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GNC Holdings' (GNC) Q1 Earnings and Sales Miss Estimates

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  • LLY
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GNC Holdings, Inc. GNC reported first-quarter 2020 adjusted loss per share of 19 cents (excluding the impact of certain one-time items like inventory and vendor allowance reserves relates expenses due to current and estimated adverse impacts from the COVID-19 pandemic), a significant decline from year-ago adjusted earnings per share of 15 cents. The bottom line significantly lagged the Zacks Consensus Estimate of earnings of 6 cents per share.

Reported loss per share for the quarter was $2.45, marking a huge decline from loss of 23 cents reported in the prior year.


Revenues for the first quarter came in at $472.6 million, down 16.3% year over year. The top line lagged the Zacks Consensus Estimate by 0.6%. The year-over-year decline in revenues was the result of a number of factors including the closure of company-owned stores under its store portfolio optimization strategy, sales declines during the second half of March due to the COVID-19 pandemic, the transfer of the company’s Nutra manufacturing to the Manufacturing joint venture (under its agreement with International Vitamin Corporation or IVC), a 13.8% drop in domestic company-owned same store sales and lower domestic and international franchise revenues.

Quarterly Segmental Details

GNC Holdings operates under three segments — U.S. & Canada (including company-owned stores in the United States, Puerto Rico and Canada, franchise stores in the United States, and e-commerce), International (inclusive of franchise locations in approximately 50 countries, The Health Store and China operations), and Manufacturing/Wholesale (comprising manufactured products sold to other segments, third-party contract manufacturing and sales to wholesale partners).

GNC Holdings Inc Price, Consensus and EPS Surprise

GNC Holdings Inc Price, Consensus and EPS Surprise
GNC Holdings Inc Price, Consensus and EPS Surprise

GNC Holdings Inc price-consensus-eps-surprise-chart | GNC Holdings Inc Quote

In the reported quarter, GNC Holdings’ revenues from the U.S. & Canada segment fell 13.3% year over year to $424.2 million. Notably, e-commerce sales accounted for 10.6% of U.S. and Canada revenues, up from the prior-year quarter’s 7.4%.

Company-owned net store closures, including e-commerce salesdropped 10.1% resulting in a $35.8 million decline in revenues. Out of this, approximately $20 million was attributed to the impact of COVID-19 in the second half of March.

International segment revenues declined 18% to $7.4 million during the reported quarter. This downside chiefly resulted from the outbreak of COVID-19, which caused business disruption in the International segment from January 2020. International franchisees revenues declined $6.4 million due to lower sales primarily in the Asian markets as a result of the pandemic.

The Manufacturing / Wholesale segment’s revenues registered 57.2% year-over-year plunge to $14.9 million. This mainly resulted from the transfer of the Nutra manufacturing business to the manufacturing joint venture with International Vitamin Corporation. Further, sales to wholesale partners decreased 21.4% to $14.9 million largely due to the closures of Rite Aid store-within-a-store as a result of Walgreens' acquisition of certain Rite Aid locations.


Gross profit declined 32.7% year over year to $136.7 million. Gross margin contracted 703 basis points (bps) to 28.9% in the first quarter.

Selling, general and administrative expenses declined 2.5% to $144.5 million. The company registered adjusted operating loss of $7.8 million in the quarter against $54.8 million of adjusted operating profit in the year-ago period.

Financial Position

GNC Holdings exited first-quarter 2020 with cash and cash equivalents of $137.4 million compared with $117 million at the end of 2019. Total debt was $895 million at the end of the quarter, compared with $862.6 million at the end of 2019.

First-quarter net cash outflow from operating activities totaled $12.1 million compared with $68.7 million of net cash inflow recorded in the year-ago period.

Our Take

GNC Holdings first-quarter 2020 results were dismal largely because of significant sales disruption caused by the pandemic. All the operating segments of the company registered significant year-over-year sales decline during this period.

The company noted that during March 2020 significant COVID-19-led restrictions were imposed by the state governments.  As of May 6, 2020, a respective 1300 and 40% of U.S. and Canada company-owned and franchise retail stores were closed. GNC fears that some of the stores temporarily closed now, may be closed down permanently in the future.

Zacks Rank & Stocks to Consider

GNC Holdings currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents against the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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