricing pressures due to competition.
GNC Holdings, Inc., headquartered in Pittsburgh, PA, is a leading global specialty retailer of health and wellness products, including vitamins, minerals, and herbal supplement products, sports nutrition products, and diet products.
TPG-Axon Capital Management, the activist hedge fund firm, provides its services to high–net worth individuals, pension funds, and banking institutions. It manages limited partnerships for its clients. The firm invests in the public and private equity markets across the globe. It typically invests in healthcare, pharmaceuticals, financial services, technology, energy, and basic materials and retail.
Founder Dinakar Singh served as a co-head of the Principal Strategies Department at Goldman Sachs until early 2004. He became a Partner at Goldman Sachs in 1998. Prior to this, he spent four years in Hong Kong, establishing the proprietary investing effort in Asia. He serves on the President’s Council on International Activities and is the Trustee of the Goldman Sachs Foundation. Singh has been a Trustee of Cold Spring Harbor Laboratory Inc. since November 2010. He is also the Founder and Chairman of the Spinal Muscular Atrophy Foundation. He graduated from Yale University in 1990.
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