GNC Holdings Inc (NYSE:GNC) was sold off massively after the company declared third quarter numbers that missed market expectations. Judging by what the Interim CEO said on the conference call, a lot is wrong with the company.
Shares in the specialty retailer of health, wellness and performance products dived 24.88% to end Thursday at $15.13, on volume of a huge 18.04 million shares compared to average volume of 2.25 million shares.
Technically, there could be more downside considering yesterday’s low coincided exactly with the April 2011 low of $14.81.
That low seems destined to be broken today given that, at the time of writing, GNC is quoting at $14.46, down 4.43%, pre-market.
GNC Holdings Inc (NYSE:GNC)’s dismal Q3
In the third quarter, everything seems to have gone wrong for GNC, which has an 80-year old history and operates out of more than 9,000 locations globally.
For the quarter GNC reported EPS of $0.59, which missed by $0.12, and revenue of $628 million, which was down by 8.1% and missed estimates by $22.33 million.
Comparable store sales including online fell 8.5% at company owned stores. International sales slipped 18.7% year on year.
Interim CEO, Bob Moran, on the conference call :
- Our financial results continue to be unacceptable.
- I’ve spent the past 90 days doing a deep dive into the details of the business, and together with the team, we assessed all aspects of it. And frankly, what we found was a badly broken business model in need of change.
- The point of sale system in our stores were out of date and timed out, causing long transaction times and lost transactions, ultimately frustrating customers and associates.
- Our stores have too many out of stocks, and that is unacceptable. The fastest way to lose a customer is to be out of stock on a product when they want it.
- We have made our pricing strategy and gold card program very confusing to the customer.
- We eliminated bulk sales…These were actually creating a conflict, because many of those were deeply discounted, and then the bulk items were being taken to online channels that were not sanctioned by GNC. So there was a conflict, and consumers were getting the opportunity to buy products at prices that were not appropriate and not coming into our brick and mortar stores.
GNC Holdings Inc (NYSE:GNC) this morning: analyst downgrades
Piper Jaffray and Bank of America have downgraded GNC to Underweight.
BofA/Merrill Lynch downgrades GNC to Underperform.