At GNC, net income increases as sales decline slows in third quarter

CEO Ken Martindale says company is in talks to restructure debt by end of year, but some speculate company will go private.

Victoria A.F. Camron, Digital content specialist

October 24, 2019

2 Min Read
At GNC, net income increases as sales decline slows in third quarter 2019

Reporting a smaller net loss and increased net income during the third quarter,  GNC executives sounded positive Thursday morning about the company’s future.

The global supplements corporation said adjusted net income increased $1 million, to $3.1 million, compared with the third quarter of 2018.

 “For the third quarter in a row, operating income from our largest segment—the U.S. and Canada—increased compared with the corresponding period of  2018,” said Chief Financial Officer Chief Financial Officer Tricia Tolivar. The third quarter ended Sept. 30.

Consolidated revenue for the quarter was $499.1 million, down from $580.2 million a year ago, the company reported. Factors causing that decrease included the transfer of business to the two new joint ventures regarding Nutra manufacturing and businesses in China; the closure of company-owned stores; lower sales in the U.S. and Canada; and lower revenue from franchised stores in the international market.

For the third quarter of 2019, GNC Holdings Inc. also reported:

  • Same-store sales—including e-commerce—in the United States and Canada dropped 2.8%. In the second quarter, sales had dropped 5.4% compared to the previous year.

  • E-commerce sales grew 12% and made up 8.6% of revenue in the United States and Canada, compared with 7.2% a year ago.

  • Revenue in the U.S. and Canada was $444.7 million, down $31.8 million from the same quarter in 2018.

  • Net loss of $2.4 million, compared with $8.6 million net loss in 2018.

“We feel good about our strategy to improve our global brand and improve our operating performance,” CEO Ken Martindale said during the call.

Some business media have suggested that GNC’s partner in China, Harbin Pharmaceutical Group, plans to take the company private, but this issue was not raised during the call. However, Martindale and Tolivar both discussed the company’s success at lowering its debt and its ongoing attempts to restructure its remaining debt.

Since early 2018, GNC has reduced its debt $440 million and lowered its net total leverage ratio to 3.6x from 5.0x, Martindale said. With assistance from a board of directors committee, the executives have been meeting with “current and potential debt and equity holders,” he explained. These sources are in the United States and Asia, according to the earnings release.

“We believe we are closing in on a longer-term resolution for our capital structure,” Martindale said.

The company ended its third quarter with $190 million liquidity and, year-to-date, the company’s free cash flow is $87 million. Adjusted EBITDA is $166 million.

About the Author(s)

Victoria A.F. Camron

Digital content specialist, New Hope Network

Victoria A.F. Camron was a freelance writer and editor contracted with New Hope Network from 2015 until April 2022, when she was hired as New Hope Network's digital content specialist—otherwise known as the web editor.

As she continues the work she has done for years—covering the natural products industry for and Natural Foods Merchandiser; writing up earnings calls and other corporate news; and curating roundups of trends and information for the website—she is thrilled to be an official part of the New Hope team. (She doesn't mind having paid holidays and vacations again, though!) Victoria also compiled and edited newsletters, and served as interim content director for Delicious Living in 2016.

Before working as a freelancer, she spent 17 years in community newspapers in Longmont, Colorado, and St. Charles and Wheaton, Illinois. Victoria is a Colorado native and a graduate of Metropolitan State College of Denver.

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