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.