GNC Holdings Rides on New Pacts Amid Weak Same Store Sales

On Sep 9, 2018, we issued an updated research report on GNC Holdings, Inc. GNC. We are upbeat about this Zacks Rank #3 (Hold) company’s significant progress with e-commerce business over the last few quarters. However, cut-throat competition is a persistent concern.

This leading global specialty retailer of products for health and wellness including vitamins, minerals and herbal supplement plus sports nutrition and diet has outperformed its industry in the past three months. The stock has surged 48.5% compared with the 6.9% rise of the industry.

The company put up a mixed performance across a broad range of applications. Some recent developments including the launch of Lit AF, which is an enhanced, next-generation, pre-workout dietary supplement under the $135-million Beyond Raw GNC brand, are worth a mention. Meanwhile, the company is on track to achieve its 2019 and 2020 cost-saving targets. We are also encouraged to note the expansion in both its margins during the second quarter. 

GNC Holdings, Inc. Price

GNC Holdings, Inc. Price

GNC Holdings, Inc. price | GNC Holdings, Inc. Quote

GNC Holdings’ international business has been a key driver in recent years. During the quarter, the company registered growth across several of its principal franchises. International franchise stores, forming the bulk of the company’s global business, witnessed 2% year-over-year growth in the second quarter. While GNC Holdings continues to gain traction in India, it also delivered initial product shipments to its Japanese and Australian partners.

GNC Holdings’ recent strategic joint venture with vitamins and nutritional supplement manufacturer International Vitamin Corporation looks promising at the moment. This apart, the company has been progressing well with its collaborator Harbin Pharmaceutical Group, which was closed in 2018. This JV has been strengthening the company’s presence in the vast supplements market of China.

On the flip side, GNC Holdings’ revenues from the U.S. & Canada segment fell 8% year over year in the reported quarter. Company-owned net store closures negatively impacted revenues by $14.9 million. Moreover, in domestic franchise locations, same-store sales slipped 1.8% from the year-ago period.

This apart, GNC Holdings faces a tough competition from varied companies both in the domestic and overseas markets. Also, failure to comply with the FTC regulations and changing consumer preferences may hamper the company’s business.

Key Picks

A few better-ranked stocks in the broader medical space are Medtronic MDT, Baxter BAX and NuVasive NUVA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is expected to be 7.13%.

Baxter’s long-term earnings growth rate is projected at 12.8%.

NuVasive’s long-term earnings growth rate is estimated to be 12.75%.

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