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Revenue, net income fall again at GNC, company announces

Closing of 87 corporate stores is the biggest cause of the decreases, while ecommerce sales disappoint executives.

Revenue and net income at GNC Holdings Inc. again dropped compared to first-quarter results a year ago—and those results were lower than the previous year’s.

The global supplements company released its Q1 financials Thursday morning:

  • Total revenue was $564.8 million, down 7% from 2018’s $607.5 million. Revenue in the first quarter of 2017 was $654.9 million, 13.7% higher than the current amount.
  • A net loss of $15.3 million, compared with net income of $6.2 million—a drop of 346.8%. The company saw net income of $24.7 million in Q1 of 2017.
  • Adjusted net income was $19 million for this quarter, compared with $20.1 million a year ago and $26 million in 2017.
  • Gross profit was 36% of sales, compared with 34.1% a year ago.
  • Domestic same-store sales decreased 1.6% from a year ago. First-quarter 2018 same-store sales were 0.5% higher than in 2017.

During the quarter, which ended March 31, GNC closed 87 corporate-owned stores. Those closings triggered about $14 million of the quarter’s revenue loss and a drop of 1.6% in same-store sales that translates to a $6.2 million loss of revenue, the company reported.

The company was pleased with its EBITDA margin of 11%, CEO Ken Martindale said during the morning earnings call. He pointed out that comparable sales at domestic franchise stores rose for the first time in years.

Martindale said the company expected same-store sales to drop, but the 1% growth in ecommerce sales was disappointing.

“Our ecommerce business has been softer in recent quarters due to headwinds with the Amazon.com marketplace,” Chief Financial Officer Tricia Tolivar said. GNC is searching for a chief digital officer, Martindale said.

On the positive side, GNC-branded products accounted for 52% of domestic sales, up from 50% a year ago.

Earlier this week, the company announced it will introduce a line of topical CBD products in the District of Columbia and 23 states. “We are well-positioned to capitalize on the growing consumer demand for CBD-related products,” Martindale said during Thursday’s call. “And we are taking great care to find strong partners and identify products that are right for the GNC brand and for our customers.”

Internationally, the company is seeing growth with its franchise partners, Martindale said. Two weeks ago, an existing store in Shanghai, China, re-opened as the company’s first “global showroom,” where customers can talk to a nutritionist, see a wide range of GNC products and order electronically to be shipped to their homes.

Later this year, GNC plans to release its first shipments to the company’s partners in Japan and Australia.

Tolivar said she expects gross profit of 32% to 35% during the rest of 2019. The company ended the first quarter with $154.3 million in free cash flow, she said.

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