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GNC Holdings Q1 Results Weak, Overseas Prospects Bright

Zacks Equity Research
Updated

On Jun 1, we issued an updated research report on Pittsburgh, PA-based GNC Holdings, Inc. GNC, a leading global specialty retailer of products for health and wellness, including vitamins, minerals, and herbal supplement, sports nutrition and diet. The company currently carries a Zacks Rank #4 (Sell).

GNC Holdings made a disappointing start to its first quarter of 2016 with the results squarely missing the Zacks Consensus Estimate. Moreover, the company’s failure to maintain the prior quarter’s (sequential) rebound, in terms of domestic same-store sales, concerns us.

Moreover, GNC Holdings’ business is particularly subject to changing consumer trends and preferences. The company’s failure to respond in a timely or commercially appropriate manner to such changes may adversely affect customer relationship and product sales.

Moreover, the nutritional supplements industry is characterized by rapid and frequent changes in demand for products and new product introductions. If GNC Holdings fails to predict these demand trends and provide the stores with the latest products, it can harm customer relationship and the company’s market share.

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The U.S. nutritional supplements retail industry is large and highly fragmented. In the U.S., GNC Holdings competes for sales with heavily advertised national brands manufactured by large pharmaceutical and food companies, as well as other retailers. In addition, as certain products become more mainstream, the company is subjected to increased price competition with more participants entering the market.

On a brighter note, GNC Holdings’ international business has been a key growth driver in recent years. As of Mar 31, 2016, the company had 2,059 international franchise stores across more than 50 countries.

The company also made substantial progress in its retail segment during the reported quarter and also opened eight new stores.

We believe that the fact that GNC Holdings is a global specialty retailer with a network of more than 9000 locations worldwide will help the company eventually overcome the adversities in the retail segment. The company also holds a strong cash balance position, which is a major positive.

Key Picks in the Sector                 

Better-ranked medical stocks are Baxter International Inc. BAX, Boston Scientific Corporation BSX and SurModics, Inc. SRDX.  While Baxter sports a Zacks Rank #1 (Strong Buy), Boston Scientific and SurModics carry a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
 
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GNC HOLDINGS (GNC): Free Stock Analysis Report
 
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